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How to scale your property business in 2022

 

iStock-681904114-min (1Man With iPad and Looking With Building in the Background

 

Property development in the UK is a crowded market. The abundance of competitors looking for the best deal can make it feel impossible for you to seal the best deals - never mind scale your business.

Luckily, there are multiple ways for you to overcome these issues and grow your property portfolio.

In this blog, we’ll debunk popular property myths, provide tips and discuss three simple strategies to grow your property business in 2022.

Property development myths

Let’s start by debunking a few myths that may have stopped you from growing your property business:

  • Profits aren’t made on every deal - Regardless of the impression they may give, not every developer turns a profit on every deal.

  • Teaming up isn’t always a winning combo - If you choose to partner up with someone, you need to choose someone more experienced so you can soak up their knowledge and avoid costly mistakes. 

  • Your circumstances do matter - What can you bring to property development? Is it money to invest or can you source deals? If you lack one of these, you could partner up with someone who can strengthen your team but they in turn will be looking for specific skills in a partner to strengthen theirs. 

  • Access to capital and the cost of capital are important - There’s a strong motivation for investors to put use to their money right now. This is due to concerns about inflation - rates and house prices also move with inflation which can reduce profit. 

  • You don’t need lots of money - Providing you have enough to cover living costs, there are ways to make finance deals so that you aren’t relying on lots of cash.

  • Strategies specific to a geographical location are incredibly effective - It ensures you understand the value of land, capital appreciation and potential income.

 

Property development strategies for 2022:

Before we look at the growth strategies, there are a few considerations to help you scale your property business:

  • Fundamentally, you always want to be adding value to a property - whether that’s through improving/extending, gaining planning permission, changing use, etc. The trick here is to buy cheap.

  • To maximise your income, we recommend sheltering your profits under a limited company - so that you only pay corporation tax (c.19%). You can use tools like this one to easily access Land Registry data and other sources to study historical capital gains. This should be used in your viability assessments.

  • Don’t get stuck on a bridging loan - The transaction costs are high and if you were looking to switch this to development finance at a later date, the overall costs of the bridging loan may not be covered by the development finance. Therefore lots of equity can be lost here too.

Now, the question is: what are the most effective property strategies to make you money and grow your business?


Strategy #1: Buy 3, sell 2, keep 1

You can buy three properties and add value to each. By selling two of these, you gain access to that cash which you can recycle in other deals. Plus, it motivates sales agents to bring in your next deal if you put it back on the market with them. By saving one property, you can build your portfolio. Repeating this process is a top strategy to help you scale your property business. 

Strategy #2: Go direct to the vendor

Great opportunities can be found where the property owner wants money more than the property. For example, a vendor awaiting probate on a family member's house where they need to pay inheritance tax. The best approach to beat competitors and avoid pricing wars is to go direct to the vendor and build a rapport. This is much more effective than open viewings via Rightmove which can be very time consuming and often have high transaction costs.

Strategy #3: Partner with more experienced professionals

Scaling is all about successful Joint Ventures! Better quality partners will enable you to scale.

6 property investing top tips to scale your business

Here are several top tips to help you succeed in scaling your property business in 2022:

  1. Don’t go down the unsecured debt route - It almost always ends up a ponzi.

  2. What a good deal actually looks like - The deal has to be the right property. It needs to be one that can be improved (extended etc.) and the vendor is motivated (and sells at a lower rate).

  3. Avoid the temptation of massive deals with too much debt - Or building a big expensive team. Lots of developers do really well until they lose control of a big deal. You can scale without going way beyond your comfort level - such as strategy #1.

  4. Partners should complement, not duplicate - To benefit from partnerships, you need someone who compliments you with skills you lack. For example, it works best if one of you is the project manager.

  5. You don’t need huge investors - It’s recommended to start small (e.g. if they have £1 million of funds available for investing, borrow £200k).

  6. Don’t split income and capital gains down the middle - If you are looking to build an income from your portfolio, you shouldn’t split everything down the middle with your partner or investors. For example, with investors, you should split income and capital gains separately to help both parties maximise profit. Your investors will likely benefit from more equity/capital gains if they also have high-income employment.

Simply scale your property business today

Scaling your property business doesn’t mean complex strategies. Using a model where you sell most and retain a few helps to release funds whilst also growing your portfolio. Moreover, by partnering with pros, you can alleviate the costly mistakes that other developers learn through experience.

Don’t be put off by how other developers seem to be doing and the approaches they are using. Focus on what works for you and you will more safely scale your property business.

Savvy entrepreneurs are leveraging online property tools to source off-market opportunities, quickly qualify them and go direct to the vendor to secure the deal for the best price. Trusted by thousands of property entrepreneurs, Nimbus Maps enables property investors and professionals to find the best off-market opportunities and make decisions quickly and with confidence.

See our property intelligence platform in action: Book a personalised demo today.

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