Starting a business in Real Estate

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orlando

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Hello every one

I?m interested in starting a business in property developing but just need a bit of advice on how to start up (financing, registering business for tax, and anything else I would have to do to start this as a business, I need guide as I haven't a clue).........any advice welcome!!!

What is the best way or most common way to finance a first development?

I?m keen to hear everybody?s stories so any replies I would be grateful for!
Thanks
Orlando
 
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malachi

New Member
Hello Orlando,
I don't wish to be unkind, but if you 'haven't got a clue' why are you thinking of doing this?

Do you have building skills? Project management skills? Financial skills? It's a huge financial risk if you have no money of your own to invest (i.e. a deposit).

I don't think that people generally wake up one day and think, "I want to be a property developer". It usually happens as a result of someone buying their first home, doing some work on it and selling at a profit.

It's learning 'on-the-job'. But the sole aim is not to make a profit, the profit is incidental. Then they have the courage to buy another, do it up, and sell. They get into property developing by accident almost!

Financing a 'first development' (i.e. a property bought SPECIFICALLY to do up and sell) is usually done by remortgaging the existing home for the deposit and borrowing the rest.

You CAN borrow the deposit and the balance from the bank, but lenders may not be keen unless you are prepared to risk some of your own money. They will probably want to see a 'track record' of successful developments before they will lend to you.

You might consider going into this with a friend who has cash to invest...

As for registering for tax... you don't need to because it's not treated as a business. You WILL be taxed on any profit as an individual however, and will need to fill in a tax return. You will pay capital gains tax (at 40%!) on the profit you make when selling it on.

Be sure to include in your budget:
Selling fees, acquisition costs, contingency fund and the biggie... mortgage interest payments!

Treat every potential project as a mini business in itself. There has to be some profit in it for you. Get your business-head well and truly screwed on and don't let your heart rule your head. Also, devise a budget and STICK to it! Don't be tempted to spend another penny.

Get quotes for professional work (e.g. roofing, plumbing, electrics, foundations etc) BEFORE you even exchange contracts. Be sure you know EXACTLY what it's going to cost you. Consider why no-one else has bought the property you are interested in. Is it because they have weighed up the costs already and decided there is no money to be made?
Thank you
Malachi
 
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