How To Sell Your Development

As a property developer, you invariably experience a few highs and lows on every project. One high point I always enjoy is that quiet walk around the finished units. Snagging complete, these box-fresh, pristine spaces appear in stark contrast to the messy, noisy activity of previous weeks. With the stresses and strains now behind you, it’s remarkable that so many elements and processes have somehow come together to create a single space that’s now ready to become someone’s new home.

But that feeling of calm is a little premature since arguably the most critical element of the whole project still lies ahead of you. Which is, of course, the part where you sell the things, pay back your financiers, and, if you’ve done your job well, pocket a healthy profit. So how can you make sure that your new homes fly off the proverbial shelf? Let’s start by understanding the downside if they don’t.

Most developers will be using both commercial finance and private finance to fund their projects. They’ll typically borrow up to 70% of the asset purchase price and 100% of the development funding from commercial lenders. They might also borrow up to 100% of their deposit from private finance. This gives them substantial financial leverage since they’re not personally putting in a huge amount of their own money. However, it also means they’ll want to pay these lenders back as soon as possible. Every month that the new units don’t sell means another month of interest that needs to be paid. And that comes straight off the bottom line.

In theory, you could potentially end up in a situation where your units aren’t sold before your finance terms expire, and so you’ll need to refinance. Not only will this incur additional fees, but your lender is potentially able to renegotiate the deal. It helps reinforce the importance of having an alternative exit strategy from day one. For example, let’s suppose you can’t sell. In that case, you could refinance the development using buy to let mortgages, which would allow you to repay the asset and development finance and defer the sales while making a small profit through renting them out. It might not be your preferred outcome, but it means your financiers will be happy, and you’re in a cash-positive position even if your profits are stuck for the time being in your new bricks and mortar.

It’s worth noting that you’ll typically be paying your lenders back first. If you build five flats, all your profit is in the last flat. Selling the first four apartments allows you to pay off the finance, but your own profit won’t materialise until you complete on that final unit.

Let’s now turn our attention to what you can do to make your units more saleable. The crucial point is that your marketing strategy shouldn’t begin when your project is finished. It starts way before a single brick has been laid, in fact, before you’ve even made an offer to buy the host building or the plot of land. As part of your due diligence on any project, you’ll need to determine who will be buying your units and what they’ll be looking for. Are they after one-bed or two-bed flats? Do they want gold taps and marble bathrooms, or should you keep it cheap and cheerful? Are they downsizers who need parking and larger rooms to fit their furniture in, young professionals who want cafes and bars on the doorstep, or families who want outside space and amenities? To get the lowdown on the local area, you can glean a lot online, but then you’ll also need to engage with some local residential agents to get their views. Get your ideal customer wrong, and you could easily find it a struggle to sell your units quickly. Also, make sure you’re aware of any other developments that are likely to be hitting the market in the interim by asking agents and looking on the local planning portal.

Ok, so we now know what type of unit we need to build and who is likely to be buying. Next, we’ve got to nail the design. At worst, good design will make your units easier to sell; at best, it can add a premium to your sale values. Your first question is whether you should hire an interior designer as they can often add a lot of value. However, their role is so much more than just choosing the décor. Getting their input at the outset can seriously improve the layout and flow of your floorplans, which can significantly impact buyer appeal. There’s a cost involved but do bear in mind that your design learnings can be re-used on future projects, and so it’s an investment that pays back multiple times.

Good natural lighting is mandatory in any new home, but make sure that maximising light is a priority in your team’s design thinking as it can make all the difference to the ‘feel’ of a place. You can also use feature lighting to create interest, and there’s a wealth of design ideas out there to choose from.

When you’re working to a budget, you need to make a point of sweating the small stuff. So often, it’s the little touches of quality that can make a difference, particularly on entry-level flats and houses, as they can alter the perception of the entire home. A small step up in specification will allow you to create some wow factor without breaking the bank. For example, premium wooden doors with brushed steel fittings have a significant visual impact compared to their cheaper white six-panel counterparts. Similarly, metal switches and sockets ooze quality compared to standard white plastic fittings.

Consider buying entry-level products from premium manufacturers such as Bosch and Siemens when choosing appliances in the kitchen. You’ll get all the cachet of the brand, yet their basic models won’t cost you a fortune. Deeper splashbacks are welcome but be wary of splashing too much cash on premium worktops as they can badly dent the budget. Luckily, there are many good quality options at the lower end of the price spectrum these days, providing you’re careful with your design choice.

One bugbear of mine is cheap-looking bathrooms, and there’s really no need for it. Make sure that you tile right down to the floor with basin splashbacks, rather than the usual cheapskate approach where there are no tiles behind the basin. It costs peanuts in the scheme of things, but it looks so much better. LED mirrors, chrome shaver sockets, and decent shower fittings all add to the quality vibe on a sensible budget. Another nice touch is to put in a big shower cubicle, even in a smaller flat. No one likes a pokey shower, and it will compare well with other flats, even if yours has a smaller overall footprint.

Headroom is another area where conversions often have an advantage over modern apartments. Opening the roof void to create vaulted ceilings can increase the feeling of space and make flats feel a lot bigger than their footprint would suggest. Adding a loft hatch or a mezzanine level can also create valuable storage space. The problem with smaller flats is that there are very few places to store anything, so be sure to make the most of every nook and cranny. Even modest spaces that wouldn’t be considered big enough for storage on a larger property will be welcomed in a smaller flat.

If you’re converting a commercial building, there’s usually an opportunity to retain some of the quirks and heritage features of the original building, which can add both interest and value.

The shape of the rooms and the building’s architectural features add character, and following through with a more ‘industrial’ theme with the internal décor can make a building stand out; just make sure that your target audience will appreciate that particular style. Modern blocks of flats often have little character, and ceiling heights also tend to be modest, which gives your more characterful apartments a chance to shine.

So, our target market is understood, and our project has been designed to within an inch of its life. We now need to go about marketing it well, and for this, we’ll need a friendly local estate agent.

Having engaged with several agents right at the outset, you’ll have picked one that you think has the best chance of getting some quick sales. Choosing an agent can be something of a lottery, but there are several sensible checks to be done before you appoint one. Go on Rightmove’s map view and see which agents recently sold similar properties in neighbouring streets. It’s one thing for an agent to ‘cover’ a specific area, but their local knowledge may be sketchy if they’ve not sold anything nearby in recent memory. Check out each agent’s particulars; do some look more appealing or professional than others? Are the photographs or the presentation better, or perhaps the descriptions sound more appealing? And how experienced is their sales team? You’ll also be considering their feedback on pricing and their confidence, having seen comparable properties they’ve sold recently.

Give some thought to the agent’s fee structure and make sure they’re incentivised to sell quickly without recommending price drops every five minutes. If an agent gets a 1% fee on your newly built £100,000 apartment, then they’ll receive £1,000, whereas you’ll be making a £20,000 profit. But, if the agent recommends you drop the price to £90,000, their fee decreases by 10%, but your profit halves. Their sales job is now easier, but you’ve taken most of the pain. The good news is that the opposite is true if they sell at £110,000, so consider including a ratchet in their fee mechanism that rewards them handsomely for quick sales at a top price. Don’t be tempted to try and negotiate the biggest fee discount in history with your agent. If selling your units gives them the lowest fees compared to all the other properties on their books, guess how much of a priority you’ll be getting. Far better to be paying top dollar and getting their best performance.

Once you’ve appointed an agent at the outset, it’s important that you keep in touch with them during the construction phase. Make sure you invite them on to the site mid-project so that they can get super-enthusiastic about it, having witnessed the transition first-hand. They’ll hopefully pass on that enthusiasm to potential buyers. Your agent is also a key protagonist when it comes to re-pricing your units. You will have estimated your selling prices when you first bought the property, but time has moved on, plus the imagined units are now a reality. You’ll only finalise your pricing strategy once you’ve shown the agent around the finished project; however, I strongly recommend you revisit your market analysis before that meeting. See what’s on sale locally and what has sold recently. Then when your agent shares their pricing recommendations, you’re able to critique what they tell you. Two heads are usually better than one, and at this stage, we need any optimism tempered with realism.

There are several options to look at when it comes to your marketing strategy. Pre-development sales usually involve a discount but get you more certainty from having buyers already lined up. But be careful when doing a conversion project; no matter how good your artist’s impression and CGI mock-up is, people will NOT be filled with delight when they drive by your knackered old commercial building and see where you’re expecting them to live. They won’t be able to imagine the finished article, so you’re better off keeping everything under wraps until the units are complete.

Show homes are another marketing option, but it’s a strategy that requires planning. The idea is to complete one unit as early as possible in the construction phase so you can start viewings mid-project. You’ll need to work with your contractor and agree on this before work commences, as it will impact their priorities and scheduling. Show homes work best when selling identical units since people can see what they’re buying. In a conversion project where flat shapes and sizes are likely to differ, it’s usually not the best strategy.

Dressing your units is another popular marketing tactic, as it allows people to visualise living there a lot more easily.

Here you’ll be installing furniture and soft furnishings before you conduct viewings, which naturally comes at a cost. Are you going to pay someone to dress the units for you, or will you dress them yourself? If the latter, will you be selling the flats fully furnished for a premium, or will you be ‘undressing’ them, in which case you’ll need somewhere to store your furniture, etc., until the next project?

Dressing works well because most people lack imagination, plus they tend to buy with their eyes. However, be careful about dressing smaller flats, as you don’t want them to look cluttered. Also, be cautious with the colour and style you go for when dressing a property. The golden rule is to appeal to as many buyers as possible. This means going neutral and ditching any thoughts you had of putting in those cerise lambswool curtains you really liked. Luckily, it’s not difficult to get this right; just go to any large housebuilder’s site and see exactly how the experts dress their own show flats. Do something similar, and you shouldn’t go too far wrong. As ever, ask your estate agent’s advice before deciding.

Another tactic to discuss with your agent is holding an open day. This is where prospective buyers view the property on a specific date following a marketing campaign. This increases competition and allows the agent to have their team on-site, perhaps including a mortgage advisor who can work through finance options with prospective buyers. It can work particularly well when each unit is different as people will be keen to secure their favourite, having seen other people attend the viewing.

My final piece of advice is to be proactive in managing the sale. It can be all too easy to leave everything to the estate agent, but yet again, their position is different from yours. If a month passes by without a sale, they’ve simply not earned their commission yet, whereas you’ve another month’s interest to pay on any outstanding finance. This makes your need greater than theirs, and so you should be pushing them hard. Don’t get suckered into a long exclusivity period, as you’ll want to jump ship if the agent isn’t performing. And make sure you’re getting regular updates, not only on the number of viewings but also on viewers’ feedback. Finding out why people didn’t buy can help you refine your sales strategy in the future, possibly with a new agent.

Hopefully, that’s given you some food for thought on sales tactics. Make sure your sales strategy is integrated into your thinking from the start, and you should have every chance of securing a quick sale and a healthy profit.