What does a property developer do? What is property development? And how do property developers make money?
We’ll answer all of these questions in the following article.
What does a property developer do?
The short answer is that developer adds value to land or property.¹
So how do they 'add value'? Well, there are many ways in which property developers can do this. In fact, you may be considered a residential property developer. For example, if you have ever built an extension, converted a loft, or even redecorated your own home, since all of these will likely have added value.
Firstly, let's find out more ways in which a developer can add value to land or property.
How does a developer add value to land or property
- Renovate, extend, redecorate or otherwise improve an existing property. This is something that homeowners might choose to do themselves. Firstly to enjoy the home while they live there. Secondly perhaps to allow their family more space. And finally to increase its value when they choose to sell it.
A developer might buy a tired property, then renovate or redecorate in order to either resell at a profit, or rent it out.
- Source land or property and repackage, negotiating a deal in the process, which they sell on to another developer or property investor.
- Purchase undeveloped land and build either residential or commercial property on it. They may then choose to sell the newly built property, or rent it out. By refinancing, they can often regain the money that was originally invested, since the value has increased since purchase.
- Buy a property and convert it, for example, a large house might be converted into smaller flats, adding to the total value. Or a developer might buy an old office (commercial) block and convert it into smart new apartments (residential).²
- Purchase a property, knock it down and rebuild something new. When a property is not suitable for renovation or conversion, the developer may choose to knock it down and build a new property in its place. For example, if it is structurally unsafe or an absolute eyesore!
Is property development the same as a construction?
No. Many property developers do manage the construction of their developments, but they do much more than this. A property developer coordinates and is responsible for all the stages of a project from inception to realisation. Above all, they work with others to ensure its completion.
Who do property developers work with?
Developers usually coordinate with the following people as they envisage, design, manage and organise the project from start to finish:
- Planning consultant
Helps with the planning process and applications
Designs the development, including plans for its construction
- CGI Company
Works with the architect's plans and the interior designer to create accurate visuals of the development (both interior and exterior) before and during construction
- Quantity Surveyor
Calculates materials needed and costs the project, ensuring that the project finances are closely managed and reported accurately
- General Contractors
Builds the development according to the architectural plans and is responsible for any subcontractors they hire
Scrutinises and analyses financial reports, tax returns, budgets and accounting records to ensure efficient operating practices
Provides legal advice and assistance. Firstly during the initial purchase. And secondly during the sale of the final development
- Professional snagging company
Checks the new development for minor faults
- Estate Agent
Publicises the final development, arranges and oversees viewings and helps secure buyers or tenants
- Graphic Designer/Printer
Designs and produces boards and brochures for the final development
- Interior Designer
Visualises and designs the interiors of the development, working with the CGI company at the start of the project, then decorates, styles and 'sets' a fully furnished show home
Shoots the finished development, both interior and exterior, for promotional materials
- Cleaning Company
Cleans the finished development, ready for sale or lease
Why develop property?
As we've already explored, homeowners may choose to develop their property in order to climb up the property ladder, to create space for an expanding family, or to make their living space more functional and to their own taste. However, for property developers, the main goal in property development is to make a profit, since, after all, it is a business process.
In conclusion, property professional, Vicky Bromley-White, puts it this way:
What does a property developer do?
In summary, a property developer adds value to land or property.
¹ [SOURCE: Quora]
² We did this with our Borough Green development
³ You can learn more about the risk/return tradeoff in our post on ROI.
Find out more about property development:
- What is property development and how does it work?
- Which type of property development is right for you?
- What do all these terms and acronyms mean? Property development jargon-busting
- What 5 things should a property investor consider when evaluating an investment opportunity?
- 10 top tips for property developers
- How to use crowdfunding for your property project
Finally, you can watch more videos about what a property developer does and how we work on our YouTube channel.