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Amateur Developers

Posted: January 2014

By Jo Eccles

With house prices on the rise in central London, we’ve seen an increase in the number of buyers looking to try their hand at small time property development. As someone who sees an average of 400 different properties each year across the capital, I think I can comment with some authority on what not to do if you’re thinking of going down this route.

Firstly, choose the property wisely and remember that you get what you pay for. Many small time developers will buy lower ground floor flats as they tend to be cheaper and there’s often less competition for them. Inexperienced buyers mistakenly believe that because they’re cheap, they can carve out a bigger profit margin, yet this is not the case. The purchase price is often less but their resale value will be too.

Secondly, do your sums correctly and prudently. Factor in works costing more than you anticipated, plus possible delays, obtaining permissions from managing agents, and so on. All of these eat into your profit margin. Also ensure sure that you use good tradesmen and draw up formal contracts with them.

Whatever you do, don’t do a cheap refurbishment. Buyers aren’t stupid and it will incense them if they get the impression you’re trying to make a quick buck out of them. I always say if you’re going to do a job, then do it properly. You don’t need to go overboard, but equally don’t cut corners. A cheap refurbishment will work against you and delay you recouping your profit as the property will take longer to sell. On the other hand, if you do a great job, buyers will fall over themselves to secure the property and you will release your capital quickly.

Finally, throughout the project, keep thinking about the property as though it was yours – what would you want in it, how would you use the space, and so on? I find the properties that sell well are those which have been cared for and thought about, rather than those which have the wow factor but are completely impractical.

If you have a question you’d like Jo to answer please email info@sppropertygroup.com or tweet her @joeccles.