Top tips for property development success

Though the property boom is well and truly over for the time being, recent figures suggest the market may slowly be picking up. And with recession-related repossessions making property available at rock bottom prices, there's still money to made in becoming a developer.

Become a property developer

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Here are our top tips for success in the world of property development.

Research is key
It's easy to imagine that if you buy a rundown property and do it up, you're bound to make money, but the reality is that researching the every detail of the area and the market is key to successful developing. If you've got your eye on a possible money-maker, look at how much similar properties go for in the area, take financial factors such as stamp duty and conveyancing costs into account, and be realistic about how quickly you are likely to sell and to whom. Unless you have the cash to buy outright, the longer the property sits empty, the more money you'll be losing so a quick turnaround is ideal.

When it comes to refurbishment or renovation, do get thorough inspections from qualified professionals and tradesmen so that they can give you a full and detailed quote... then assume there will be delays and cost increases, and build in a contingency fund. Always think of the worst case scenario - if you can still afford it and think you can make a profit, it could be a good investment.

Scout your location
It doesn't always follow that there's money to be made in the best area of town. Those postcodes with the most desirable houses are always in demand, but you'll likely pay a high price, and that immediately eats into your profit margin.

In fact, many of the canniest property developers make their business work by identifying those areas on the up. Good schools, transport links and green spaces are most definitely sought after and will make a world of difference to many buyers, but do your homework and you may find that buying on the edge of town or in areas close by that could soon become fashionable offer the best chance of financial success.

Eye up the auctions
Repossessions and rundown properties often end up in auctions, and there are often bargains to be had. However, you will need your eyes fully open to make a sound investment. If you plan to get a mortgage, it will need to be in place already, and you will need to pay a deposit immediately after the auction. Be sure to take a detailed look at the property in advance of the auction so that you know it's a viable option financially, and then set your limit in stone. Get caught up in the adrenaline rush of bidding and you could end up paying over the odds, only to find yourself well and truly out of pocket.

Pay the right price
Success in property development relies largely on buying at the right price. In general, the lower the buying price, the greater the margin, so every penny off the asking price counts. Don't be afraid to negotiate.

Target both sellers and buyers
Given the above, it can really pay to target sellers who might be more likely to give you a good deal. As harsh as it sounds, the more desperate they are to get rid of the property, the better your profit margin will be. Estate agents will often have some background information on the vendor, so don't be afraid to ask why they are selling. If they are moving abroad, getting divorced or are in financial difficulty, they are much more likely to accept an offer. Those with planning applications pending are also worth looking at, as they might take a lower price subject to permission being granted, and if the property does get approval, you'll be quids in when you sell.

On the other side of the coin, when it comes to refurbishment, it is essential to have your target market in mind. A professional couple will almost certainly be lured by high quality fixtures and fittings, but if you plan to rent the house or apartment to students, there's little point in splashing out on the best.

Most importantly, remember that investing in property is a risk. Do it well and you could make a healthy profit, but make a mistake and it could leave you with a mountain of debt. Do your homework and don't get carried away.

Are you a successful property developer? What advice would you give to somebody hoping to make money in the market? Leave your comments below...