How to Become a Property Developer

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Britons love to invest in bricks and mortar as a way to grow their wealth or even as their primary career. Recently the UK housing market took a slight hit from Brexit, government regulations and the Coronavirus pandemic but it’s still a viable long-term (25 years), inflation protecting, investment route that can yield fantastic returns if you do it right. It’s also important to note that, in general, the house price trend is an upward one, and any blips are likely to be only temporary. There are forecasts that indicate that the market is expected to continue growing in the coming years and some areas of the UK have some golden opportunities for the shrewd property developer.

The main strategies for property development are as follows

  1. Buying residential property to renovate for sale or rental
  2. Buying commercial property and converting to residential
  3. Building a second home or commercial premises
  4. Buying land for a ground-up development
  5. Investing in land, securing planning permission then selling to another developer

In this guide, Think Plutus will show you how to become a property developer and offer advice and insights into how to make the most of this exciting venture. We’ll start with the fundamental requirement: the property development business plan.

Creating your property development business plan

On a basic level, business plans are all alike – they give a detailed overview of your intentions for the business alongside strategies for how those goals will be achieved. If the plan is purely for personal use, it won’t be necessary to go into such forensic detail as if you were starting up a full-fledged property development business that would require investors. Nonetheless, there are a few key elements that you should be absolutely clear on before you begin putting your own money down.

On a basic level, business plans are all alike – they give a detailed overview of your intentions for the business alongside strategies for how those goals will be achieved. If the plan is purely for personal use, it won’t be necessary to go into such forensic detail as if you were starting up a full-fledged property development business that would require investors. Nonetheless, there are a few key elements that you should be absolutely clear on before you begin putting your own money down.

Consider the following:

  • Who is the target market for your properties?
  • What sort of properties will your target market find most appealing?
  • Where will your funding come from?
  • What timescales and costs do you estimate for construction/renovation?

Experienced property developers will tell you that you should obtain an estimate of the total value of your development project from a bank surveyor rather than an estate agent. Your cashflow is paramount in this type of project and you must plan for paying the bills whilst you wait for a property to sell.

If you are reaching out to investors you should make your plan very clear and as concise as possible. It needs to emphasise the key aspects so that potential investors can quickly understand everything they need to know. In addition to the things listed above, you must also include:

  • The structure of your company
  • Financial targets and projected returns
  • Construction strategies
  • Market research

The financial targets will be the biggest eye-catcher for investors but your market research will add weight to your projections. You need to demonstrate the strength and relevance of your business plan to give investors confidence that their investment will pay off if they back you.

But-to-let vs buy-to-sell

Amongst the core decisions you will have to make, one of the pivotal choices is between buy-to-let or buy-to-sell for your business model.


With a buy-to-let business model, you would have to purchase a property to renovate which you will subsequently rent out to tenants. The rental payments you receive will pay off the mortgage on the property and provide a little extra profit as well.

This is an attractive option, particularly in light of the fact that high house prices in UK towns and cities has created a huge market for quality rental properties. But it’s important to understand that you will ultimately have to take responsibility for the maintenance of the property. You will have to do things like:

  • Arranging repairs
  • Organising regular inspections of smoke detectors and the boiler
  • Finding tenants and checking their background and affordability

Of course, a letting agency can carry out much of this work on your behalf, but they will charge for their services, which will eat into your profits.

Buy-to-let can be great for generating a long-term income stream, but it is not a good option for making lots of money quickly. It will take discipline and dedication, and you must acknowledge that the needs of your tenants are all-important (after all, they are the source of your income). It would be wise to plan for void periods as it’s likely there will be times when the property sits empty whilst you search for a new tenant.


This buy to sell business model is sometimes known as property flipping. It involves purchasing a property, holding it for a short period of time, then selling it on again. To make this strategy property, you generally need to target properties that need improvements. Whether it’s renovating the interior or converting the loft into an additional bedroom, you must identify opportunities to increase the value of the property so that you can sell it for more than the cost of the purchase plus renovations. The more work required, the greater the risk, and the bigger the potential for profit. However, it is advisable to start small in order to get a handle on the process.

It is vital that you stay on top of costs during the process of renovation/construction, which is why a detailed plan is required from the outset. It is also wise to include some leeway (usually a minimum of 10%). It is very rare that a project comes in under budget, with most costing more than initially expected.

The contacts you have to call upon can make a huge difference with these projects, so be sure to build relationships with architects, builders, electricians, plasterers and other tradespeople who you can trust to do a good job. Many people attempt to do some of the work themselves to keep the costs down. The major benefit of this business model is that if you are successful in selling for a profit, you’ll get an instant lump sum of cash. This can then be reinvested in your next project, enabling you to build a portfolio much more quickly.

Reality check

In all likelihood, if you stick with property development you will probably shift between these two business models. A property that you initially bought for rental purposes may be a good candidate for selling after a few years, or you may want to use the profits from a buy-to-sell property to invest in a buy-to-let. The state of the market can shift too, which will have an impact on your approach, so it’s important to be flexible.

Experienced developers will advise you to plan an exit strategy. If your objective is to resell the property, budget for having to sell for 10% less than today’s market value. The market can be unpredictable and challenging so it’s wise to give yourself a safety net. If prices drop, you’ll have given yourself a buffer. If, however, prices slide away and the property doesn’t sell, you will have finance in place to take out a buy-to-let mortgage if necessary.

Whichever route you choose as your primary business model, you must always carry out thorough research. There are no shortcuts!

Buying property: personal purchase or via a limited company

When starting a property development business, you need to decide whether to buy property as a sole trader or set up a limited company through which you will purchase property. There is lots to consider, with complex tax considerations in both cases. Financial advice can be invaluable in making the right decision, but the following general advantages apply:

Advantages of buying as a sole trader: It’s complex, but capital gains tax can be lower for personal property owners, compared to corporation tax and dividend tax, particularly if you plan to sell property regularly. If you remortgage to release equity on property you own no tax is payable, compared to taking money out of a limited company.

Advantages of buying through a limited company: Unlike a sole trader, you will be able to offset interest costs against the rental/property income. You will only pay Corporation Tax on your profit, which is currently 19%, as opposed to being liable for the personal income tax up to the higher rate of 40% or the additional rate of 45%. Income can be reinvested into other properties to help reduce your tax liability further, since you are only taxed on end-of-year profits. However, when you take money out of your limited company via salary or dividends, you could end up paying nearly as much tax overall.

Read more on limited company buy to let mortgages.

Doing the market research

Before you spend a penny of your investment money, you must do all the calculations and have a comprehensive understanding of your chosen area. You need to know what buyers or renters look for in that area and what sort of property you can afford on your budget.

Location is everything

You will undoubtedly have heard of the famous UK property television programme, and it’s a cliche, but the property market is all about location, location, location. This doesn’t always mean you need to buy property in the ‘best’ part of town, however. Whether you are investing in the resale or rental market, you can be pretty sure that prices will already be close to their peak, and the property values won’t increase significantly. Instead, look for areas that are right on the cusp of becoming hotspots where house prices will soar.

A good rule of thumb is to target properties on the fringes of the popular areas in town and cities. Waves of gentrification are likely to continue spreading out as more people are priced out of the areas themselves. There are plenty of resources online to find data about the prices of houses sold in different areas – try a search on Rightmove, for example.

Try to get into the mindset of your target market. Transport links are essential, and young professionals and students love to have bars and restaurants within walking distance. Families, on the other hand, will want a safe environment with access to good local schools.

Familiarise yourself with the local estate agents and reach out to them – they can advise on what buyers and renters in their area are looking for. Check in with them regularly to get to know them and keep your finger on the pulse of the local market. If they have a good relationship with you, they will give you the inside track on the latest prospects that meet your requirements.

For buy-to-let business models, university cities are a great option as they are known to have a high success rate for buy-to-let investors. Student numbers are ever-increasing and the need for student accommodation has never been higher, so you’ll be able to generate solid returns that are guaranteed for 3-5 years.

Furthermore, never rule out more unconventional property sales. Auctions can yield superb opportunities for property investment, as long as you are well-versed in the process and the potential pitfalls. Be aware that a deposit is payable on the day of the auction for any property and this deposit will not be refunded if everything falls through, no matter the reason. You could also look at repossessions which, though less common today than 5-10 years ago, offer similar value for investors as auctions. Again, having good relationships with estate agents can help get you access to these types of sales.

Calculating Return on Investment (ROI) or rental yield

In any business venture, the objective is to get a return on your investment. This goes for property too and it’s important to get the maths right and be accurate about what your costs will be.

Buy-to-sell ROI

The basic formula for calculating buy-to-sell Return on Investment (ROI) is quite simple.

However, with some property financing methods, you may find that the purchase price is not straightforward. You should only include the money you have actually put up meaning, in most cases, the deposit you put down on the loan or buy-to-sell mortgage.

Incidentally, a conventional mortgage probably won’t be appropriate for a buy-to-sell property. Of course, the loan amount will have to be repaid when you sell the property, so factor this into your calculations. The goal is for the property to increase in value enough to yield a healthy profit after all expenses and loan/mortgage interest repayment.

Cash Purchase 

Net Return = Sale price – (Purchase Price + Costs)

£300,000 – (£200,000 + £35,000) = £65,000 

ROI = Net Return ÷ (Purchase Price + Costs) x 100

£65,000 ÷ £235,000 x 100 = 27.66%

Financed Purchase

ROI = Net Return ÷ (Deposit + Costs & Interest) x 100%

£65,000 ÷ (£50,000 + £45,000) x 100 = 68.42%

The real challenge is working out all your costs. The majority of this amount will be what’s spent on renovations and construction on the property. However, you will also need to consider the costs of arranging the finance, the loan/mortgage repayments you have to make, solicitor fees, survey fees, estate agent fees and bills like insurance, utilities and council tax.

Tax implications from buying/selling will also need to be taken into account.

Buy-to-let ROI and rental yield

While there is no fundamental difference between buy-to-sell ROI and buy-to-let ROI, the latter is a little more complex to calculate. You will need to work out the annual return on your rental property as a percentage of the purchase price.

Gross yield

Gross yield is the annual rent divided by the purchase price.

Annual Rent ÷ Purchase Price x 100

First comes the simple bit – calculating the total annual rent. Simply multiply your monthly rent by 12. So, if your tenants pay you £1,250 per month in rent, the annual rent would be £15,000. It is then a matter of dividing this amount by the price you bought the property for multiply by 100 in order to get the percentage.

Let’s say you paid £250,000 for the property – the sum would look like this:

£15,000 ÷ £250,000 = 6%

So in this example, you achieve a gross rental yield of 6%. Unfortunately it is never as simple as this in the real world, to get a true rate of return you will have to account for costs.

Net Yield

In order to get a more accurate level of return you will need to consider the expenses associated with the purchase (survey costs, agent fees, etc.) You also need to factor in the costs of arranging and paying for your property finance, such as a buy-to-let mortgage.

Net yield is another simple calculation:

Cash Purchase

(Annual Rent – Costs) ÷ Purchase Price x 100

(£15,000 – £2,000) ÷ £250,000 = 5.2%

Financed Purchase

Annual Rent – (Annual Costs + Mortgage Interest*) ÷ Purchase Price x 100

£15,000 – (£2,000 + £6,563) ÷ £250,000 x 100 = 2.57%

*Based on a 75% LTV buy to let, interest only mortgage at 3.5%


Let’s return to our example to examine buy to let return on investment (ROI) in more detail. The purchase price was £250,000, and a buy-to-let mortgage usually requires a 25% deposit. In this case, your deposit would be £62,500. Annual costs can vary, but let’s say they add up to £2,000.

We now need to calculate the cost of the financing. Buy-to-let mortgages usually come on an interest-only basis, wherein your monthly payments cover the interest on the amount borrowed rather than gradually paying back the capital itself.

If the interest rate was 3.5%, the cost of the mortgage would be 3.5% of the loan amount. Bearing in mind you put down £62,500 of the £250,000 purchase price, the loan amount stands at £187,500.

You need to calculate 3.5% of £187,500, and the easiest way to do this is to multiply 187,500 by 0.035. The answer is £6,563.

You now have all the elements you need to give you a pretty accurate idea of your annual ROI.

The sum will look like this:

ROI = Rent – (Costs + Mortgage Interest) ÷ Deposit x 100

15,000 – (2,000 + 6,563) ÷ 62,500 x 100

6,437 ÷ 62,500 = 0.103

0.103 x 100 = 10.3%

This is a very healthy return, but you will need to consider other expenses like stamp duty, tax, maintenance, insurance, letting agent fees and anything else you have to pay out. These will eat into your profit. Furthermore, the calculation above assumes the property will have tenants paying rent for all 12 months of every year – in reality, you will need to budget for periods where the property is empty.

If you brought the property mortgage free, your buy to let ROI would be the same as the net yield.

In order to make buy-to-let economically viable, you must get an accurate figure for what needs to be charged in rent. You must also be very clear about what you can afford to pay for a property.

Getting the timing right

They say comedy is all in the timing – well, the same is true for a successful property development. When searching for the right investment property, you need patience and discipline to carry out the research properly. Analyse the sale prices in the areas you are looking at and calculate both the floor and ceiling price for your target property type. Next, try to shed some light on what is driving the difference between these two values. What are the key factors? Look for things like:

  • The quality of the interior
  • Proximity of good schools
  • Good transport links
  • Proximity to a popular high street

You must also take the same forensic approach to choosing an area to invest in. Many people start off somewhere fairly close to home as you’re more likely to have a good understanding of the area. However, you may need to cast a wider net if you are to find a location with real potential for growth. Keep an eye out for areas where properties are quick to sell and you can already see construction and investment taking place – these are good indicators of a location that’s on the rise.

Never let estate agents hurry you into a purchase before you have completed your research. Estate agents can be a useful resource but, ultimately, their job is to sell properties as fast as they can for the highest possible price. Be steadfast if they start to apply pressure for a quick decision – it’s better to lose the property than to make a hasty decision and overlook a serious problem. The wrong investment can become a money pit that no-one wants to buy or rent.

Having said that, once you do find a property that meets every one of your requirements, you must act quickly to secure it. When looking in popular areas, the property market moves at a fast pace, so you must be decisive to get your hands on the right property. It’s not good to overpay, mind – you have set a budget and you should stick to it. If someone else outbids you, it’s possible they have advantages you don’t (perhaps they are a skilled tradesperson, for example). It may even be that they are simply more optimistic about the property market in the location.

Experienced property investors have an adage that you should take on board: “Never regret the deals you don’t do”. Keep this in mind when a property slips through your fingers.

Renovating a property for resale or rent

Speed is of the essence when carrying out renovations. The faster you can get a property ready, the faster it can make you money. Having said that, you should never cut corners – potential buyers or tenants will notice rough edges or a sub-par finish and this will put them off. The following points need to be considered when doing up a property:

Picture your ideal buyer/tenant

The golden rule of property development is that it isn’t about you. Every decision you make should revolve around shaping the property into something that will appeal to the maximum number of people.

Resist the temptation to over-personalise an investment property and approach the process as a business at all times. One particular recommendation is to avoid using too much colour since what’s bright and rich to one person will be garish to another. Magnolia walls may be plain and dull, but they make a room feel larger and present as a blank canvas for the buyer or renter to customise as they please.

You should also stay away from blowing the budget on elaborate fixtures and fittings, particularly if the location is a mid-priced area. Consider your target audience and what they would expect. A student renter may have no need for, or appreciation of, a stylish bathroom suite, whilst young professionals may be willing to pay that bit extra for a property with style and elegance. At the end of the day, area has the biggest influence on price, so look at property sites to see what is selling and learn more about the style of interior found in properties with a higher price tag.

Stick to a schedule

When carrying out property renovations, project management is a key skill. You need to know exactly when and how every element of the renovation is occurring and keep track of costs.

Ensure you have a handle on every single detail and avoid the expense of having to change your plans during the renovation. A good way to keep on top of this is to produce a detailed specification sheet that lays out the changes to be made in each room – every replacement, every inspection/test and everything that is to remain untouched.

Seek out good project management tools – there are plenty to be found!

Cover all the basics

There are certain things that every buyer or renter will expect from the home they are moving into. If you come up short on any of these things it is sure to cause you problems, so consider the following:

The boiler

Until something goes wrong, you may never appreciate just how important your boiler is. It warms the home, makes your bath or shower the ideal temperature and even does its bit in the kitchen (ever tried doing the washing up without hot water?)

Boilers come in a variety of shapes and sizes, but you should do your research thoroughly to ensure you get the right boiler for your property. Factors to consider include where it will be stored, how powerful it will need to be for the property and the type of pipework present. Consider the boiler carefully when carrying out renovations.


No matter the buyer or renter, everyone wants to feel safe in their own home. Therefore, you have a responsibility to meet this need.

This is particularly important for a buy-to-let property, as landlords have a legal responsibility to ensure properties meet a set of basic rental property security needs. One thing to consider, for example, is that the exterior doors and windows must be lockable. The money you invest in security will lower your insurance premiums – there is no legal requirement for landlords to take out insurance, but many buy-to-let mortgage providers insist on it.

For higher-value properties, the home security needs are likely to extend beyond simply providing lockable doors and windows. An intruder alarm will be important, and it may be worth including a guard response system and CCTV. There is plenty of advice out there to help you identify the security needs of your property.

The kitchen

The amount you spend on your kitchen will depend largely on your target market. It’s a key part of most homes, so you will need to plan the space carefully. As a bare minimum, it should be a clean space that does what it needs to do. Consider things like how the occupants are likely to use the room, how much storage is needed, and how easy it is to access the sink and other fundamental appliances.

Remember: landlords have a responsibility to ensure that all electrical appliances are safe at the beginning of a new tenancy, so have them inspected regularly and upgraded when necessary.

While the expense of this can be significant, a good kitchen will make your property more appealing to renters. You will also reduce the risk of fire from faulty or outdated equipment. Legally, you must ensure any appliances that use gas are checked regularly by a Gas Safe registered engineer, and for Houses in Multiple Occupation (HMOs), portable appliance testing (PAT) must be carried out at least once every five years.

The garden

Many buyers and renters place a huge amount of value on outside space, so if you invest in a property that has a garden you should try to make the most of it. Your target market is key, once again – families with children will often want an open lawn, while professional couples would prefer something low-maintenance, and students may just want a nice space to sit and relax in the sun.

Think about the positioning of the sun. If there’s an old shed occupying the sunniest spot in the garden, it might be worth removing it and installing a pergola to make the garden more usable and desirable.

Financing your property development

We have detailed guides on property financing, but here are some basic options for financing your property development:

  • Cash – Rarely an option for people just starting out, but it may be a good one later in your journey.
  • Buy-to-let mortgage – If you plan to rent out a property once it’s developed, a standard residential mortgage will not be sufficient. Buy-to-let mortgages usually come on an interest-only basis and require a large deposit along with higher interest rates and bigger fees than a standard mortgage.
  • Buy-to-sell mortgage – A standard mortgage also won’t be sufficient for developers wishing to buy, renovate and resell a property. You will need to look for a buy-to-sell or flexible mortgage, which will involve higher fees and require a larger deposit.
  • Bridging loan – This is kind of short-term, high-interest loan used by people who buy a property whilst trying to sell another. Property developers often use them because of their short-term nature. They are secured loans, so you will probably need to own property or land against which the loan can be secured. You must have a clear exit plan for how the loan will be repaid at the end of the term.
  • Property development finance – This is generally offered to established, experienced property development businesses. It’s essentially a form of business loan, so turnover and other financial figures are taken into account.
  • Personal loan – If you’ve inherited a property that needs some work, or you need a little extra cash for renovations, an unsecured personal loan is an option to consider.

Key thoughts

The most important thing to know about property development is that it is not a short-cut to wealth. Analysts cautiously predict that the market will recover over the medium term, but it will be some time before people start experiencing the massive gains that were possible in years gone by. However, if you approach it with discipline and organisation, the long-term investment potential is good.

If you want to start a property development venture, complete the following six steps as your due diligence:

  1. Produce a detailed property development business plan
  2. Decide whether your main objective is buy-to-sell or buy-to-let (or a combination of the two)
  3. Perform thorough research of your market – what’s selling, how much for, and what do buyers look for?
  4. Calculate your ROI/rental yield to get an idea of the financial viability of your plans
  5. Identify your target market so that you can plan around what they are looking for
  6. Sort out your finance – there can be no property investment without money, so explore your options and consider seeking advice to make the right choice

You’re ready to go – best of luck!

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