Property renovation falls into two categories: light refurbishment or heavy refurbishment.

Light Refurbishment

These renovations focus on the curb appeal of a property and the general aesthetic once inside. There is no need to apply for planning permissions or building regulations, and the use of the property is never changed.

Light refurbishment is a popular strategy for first-time developers; for minimal effort, a property can be purchased, ‘done up,’ and then introduced to the rental market. Property developers spend less money with this approach and, in principle, the turnaround time is also very little. The disadvantage with these renovations, however, is cosmetic changes to a property can only go so far. If you are looking to sell the property on, it is recommended that you consider heavy refurbishment to see larger profit margins.

Heavy Refurbishment

This renovation strategy involves structural changes to a property, whereby you will need to obtain planning permissions and regulations. The returns will justify the time and effort you put in; these refurbishments are a prime example of speculating to accumulate.

Heavy refurbishment can see internal layouts change, perhaps extensions added, to make a property fit for residential use. However, they can also include converting commercial or office buildings into residential homes and barn conversions.

In any instance where you need to apply for planning permission, you must surround yourself with the right professionals. When changing the use of a property, or even when you seek approval for a new build, you will need to work with a planning consultant. In more straightforward planning applications, an architect may be able to complete this step for you.

Large Scale Conversions

With larger scale conversions, such as converting larger properties into HMOs, you may not specifically require planning permission. This change is possible in England as the General Permitted Development Order (GDPO) allows the conversion of a Dwelling House (use class C3) to a C4 HMO. However, this change of use is subject to certain limits and conditions, and there are important exceptions.

Additionally, it is crucial to be aware of the legal procedures. Failure to do so can result in fines of up to £20,000. For more information about HMO conversions specifically, download our free ebook on this website.

At the other end of the scale, property development can also refer to building new properties on empty plots of land. When considering a project on this scale, the most important thing to do is to surround yourself with a skilled team of professionals. For example, with more complex projects and especially new builds, an architect is needed to turn your plans into accurate drawings. These drawings are paramount for collecting accurate quotes and providing a detailed plan of action for builders and contractors.

Property development is not about how much work and renovation you take on with a property. Instead, it is merely about adding value so you can maximise your return on investment. If a property is only needing cosmetic work, a lick of paint and new flooring; as long as it is physically improving the building, you will be making money.

When you’re looking for ways to increase the value of a property through development, you’ll be surprised just how easy it can be.

A significant way to increase a property’s popularity is by assessing the demographic of the local area. If a single property is standing empty in a vibrant, urban location, it may not be suiting the needs of the current buyers in that area. Such a property could achieve significantly higher yields as an HMO or being converted into self-contained flats, attracting young professionals or couples.

Similarly, smaller properties with limited bedrooms may not appeal in neighbourhoods where schools are nearby. In this instance, by developing the property and converting the attic into bedrooms, or by extending into the garden or garage, the property would be more appealing to young families.

Other sticking points for buyers tend to be the lack of an upstairs bathroom, dark and dingy kitchens, as well as limited access to a garden and outdoor space. Rectifying these issues is not a particularly big or expensive job; however, for a family or an elderly couple, it is the inconvenience that these renovations would cause that puts them off.

Moreover, some buyers lack the imagination and ability to reimagine a room. When viewing a potential property, many are unable to see through dated decor and poorly maintained properties. As a developer, creating a clean, cosmetic finish is so easy and, crucially, these smaller touches will help to sell-on or let-out your property.

If you are keen to take on heavy refurbishments or a change of use project, work with the owners of the neighbouring land or properties. The last thing you want to do is cause any animosity. By communicating your plans and finding ways to reduce any negative impact, you are more likely to keep them on board with your project.

Accurately estimating a time plan and producing a breakdown of all your costs is extremely difficult, especially to a first-time property developer. Any mistakes will cost you further down the line, and your profit margins will take the hit. This is why it is recommended for new investors to work their way up with a few low-risk projects.

A sensible way to protect your finances is to prepare for unexpected setbacks and delays. Plan for the worst-case scenarios; once the project is completed, can you afford to keep the property if you are not able to sell for three months? Similarly, if there is an issue with contractors and parts, have you got any room to move on your budget?

There are two common ways to fund a development project. Depending on the scale of the venture, people either opt for development financing or a regular mortgage.

Development Financing and Mortgages

Similar to a mortgage, development financing is a loan which is secured against an asset. What makes these two options different, however, is development financing provides you with the funds to complete the original purchase and can also be used towards any refurbishment or construction costs.

When it comes to deciding between the two standard options, it comes down to the size of your development. Development financing is excellent help on much larger developments, where there will be sizeable spending. If your estimated costings are coming under £25,000, then a regular mortgage is the best course of action.

For more in-depth guidance about managing your finances and how to work out your costings, read our Property Development eBook.

Once you’ve done your property search and thoroughly researched your contenders, it’s time to seal the deal. Auctions are a great place to pick up a bargain, as long as you remain level-headed and don’t get swept along with the proceedings.

When purchasing at an auction, it is vital to remember you will need to make your financial arrangements before the auction taking place. You will require a 10% deposit with you on the day of the auction to secure a deal. The remaining 90% is then paid within 28 days

It is essential to decide your exit strategy before you begin any search for development land for a property. Are you developing a property intending to sell or rent once the work is complete? Who is the target market of your property development? Knowing the answer to both these questions is critical before you begin. Every decision you make regarding your finances, the property’s layout and finish, will be impacted by your exit strategy.

It is also vital to do your homework and view any potential properties, or land, so there are no nasty surprises. When you go-round with an estate agent ask plenty of questions and always consider the local area too.

If you would like any further information regarding property development and choosing the right exit strategy, you can download our free ebook from the top of this page. Alternatively, we have our Property Forum Chat Show podcast on YouTube where you can learn from the best experts in the property industry.