An article in PropertyReporter looks at what it takes to start small-scale property development, emphasising the advantages over other types of business.

Introduction

Starting a business isn’t easy; about 20% fail within the first two years. Finding a business model that minimizes challenges is critical. Small-scale property development seems to be an appealing avenue that avoids common pitfalls.

Seven Key Questions

Before you start, you need to answer seven key questions:

1. Market Demand: Make sure there’s a market for what you’re selling.
2. Technology Considerations: Be aware of technological changes that could affect your business.
3. Competition Management: Ensure that you can handle competitors.
4. Barriers to Entry: Recognize any limitations that may restrict your entry into the market.
5. Credibility: Think about how you’ll establish trust in your new business.
6. Margins and Overheads: Consider costs and responsibilities related to your employees and operations.
7. Available Incentives: Research any grants, tax benefits, or regulatory easements that could support your venture.

Why Small-Scale Property Development?

Small-scale property development, like turning old shops into flats, stands out for the following reasons:

1. Demand: There’s a housing shortage in the UK, ensuring healthy demand.
2. Technology: Homebuilding technology hasn’t radically changed, so there’s little risk of technological upheaval.
3. Competition: With high demand, competition isn’t a major concern.
4. Barriers to Entry: The industry doesn’t have steep entry barriers; you can hire the needed skills.
5. Credibility: Your team’s experience can provide credibility, even if you’re new to property development.
6. Overheads and Margins: Low running costs and no need to hire many people keep overheads manageable. Margins are usually around 20% of the gross development value (GDV).
7. Incentives: The government encourages converting commercial buildings into residences, providing opportunities and support.

Summary

Small-scale property development in the UK offers an attractive opportunity for those willing to tackle the challenges of entrepreneurship. It aligns well with the seven key questions and offers a robust business model. Like any venture, it’s not without its difficulties, but the risk is significantly minimized compared to other business models.

This insight could be a valuable starting point for potential investors to delve further into this market, always keeping in mind the importance of doing thorough research and seeking professional guidance as needed.