Hello, and on this episode of the Bridging Finance Podcast, we have Scott West back from Propertyze to explain the process of how to become a property developer. Thank you for joining us again, Scott. How are you today? Yeah, very well. Thank you. I'm looking forward to this one. It should be quite good. Yeah, really interesting episode to cover. So let's get straight into the questions that we've got here then. But first of all, what does a property developer do? It's a bit of a mistaken phrase, misused phrase, I guess, as a broker, when someone's a property developer, I think somebody who develops properties from the ground up, somebody who wants to build properties. But most clients, when they use the term
property developer, tend to think buy something under market value, refurbish it and sell it or retain it for their portfolio. So I would think a property developer would be somebody who wants to buy pots of land or demolish buildings and build from the ground up and build something brand new. But most people tend to think of, I forget the name of the show now, there was an old show with Serebini and she'd go in and renovate properties back to brick and do a thing. That's what people tend to think property development is. So most of the leads I get, most of the inquiries I get are kind of on that vein as well. People who want to get into developing properties that way. Okay, yeah, so, so interesting. And I know exactly the show that you're talking
about, Scott, and I can't remember the name. I did watch it. I want to keep saying change of it, but that was something entirely different. Yeah, I'm sure people list it. There'll be somebody that listens to this that will know what we're talking about. So, yeah, definitely. But yeah, really, really interesting. So let's move on then. What qualifications are required to become a property developer then? So there are no qualifications required for the client at all. You can, anybody can go buy a property and start developing a property, refurbishing it or building from the ground up. The catch there is that obviously you need to qualify professionals to undertake certain parts of those works. So, and
whether it's a ground up or refurbishment, and you have an electrical stunt, it has to be a qualified electrician. And you have to have all the electrical signed off. Same with the plumbing. If you're doing anything that is structural, obviously have to have builder's certificates. So while you as the developer, the project manager in essence, don't need anything. All of your contractors, builders, etc. will need to be qualified for their respective parts. Okay, there we go. So what is the first step in becoming a property developer then? Is it buying the land? What is the first step? I guess the first step is, isn't the one that people think about. People think the first step is going on to right move, looking at a property and
thinking I could put a liquor payment on that and change the carpets and sell it for 30 grand more or whatever it might be. The first step really is deciding what it is that you want out of this line of career choices, maybe the wrong phrase, but what is your goal is? Do you really intend to buy refurbished and retain them for rental income? Do you plan to buy them, refurbish them and sell them for a profit? Or are you planning to buy plots of land and sell them for the ground up because your end goal will be very different? Is it income? Is it large profits? Is it just a thing on the side because you kind of enjoy it? Those will probably dictate more where you start to look for properties and
what sort of profit margins you're looking for. So those will really dictate where you need to start looking. But people don't really do that. They tend to look around the area and just find something cheap and think I could do that. So really, I think identifying your proper goals for it are a big step. Okay, so that's a great point there, a key point to take away from the episode, something to bear in mind. This question follows on, I suppose here, Scott, how can you gain experience in property development? Well, I'll probably link back probably only half answer to your previous question, I guess. Once you've established your your goals, and you've set on a path of hypothetically buying it, refurbing it and selling it, much like the old Sarah B.
You showed that referred to how do you gain experience? Well, experience first and doing is probably the best one. But I would very strongly expect you to speak to a professional, either a builder, a broker, if you've got plans to finance that that transaction, because they will both have experience in dealing with these but not maybe not directly for their own projects, but have dealt with loads of other people's projects before. So that's a very good one. And use other people's networks. If you've got friends or family that have done this before, ask them for advice, what were their pitfalls? What were their advantages? Like need advice they can give you on saving money on these parts or do a
bit of research, watch some shows, look online. But the best thing to do is just to get involved with what you've done that because you'll only learn by doing and you'll only learn your mistakes by making them. That's very true. Some good top tips there. And with that in mind, the next question asks, what are the mistakes made when getting started in property development? And can they be avoided? They can be avoided very easily. If you speak to professionals upfront, the amount of times I've had people come to me with inquiries where they've gone away and they bought something at auction for cash. They halfway through the refurb and run out of money. They bought the project in their own name rather than a
company name. So they didn't speak to an accountant, they didn't speak to a broker, they haven't spoken to a builder. They just thought, I can do this, went out and bought something and tried to run it and ran out of money. I know they're stuck. What we can help those people, it becomes very costly and eats into a lot of their profits that they were expecting to make. The biggest mistakes I have with them, speak to a broker upfront if you plan to keep it. And even if you don't plan to keep it, speak to a broker because although bridging financial is expensive on the face of it, it allows you to do a project with a lot of your own money saved. If you can use somebody else's money to fund 60, 70% of a bill, do that
because you still can keep the profits. So have a speak to a broker upfront. Speak to an architect or a builder, get some quotes, what can I do? What would make this a better sale? Speak to an accountant. In most cases, a limited company is going to be a better option for people, even if that's retaining them for income or if that's selling. I mean, Kavya, I'm not an accountant, please do speak to one, but in most cases, we will probably advise to say that that's the better option to go if this is a business route you're planning to take. Okay, there we go. So again, some things there to really think about. This is also reminding me of Grand Designs, Scott's a little bit as well, another TV program. Are we on the right lines
there or? Yes, actually, you're not wrong. You're always sitting almost every single episode. You end up living in the caravan for two years longer than they expected. Yes. They were their budgets. The difficulty with those are that those projects are the people's main homes, so they become emotionally involved. So I think like we've discussed on the bridging and we've discussed on the mezzanine funders before, you become emotionally involved on those projects, it's very easy to carry it away and just upgrade the bathroom from the £15,000 money sold to a £30,000 one that had a rainfall shower. And to upgrade the kitchen from the one that looked nice to the one that looked really nice and that
next to £30,000 there. And that's where those people fall down. When they budget at the beginning and where they end up after they've gone kitchen shopping, bathroom shopping, all little bits and pieces, the emotions get involved and you don't make good business choices. So yeah, you're on the right vein. Okay, yeah. No, good point there, Scott. The emotional attachment there. Okay, let's move on then. How should you assess your borrowing capacity? With these sorts of projects, it's actually not about you as the client, largely speaking. Assuming you've got okay, credit and can fund your part of the deposit, the debt, the borrowing capacity is really limited to the building. So if you're purchasing something
under market value, so another market value, something that needs to be refurbished, 65, 70, we can go to 75 or 80% really, if we have to, but that becomes quite costly. So I would suggest that you probably expect to fund maybe a 30 to 35% deposit and we can then fund the refurbishment works for you as part of that transaction. And if you're thinking of the ground up, then we can fund 100% of the built costs or the development costs and 65 to 70% of the land cost, approximately. So you can borrow a great deal of the money required to do this. And then the other conversation is, if you plan to keep it, we need to make sure that the expected rents income will cover a buy to let mortgage at the end, which is the conversation would
have with you upfront anyway. If you plan to keep it, let's get a buy to let mortgage quoted now. So we know that it works upfront. Right. Okay, there we go. So clearly explained there a clear breakdown and instructions there. This next question is interesting. What's the difference between a property developer and a property manager? Yeah, they are very different in that the property developers is clearly someone who's either buying to refurb and retain or ground up development that they're hands on with the assets and they're building their own equity in those assets. A property manager, I would, I would tend to think of a property manager as some a bit more like a, an estate agent, somebody manages your
tenancies for you, and your lease agreements if you've got commercial premises. So if you're the people probably listening to this, I'm going to be property developers, the property manager side of thing, unless you've got a very, very big portfolio and you've done a lot of these before, you might have a property manager do this for you. You might, you know, you feel lucky enough to be successful enough to have a very large portfolio and a lot of equity behind you. And you've got a property manager, you might have someone doing this all for you. But you probably wouldn't be listening to this podcast. So I would say that most people listening would be the property developers. Okay, that makes sense there. So
we've got two questions left here, Scott, the next one asks, and I think you've probably covered this one. Does a property developer also need to be a builder? No, I do get a lot of inquiries from builders. Do you think I've done this countless times rather people work on it myself, but you don't need to be a builder. As long as you have qualified professionals doing the respective work they need to do. So if it's an extension, have a builder do it, or at least if you're capable, get it signed off and checked. You don't need to be a builder. But having relevant experience in various fields can help you with planning upfront. I would definitely engage on fairly early on if you plan to do any real work for the properties.
Okay, so we've covered that there then. The next question does also ask, do I need a property development team? And if so, who should I include? Well, us clearly. It depends again, if you're doing a, I'll answer the question in the two parts. If you're thinking development, as in ground up, you'll need an architect who will most likely submit your planning application. They will run that they will do the drawings for you. They should help you manage and plan through as well. You'll need a site manager who will then organize various contractors through that. So you'll need an architect, project manager, and an accountant as well, most likely. If you're thinking of buying something to refurb it and
then either keep or sell, I would still engage a builder fairly early on for their ability to kind of give you quotes and some costings. An accountant absolutely put in there. And in both cases, a broker, somebody like us that can come in and give you first advice on exit strategies, if you plan to keep them, the financing costs are out to try and minimize those. And we've seen these deals hundreds of times over in various different ways, commercial ground up developments, real estate, very large estates where they've had hundreds of houses built, small ones, we've had one at the bottom of the gun. We've seen most of them. It's got very little that you've come to us with that we haven't seen or
didn't have experience with. So that means we can give you a lot of advice, a lot of feedback very easily on whether the numbers you're showing us make sense, but the project is feasible, what we think of the exit strategies, what we think of the project as a whole. So definitely gauge the broker and accountant and the builder at the very least. Okay, there we go. So a good note to end on there. Scott, do you think there's anything else we need to know here or do you think we've pretty much covered all that we can? I think we probably covered most of the things we'll need to know as a property developer. I say that I guess the biggest takeaway is really understand what it is your your actual goal is because we
all like painting and decorating and at least the first thing we start to argue with our spouses. But re-understanding what your goal is, whether it's to build a portfolio of properties, whether it's just to build themself, whether you want to be involved for the ground up because those are a lot harder and a lot more headache, but have a greater yield, you get a better return on that. So really understanding your term, your goal, whether it's 10 year goal or 20 year goal retirement plans, work backwards from that and then have a conversation with your broker and put steps in place. How do I get from here to there and we can help you map it out, business plan together that helps you understand
what projects you need to be looking for and how to grow those absolutely bigger big projects that meet your goals. Okay, well, that was really, really thorough there, Scott. So thank you for that. Really interesting. So hopefully anybody that's listening to this has found that useful as well. And I'm sure we'll speak to you again on the podcast soon. Hopefully they find it useful. And yes, I'm a forter.
