Property development can be broken down into seven key steps: sourcing, appraisal, securing the deal, planning, funding, construction and exit. Below we’ll walk you through these seven steps.
Seven steps of property development
Step one: Sourcing
The first stage is to source your project. But where to start? New build or conversion? In your local area or further afield? Single plots or multi-unit developments? To become a successful developer you’ll need to source a lot of opportunities in order to find successful deals. Great deals often come from great relationships so it’s important to build your network.
Experience tells us that the best deals are usually those that are ‘off market’ with the opportunity to add significant value by obtaining planning permission. The best, and easiest, way to find these types of deals is to get out there, spot the opportunities yourself and develop a relationship with the vendor.
Step two: Appraisal
The appraisal process is the most important part of any development. The purpose of an appraisal is to look at the deal on paper first and uncover any potential risks or stumbling blocks.
At this stage it’s important you follow a process: first, undertake an initial assessment, followed by a pre-planning assessment, and finally a full development appraisal. The full development appraisal is vital as it will determine the realistic value of a site.
It’s true to say that the appraisal process will cost you time and money, but as this is the most crucial part of the overall process, it is important to view this as an essential investment rather than an unnecessary cost. After all, moving forward with the wrong deal will cost you a lot more time, more money and create more problems.
The key to success is to stick to the due process, and be persistent: only this will lead to the success and profits available within development. Find out a bit more about our nine pillars of development appraisal.
Step three: Securing the deal
Once you have properly appraised a potential development opportunity, it’s been given the green light, and you’re happy to move forward with it, this is the stage where you need to secure a good deal.
Essentially structuring a deal starts with a blank piece of paper. By combining information gathered during the appraisal process with an understanding the vendors requirements, you are then in a position to put together a structure that works for all involved.
A great way of unlocking maximum value, and creating a real win-win deal for you and the vendor, is by agreeing a base price for the site and sharing any increase in value after planning consent is granted.
Step four: Planning
Obtaining planning can add huge value to your projects. To do this, you need to devise a sound planning strategy, and hire the services of a good planning specialist.
Successful planning is about creating a scheme that makes best use of a site, meets local demand, and adheres to local and national policies.
Don’t forget to allow enough time for the planning process to take place, as this can take months, and look out for planning conditions that may delay your progress.
Step five: Funding
You can finance your property development project in a number of different ways. Perhaps by securing commercial finance, by working with private investors, in a joint venture, or by bridging or crowdfunding.
Having experience and a successful track record in property development are key attributes when seeking to secure funding, especially from commercial lenders. But, if you’re less experienced you too can get funding for your projects, so don’t worry; having a great team of specialists and consultants will help you open doors to access the funds necessary for your projects.
If you have a great team in place and you have followed the process and your project is backed up with a strong appraisal, the funding should follow smoothly.
Step six: Construction
Work on your project is now underway. This is without doubt the most exciting part of the process, as you’re seeing your dream finally become a reality.
This stage has three main parts: pre-construction, construction and post-construction. Having a good construction team and project manager will make sure that your build goes smoothly, stays on budget, and is delivered on time. However, it’s important to allow a degree of contingency costs into your build budget.
Whether you’re looking to sell or rent your newly-created properties, presenting a show home is worth its weight in gold. This will draw-in prospective buyers or tenants, and secure early sales or rentals.
Step seven: Exit
Start with the end in mind. Do you want to sell the deal to a developer? Do you want to build and sell? Or do you want to build and rent out the units yourself? Every project needs more than one exit strategy, and you need to devise these at the beginning, not the end!
We break these down into these three areas: sourcing, build-to-sell, and build-to-hold. Sourcing and selling onto a developer is a great way to earn fees and a great place to start if you are new to development. Build-to-sell is a trading strategy that will earn hundreds of thousands from just one deal! And build-to-hold is a great strategy if you are looking to create long-term wealth, by retaining the properties yourself and renting them out.
Understanding the nine pillars of property appraisal are key to every successful project
Whether you're a hands-on developer or investor that likes getting down to the detail of a development project, or you prefer to carry out your project using a fully-managed service, we can help. We provide practical guidance, plus fully-managed delivery through our in-house services. We have an excellent contact book of preferred delivery partners and approved suppliers, to help when you need them, at every stage of the development lifecycle. Don't go it alone – let our expertise support you along the way.