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It's A Great Time To Be A Property Developer

Feb 28, 2008
Most people in the UK have probably thought at some time or another that life would be better if they were a full-time property developer.

It's an easy dream to feed. Rather than sit at work all day in a job you don't like, slaving to fill someone else's wallet, you can spend your time doing what you want to do, that will make you a profit down the line.

Many of the property shows on TV appear to show how easy it is to be a property developer. You watch someone with no developing experience buy an outdated house, make a series of apparently basic mistakes while doing it up and completely ignore the advice of the expert, and STILL make a serious profit when they sell it.

Faced with that kind of thing happening around you, it would be easy to believe you should jack everything in and go for it, follow that dream and become a property developer.

Of course the reality is a little different. Buying houses, doing them up and selling them on is a risky way to make money. Unless you start with a significant amount of capital, you may find yourself deeply in debt and without a regular income to meet growing bills. If you have a family they may get sick of living out of one room or in temporary accommodation while you bash walls about.

And even if you do manage to turn a profit out of a property, it can take a while to see the cash. Selling a house is never a quick process, and the profits you make must not only cover your cost of living for the period of time you spent doing up the property, but probably also fund your next project too.

Still interested in being a property developer and have the guts to match? Well, this is a great time to do it.

New research from the Birmingham Midshires Bank has revealed that landlords saw the returns on their investments increase pretty dramatically throughout 2007.

It discovered that the total return for an investor was 16.3 per cent in the year. And that compares to a rate of just 13.5% in 2006.

This was despite 2007 being a tough year for the property market. The introduction of the Home Information Packs - or HIPs - slowed the supply of new property coming onto the market. And a number of increases in interest rates made people less able to afford bigger properties, making them more likely to stay in their existing house for a few more years.

Birmingham Midshires says its figures for being a property developer are calculated in a standardized way, so price and rent movements are tracked on a like-for-like basis. The bank claims it's the only organization measuring the rental market in this way.

However, while returns are looking good, the risk element is increasing. As a property developer in 2007, you had to shell out more cash to get a development property in the first place.

The average price of a typical house bought to be done up and rented rose by 10.9% during the year, to an average of 154,795.

The amount of rental yield went up by a smaller margin, rising by 5.4%. And that figure is based on a 3.1% increase in average rent over the year. That makes the average rent charged by a property developer up to 698 a month in 2007, compared to 617 in 2006.

The company believes the fundamental things holding up the buy-to-let market are sound.
About the Author
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