The Perks & Pitfalls Of Property Development

Ever considered a career in property development? Perhaps unsurprisingly, many women have. After all, it’s a fantastically flexible career that fits neatly round motherhood and can lead to huge financial wins if you play your cards right. No commute, no nine-to-five, no boss to answer to – and so much to gain in terms of satisfaction and remuneration.

For Hackney-based property developer and mum of three Nicole Bremner, the last five years have been a whirlwind – at a time when many property companies are struggling. As Nicole’s book BRICKING IT documents, she went from a struggling stay-at-home mum to property developer with a multi-million-pound portfolio. She is the founder of property company East Eight (east-eight.com) which she built from scratch. But how? Belle decided to find out more…

“I’ll happily admit that when I started out in property I knew nothing. I’d already tried a whole host of entrepreneurial ventures but none made a real contribution to the family finances. Like many people my first property development project was my own home. I learnt by doing it”.

Nicole likens the property journey to childbirth – if you remember in detail the emotional rollercoaster you went on, you wouldn’t do it again. “Many people renovate a property and never want to do it again. It is difficult, things don’t go to plan and you need to rely on so many external parties that it’s hard to keep things to a schedule.”

It’s certainly not for the faint-hearted. The profit from Nicole’s first property deal plus some family savings were needed to kick-start her company. She admits that there have been nights spent lying awake worrying about the risk involved in her property deals. But there are many rewards. “The best bit about a property career is that I’m being creative and building homes that people aspire to live in. I’m also doing my bit to ease the housing shortage”.

Many would consider it too much of a risk to invest in property at this difficult time in the UK market. The answer for them could well be crowdfunding. Nicole has now crowdfunded six projects enabling investors (many of whom are aspiring developers themselves) to invest in a project without taking on the work of the development themselves.

‘With crowdfunding, new investors or developers can dip their toes into a project for a smaller investment share, have a front row seat in its development and learn from the process. Many smaller or new developers have started this way.

My advice is to avoid those deals where the risk is high and the return or yield looks disproportionately low (there are many of these out there), especially if you have little track record. Start small, work with others and see it all as a learning curve.’

Learning from the best is a distinct advantage. At the start of her property journey Nicole’s goal was modest; to complete one to two houses a year and safely build up her pot. But then she met property developer Avi Dodi, who is now her development partner. “Working with someone who was more experienced gave me the chance to learn on the project and piggyback off his experience, expertise and contacts. I learned about development finance and joint ventures; the two tools that have allowed me to scale up my business like nothing else”.

Here Nicole talks us through the pitfalls of being a property developer…

The financial risk

In most cases it’s not plummeting prices that wipe out developers. Bankruptcies occur when developers over-leverage and lenders recall loans. The onus is on you, the developer, to be prudent in your debt levels.

Being realistic about income

Choose your property business strategy based on your income needs and how much cash you have available. Do you need a regular income? If so, consider an income-producing strategy, such as buy-to-let.

Getting funds in time

Valuations usually coincide with the exchange, which is a huge high. But then you have a set number of weeks to secure the debt and equity. This can be really stressful. If you don’t have a large pot to invest and you’re not a sophisticated and high net worth investor, think about crowdfunding. This can be done through a reliable platform like www.simplecrowdfunding.co.uk, which takes a lot of the stress out of the process for you. If you’re looking to turn your property into a leisure or tourism attraction, you can apply for a start-up loan from a company such as Folk2Folk who specialise in investing in startup businesses.

Budgeting

It’s so difficult to budget for a construction. While you can account for materials – the cost of the doors, for example – that doesn’t take into account time and materials overrunning or unforeseeable issues arising on site. Even a 10% contingency plan can’t take into account every outcome. Issues do arise and costs overrun, so you need to try to find better value solutions in other areas to offset any budget overspend.

Party wall agreements

Legally you’re not supposed to start work without signed agreements in place, so enlist the services of a proactive party-wall surveyor to try and save time, while getting on with other work that doesn’t involve party walls. Or go directly to the neighbour yourself, talking through the ways the work will affect them and offering compensation for the disruption such as repointing their external brickwork, getting them to sign a contract once agreed. This could speed things up considerably.

Finding a buyer

By the time you’re looking for a buyer you’re probably out of cash and desperate to get back the funds you’ve invested and make some profit. There’s no denying that since the market has quietened buyer drop-off at exchange is a problem. There’s no urgency to complete and buyers aren’t willing to compromise like they are in a rising market. The best approach is to see profits as a long-term goal, if you can. By sharing your property developments with your audience on social media, building your crowd through marketing, sharing pictures and videos of the site and telling the story online and in person you will reap long-term gains.