Yet, transforming a small retail or office unit into flats is too small for large housebuilders and even medium-sized developers to be interested in. Enter then a different breed of home builder – the small-scale developer.
Who exactly will these small-scale developers be? In many cases they will be business owners, landlords, or entrepreneurs looking to diversify, however the appeal of small-scale development has broadened significantly during 2020, with many people from all walks of life seeing it as a potential route back to financial security.
Interestingly, becoming a first-time property developer doesn’t take as much skill, experience, or upfront investment as many might expect. The property developer’s main role is to assemble a team, find a good opportunity, and oversee the project ─ in some respects not too dissimilar to a home renovation project, for example, but on a different scale. People who currently work as landlords or who own their own business already have the key skills needed, albeit they need to be trained how to oversee the property development process. It’s not without risk, it’s certainly not easy and it takes time to complete a project, so get-rich-quick merchants need not apply. But as a means of creating significant returns, it’s arguably one of the most highly-leveraged business models there is.
Interestingly, this may provide another lifeline for the UK economy. Small businesses have been hit hard by the lockdown and many business owners are looking for additional or alternative sources of income. Those who lost their jobs in related fields may also be tempted by the thought of working for themselves. Independent developers are also more likely to create interesting, varied homes that provide an attractive living environment, rather than the mass-produced homes often built by larger developers.
How small, independent property development works
Most people are broadly familiar with the buy-to-let model and often feel that property development must be much riskier. Yet, it is possible to get started in property development with a lot less upfront capital than becoming a landlord. It all comes down to the deal you put together.
When you apply for a mortgage, the lender typically looks at you, the individual, first and then the building you intend to purchase to see if it will retain its value. If it all looks good, you get your mortgage.
With property development, specialist commercial lenders will assess the deal first and create what-if scenarios. What if the contractor goes bust? Or the market declines? They will look at your contractor, architect, planning consultant, etc. to see how robust and experienced your team is. Finally, they will look at you, to see if you have the core skills and experience to get the job done within budget. Most landlords or business-owners will already have these core skills and, if they are presented in the right light, will likely be approved.