How to become a property developer – a guide to starting your own business

Thinking of becoming a property developer but not sure where to begin? Read our comprehensive guide for some top tips on how to get started – from getting funding and writing a business plan to doing your research and having an exit strategy.

• How to start your own business
• Setting up a limited company: a step-by-step guide
• How to do a Self Assessment tax return
• Is public liability insurance tax deductible?

What is a property developer?

Put simply, a property developer makes money by improving a property to increase its value. This could be done by building new homes, renovating existing properties, or converting a property from one use to another.

As a property developer, your role is to oversee the project from start to finish. You’ll be required to raise the funding for the project while bringing together various experts to get the job done – from builders and architects to estate agents and surveyors.

When it comes to making a profit, developers generally have one of two options: selling the property to a new owner or renting it out to tenants.

If you’re planning to improve properties and sell them on quickly, our guide to property flipping has more information. Meanwhile read our ultimate property investment guide if you’re thinking of developing properties and letting them to tenants.

What does a property developer do?

Property development businesses take on a varied range of projects. Here’s an overview of some of the most common ways to make money as a property developer:

• building new properties – demand for new homes is always high in the UK, so building properties from scratch and selling them on the open market is popular with many developers
• renovating existing properties – this could be anything from refurbishing a kitchen to building a loft extension to increase a property’s value. It’s important to note that just redecorating a home doesn't’ count as property development
• converting properties – changing the use of a property could significantly increase its value. For example, converting an old shop into flats
• buying and selling land – rather than improving properties, some developers buy unwanted land, get it ready to be built on, and then sell it on to another developer

Why become a property developer?

Building a successful property development business won’t be easy, but there’ll be lots of opportunities to develop properties if you have the funding. That’s because the demand for new homes currently outweighs supply.

The government’s current target for new homes is 300,000 a year, with some estimates suggesting that the real need is closer to 350,000. Official figures show that only 216,000 new homes were supplied in 2020/21, well below the target.

You won’t need any qualifications to start a property development business so you can get started right away. However, you'll need funding and a solid plan if you want to be successful.

Over time, you could build up a portfolio of projects, using the profit from one project to fund the next one.

Property development can be complex and isn't for everyone. This article is just a guide, so if you have questions, please seek professional advice.

What risks and challenges do property developers face?

Being a property developer doesn’t come without its challenges. Not only is your money at risk, but there are plenty of factors outside of your control that could affect your projects.

Here are some of the potential obstacles that you’ll need to be aware of:

• a house price crash – whether it’s on a national scale or in a local market you’re operating in, a reduction in house prices could hit your profits
• high interest rates – if interest rates rise, your mortgage or loan repayments could increase. This could affect your cash flow and delay a project
• project delays or budgeting issues – if a project takes longer than expected or costs more than you planned, this could reduce your profit
• rising costs – whether it's expensive materials or stock shortages caused by supply chain issues, rising costs could stop you from completing a project on time or starting a new one
• a lack of funding – if you can’t get the funding you need to start or complete a project, you won’t be able to make a profit (either through selling the property or renting it out)
• legal issues – disputes over planning permission or land ownership are likely to be expensive to resolve and could severely delay a development project

How to become a property developer in five steps

Anyone can start a property development business, but there are plenty of things you’ll need to get right if you want your new venture to be a success.

Here are five key steps to follow when you start your development business:

1. Write a business plan

Before you start developing properties, it’s useful to write a business plan. This can help you plan how you’re going to run your business, identify your competitors, and consider your strengths and weaknesses.

A property development business plan should include details on the type of property you’re going to develop (residential or commercial) and whether you’re going to build properties from scratch or develop existing ones.

Download our free business plan template to get started.

2. Sort out your finances

You’ll need some funds to start your business and for each of your development projects.

Here are some of the most common options:

• residential, commercial, or buy-to-let mortgage
• bridging loan
• angel investment or crowdfunding
• secured or unsecured loan

3. Do your research

There are lots of things to consider before you buy a property or a piece of land, including:

• where are the best areas for investment?
• if you’re selling or letting the property, who is your target audience?
• which contractors are you going to work with?
• what materials will you use and where will you get them from?

4. Prioritise project management

As a property developer, your role is to oversee projects from start to finish. You’ll need good organisation skills to make sure projects don’t take longer than planned or go over budget. Project management tools like a Gantt chart could help you to stay on top of everything.

You’ll also need to build relationships with a range of stakeholders, such as:

• planning consultants and architects
• quantity surveyors
• accountants and solicitors
• interior designers
• house builders and estate agents
• tradespeople and contractors

5. Create an exit strategy

By planning what you want from each development before you start the project, you can improve your chances of making a profit.

The three most common exit strategies for property developers are:

• sell – putting the property on the market after you’ve completed the development project and increased its value
• let – renting out the property to tenants, earning regular income to fund future projects
• hold – keeping ownership of the property over a longer period with the aim of benefiting from price growth

Do I need to take a property development course?

You don’t need any qualifications to start a property development business. However, taking a course could help to build up your knowledge of things like planning laws and increase credibility with future clients.

There are university courses in real estate development, as well as a range of online courses you could take.

What is the average property developer salary?

The amount of money you could earn as a property developer will depend on the type of projects you do, as well as your exit strategy.

According to recruitment site Indeed, the average annual base salary for a property developer in the UK is £46,295.

Do you have any unanswered questions about how to become a property developer? Let us know in the comments below.