Starting a property development business should begin with deciding three things: what type of property development busines you want to run, whether a limited company or sole trader set up is more appropriate and what finances you have, need and have access to.
Where does one start to become a property developer?
Business plans are basically the same in nature. They are made to put in black and white the details of how a business is going to run and this is the same for a property developer business. The business plan for this type of business should also include details on how the plan would be accomplished. This is important especially for those business owners who are looking at finding investors. The property developer business owner should know who the target market is as well as the kind of properties that they are going to focus on, which would be appealing to the target market. It is also important to note where the funding would come from. There should also be details on timescales that are expected as well as all the costs that would come with property development like renovation of properties or construction.
What is the difference between buy-to-let and buy-to-sell?
There are 2 main types of property development businesses, those that focus on Buy-to-let and those that focus on buy-to-sell. Each has its own type of business model. Below is a brief summary to help you decide what type of business you want to run. Buy-to-let is when an owner would acquire a piece of property and then work on it to later rent the property out. Any payments from the rental would be used for paying any mortgage used on that property and later on use the payments to make profit after mortgages have been completely paid off. Buy-to-sell is when a property developer business owner acquires a piece of property, works on it, and then sells it on the market. This may include flipping the property so that the value would become higher than when it was first purchased. Each of these business models have their own pros and cons and it is up to the business owner to decide which one would be the best for the business. Combining both business models can also be done.
Is market research important?
Doing research, especially market research, is a vital part of the property developer business. It is important to know how much the expenses would be when purchasing and working on a property for profit. It is also important to do research about the location of the property, as well as what the market (the buyers or the renters) are looking for in that area. It is also important for a business owner to know how much they can afford for a property.
Should purchasing a property be done via limited company or sole trader?
Another important thing that a business owner should take into consideration is they would be purchasing property as a sole trader or via a limited company. There are things to take into account for each one, including tax considerations. Each one has its own pros and cons and it is all about finding the best one that would work well with the business. When purchasing property via a limited company, interest costs can be offset for property or rental income. The owner should also pay only the Corporation Tax based on income which is at 20%. On the other hand, when purchasing property as a sole trader, the capital gains tax would be lower. When the owner also decides to remortgage the property, it is going to be tax free. These can be a difficult decision for a person who may not be too well-versed with the terms. That is why it is highly important to seek professional help just to be on the safe side. There are companies that can help with such, including those that offer company formations services like Company Address Services.
How to organize business’ finances?
This type of business is heavy on one’s finances so it is important to make sure that all finances involved in the business are organized. One cannot push on with being in the business if finances were not available. That is why it is highly recommended for property developer business owners to know just how much money would be needed for a certain project. The computations and assessments should include how much money would be involved in purchasing a property, how much would be needed to work on the property, how long the whole project would take, as well as any other costs that would be needed in this project. It is also important to note just how much one can sell or maybe rent out the property after work has been done. Having to consider worst case scenarios would also be helpful for any contingencies.
Knowing how to start a business as a property developer may seem really daunting but with this guide, can give you an idea on how things should be done. Starting your own property business is not all sunshine and rainbows but it is going to be worth it in the end if done right.
published under Business Address Guides
