Part 1 of an eight-part series written by Ian and Ritchie for Property Investor News, featuring some of the key aspects of small-scale property development covered by propertyCEO’s ‘8-Pillars’ system. This article appeared in the August 2021 edition of the magazine.

Small-scale property development has become one of the most popular property strategies for existing landlords looking to create greater profits and for new investors who may previously have only considered a buy-to-let model. The impressive returns and significant scope presented by the government’s recent changes to Permitted Development Rights have generated unprecedented interest and a wealth of opportunity. But how can those new to development enter the fray and make serious money without making serious mistakes? In this new series of articles, Ritchie Clapson, co-founder of property development training company propertyCEO, explains precisely how to go about it.

In Part 1, Ritchie considers how new developers can go about establishing that all-important development credibility right from the outset, well before a single brick has been laid.

For as long as many of us can remember, we’ve been told the country needs to build 300,000 new homes every year. And while it never quite seems to happen, the default view is that this must be an excellent opportunity for the likes of Messrs Barratt, Taylor Wimpey, Persimmon, and Co. After all, presumably they’re the only ones with enough scale to move the needle.

But intriguingly, the government believes that small-scale developers will provide one of the biggest keys to unlocking the current housing crisis. And they’re prepared to change the planning system to make it as easy as possible for first-time developers to get started.

The landlords among you might well raise a sceptical eyebrow or two at this point. After all, the last five years haven’t exactly seen a great deal of encouragement from No.10 and its next-door neighbour regarding the property investment sector. So, why would property developers suddenly be on the government’s Christmas card list? The main reason is the ever-increasing number of vacant brownfield sites in the UK. According to the CPRE’s October 2020 report, there is now enough brownfield land to build almost 1.1m new homes. When we add to this the increasing number of retail, commercial, and industrial buildings that have become vacant in recent times, and the dire need to rejuvenate our town centres, we can get a sense of the significant scale and opportunity involved. Covid and the economic downturn have seen many business failures and a change in the way people work and use office space, leading to an increase in the number of available properties and the types of property required. Not surprisingly, the government is keen for brownfield sites to be prioritised ahead of building new homes on greenfield land. However, most of these sites are too small to be of interest to the larger players, who need scale to make their numbers work. Yet for the smaller developer, these relatively simple conversions can typically net profits of between £100k and £500k. It’s small beer for Persimmon, but it can represent a very healthy return for small-scale, first-time developers.

Later in this series, I’ll be exploring the raft of both existing and new permitted development rights (PDRs) that allow developers to unlock the value in these smaller projects while minimising the planning risk. But for now, let’s start by looking at how you should go about getting into small-scale property development and exactly what’s involved. The first thing to appreciate is that property development is a business and not a ‘strategy’. Like all good business models, having an underlying system to follow will make a successful outcome far more likely. Over the past forty or so years, I’ve built a system around eight key elements that comprise the cornerstones of successful development. These ‘8 Pillars’ are:

  1. Gaining Credibility – how to start your journey with credibility from Day 1
  2. Building Your Team – how to find great professionals who will deliver your projects
  3. Setting Up Your Business – your ideal business structure and business plan
  4. Project Finance – sourcing the money to fund your deals
  5. Finding Deals – how to find great deals that stack
  6. Analysing Deals – running the numbers to find profitable deals
  7. Planning & Permitted Development – finding the best opportunities with the least risk
  8. Delivering The Project – making sure your project runs smoothly

Branding isn’t a subject that many of our students expect to see as the first stage of their property development journey. After all, surely it’s more a concern for sportswear and soft drinks manufacturers than it is for budding small-scale developers? True enough, but here’s the thing; branding underpins credibility, and credibility is critical for anyone looking to develop property. The reason is simple; all the people you deal with as a developer have a lot riding on you not being a complete fool. Why? Because there’s serious money at stake for them. The estate agent only gets paid once your sale has completed successfully, your architect needs to know you will pay their fees, your private investors need to know their money will be returned to them at some point, and your commercial lender is going to be lending you hundreds of thousands, if not millions.

Given that your journey as a developer isn’t going to get out of the hangar, let alone off the runway, without these people on board, it’s critical that you instil confidence right out of the blocks.

But hold on a moment; surely your credibility will depend on you having a decent track record with at least a couple of development projects under your belt? How can you be a credible property developer if you’ve never developed property before? Won’t that be the shortest interview ever: “Tell us about your previous development experience, Mr. Smith. Ah, I see. Well, don’t call us; we’ll call you.” A vicious circle if ever there was one? Well, if that were the case, then we’d have run out of property developers a long time ago. New developers are the lifeblood of the industry, and the excellent news for everyone involved is that successful first-time developers usually go on to do many more projects. So, all these agents, professionals, and investors will accept you’ve not developed before and will still want to work with you. They just need to kick your tyres a bit first, and that’s where branding can really help.

But before I tell you how to get yourself all branded up, there’s a mindset shift that I need you to make. And it starts with the question, ‘what do people see when they look at your fledgling property development business?’. The tendency can be to imagine people seeing only yourself, the newbie developer with no experience, just a bucketful of hope and aspirations, and a pair of suspiciously mud-free site boots. So, if that’s what you were thinking, I’ve got some good news for you; you look a lot more credible than you think. The reason is straightforward enough; property developers don’t build houses, a simple yet somewhat disingenuous fact. Yes, property developers cause homes to be built, but that’s not the same thing at all. As the developer, you won’t be expected to design the superstructure, recite the Town & Country Planning Act, dig foundations, or lay a row of bricks. You won’t even need to choose the curtains. The reality is you’ll have a team of experienced professionals around you who will perform all these tasks for you; people such as architects, structural engineers, project managers, contractors, and interior designers. And they’ll all be keen to work for you because they’ll get a fee for their efforts, rather than a share of your profits. Better still, their fees will be met by your development finance and not out of your own pocket.

If we look at the CVs of your professional team, they’re rather impressive, with many counting their experience in decades. An average team might have over 300 years’ development experience, with several thousand development projects between them. Do you think they could knock up your half-dozen flats? Of course they could; it’s what they’ve collectively done all their working lives.

So, back to the mindset shift. When people look at your development brand, we don’t want them to see only you. They must also see this incredible team of professionals that you’ve pulled together. They may not be your employees, but they’re still on your team, and they’re the ones that will be doing most of the work.

You’re simply the CEO of a development business, the entrepreneur that has brought this team together. An analogy that I like to use is that of a cabinet minister. Today, they may be the most important person in Defence, yet one reshuffle later, they could find themselves heading up the Department of Health. How can the top person in the Health department be appointed despite having zero health experience? The answer is that their skills lie as a departmental head, effectively a CEO. They’ll be inheriting a large team of civil servants and advisors who have millennia of health experience between them and who provide all the knowledge and technical expertise needed for the minister to run the department and make any necessary decisions. That’s effectively the same CEO role that you’ll be playing; heading up your team of professionals who bring all the technical experience to your business.

Hopefully, you’re now feeling a bit better about your lack of development experience. So where does branding fit into things? Well, while your team of professionals may be doing much of the technical heavy lifting, it’s your responsibility to find the deals, crunch the numbers, source the finance, and ensure the project gets off the ground. This means that you’ll be the one who engages with commercial agents, vendors, lenders, brokers, private investors, as well as hiring your team of professionals. And, no surprises, you’ll need to come across well if you’re going to get them all onside.

So, what are your tools of the trade, branding-wise? Firstly, you’ll need a name for your business and a logo. I’ve seen some people agonise for months over this, yet we give our students just 24 hours. Why? It’s because you’re the only person in the known universe that cares what your development business is called or what colour the logo is. So, every minute you spend designing a logo is a minute you’re not hunting for your first deal. That’s not an excuse to be sloppy; the key goal here is for your brand to look ‘professional’; however, you can quickly and cheaply outsource logo design and make a point of giving yourself a deadline of tomorrow morning to come up with a name. Note that your business name doesn’t automatically need to be set up as a limited company since you will have to set up a separate limited company for each project you undertake anyway.

Now you have a name and logo; you’ll be needing a business card and a website. Again, don’t overthink it. You’re not trying to stand out from the crowd; you just need to look professional. For business cards, avoid anything quirky or gimmicky, as they look like you’re trying too hard. Good quality, rectangular cards without your mugshot on the front are the way to go. Insert your logo, name, and contact details together with your website address for good measure, and your work here is done. Just don’t be tempted to save pennies by buying cheap cards; they’ll cost you more in the long run. Your website is next, and it’s important to understand the critical role it plays in underlining your credibility. New developers often make the mistake of believing they’ll have untold hordes descending on their website from the ether; however, the reality is that even your mum will struggle to find you on Google without scrolling through page after page of listings. Luckily, we’re not trying to get ranked, as the only people that will be visiting your website are people you’ve already met or who have heard about you. Just let that sink in for a moment; the only people who will see your website are the estate agents, professionals, private investors, and commercial lenders that you’ve already spoken to. And the only reason they’re looking at your site is to check out your credibility. So, the same rules apply – keep it looking professional. Five or six pages covering your business, your personal bio with a headshot and those of your team, relevant case studies or projects if you have them, plus a home page and contact page is all you need. Use good quality images, but don’t make things look too busy, and go for a traditional layout. Critically, outsource the copywriting if you’re not an excellent wordsmith, as it’s an area that can let many websites down. Also, use a web designer or website template provider to create your website rather than going on a WordPress crash course yourself. You have far better things to do…

One of the biggest mistakes I see people make with branding is that they believe it starts and ends with a business card and a website. The reality is very different; your brand is everything that people see of you and your business. Humans have evolved to make snap judgements about people based on scant information. Walk into any room, and you’ll be instantly judged by those present, even before you’ve opened your mouth. The solution? Make sure you look professional in every situation where people might judge you. Yet, the property developer with the sharp suit, snappy business card, and whizzy website will still encounter problems if they fail to inspire confidence when they engage in conversation, which leads me to the final key tool in your armoury, the all-essential elevator pitch.

In this context, your ‘elevator pitch’ is simply your ability to convey what your development business is all about verbally. It’s certainly not a script, but it is something you need to practice, practice, and then practice again. Development is a people business, and everyone you’ll do business with will meet you. You’ll be presented with formal and informal speaking situations, ones that last from ten seconds to half an hour, and to a whole range of different audiences (hint: it’ll mostly be the same people that visit your website). You need to be 110% comfortable dealing with all these situations and coming across as a knowledgeable, focused, and professional businessperson who’s passionate about what they do, whether networking, attending a viewing, or wooing an investor. Above all, your values should be transparent, as it is these that people will ultimately be buying into.

So, there you have it, some of the critical elements that will underpin your credibility as a new developer. Next month, I’ll be looking at how you should set up your business from Day 1, making sure that you minimise your tax bill in the process.

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