Ways newer property developers can avoid overwhelming debt

By Anita Jaynes on 18 November, 2022

Featured content

Anyone can become a property developer. There are no mandatory qualifications to achieve first; it can be an exciting sector where people realise their potential.

That said, the potential for mistakes is relatively big in an industry that doesn’t typically welcome the trial-and-error approach without punishment. New starters often need a lot of financial support to make things work. They might require commercial, buy-to-let, or residential mortgages or unsecured, secured or bridging loans. 

Even big names in real estate suffer from financial mismanagement, but new starters seldom recover from impactful setbacks. Here are some ways to avoid overwhelming debt if you’re a newer property developer.

Resolve Existing Debt

Becoming a property developer requires a lot of personal investment. While starting any business requires some self-funding and risk, property development is especially demanding on that score. Sadly, over 600,000 people in Scotland alone slipped into debt during the pandemic or saw their existing debt get worse since then. The figures for the entirety of the UK will undoubtedly be much larger, so you must be honest about your financial situation long before you commit to property development. 

Try to square away any outstanding payments first. Pay back more than the minimum requirements, cancel unwanted subscriptions, sell anything you don’t use or want, and carefully curate a robust debt management plan. The sooner you square away these payments, the sooner you can get started in property development. Don’t proceed until you’re in good standing financially. 

Always Look for the Best Deal

Like any business, property developers must be devoted to finding the best value for their money in all their business arrangements. Half-hearted efforts will fast-track you and your firm to overwhelming debt, so it’s important to be careful. 

Properties should be thoroughly researched before being bought. What are the stamp duty costs like? What type of tenant or buyer do you wish to cater to with refurbishments? Is the value of the property consistent with others in the area? You should also shop around for the right coverage. Buildsafe’s resourceful 10 year building warranty can provide many assurances for your property development prospects. You can fill out their online form and save up to 30% on the coverage of major structural damage due to latent defects. The insurance company can pay for the repair or even total reconstruction if necessary. 

Budget for ‘Unforeseen’ Costs

Newer property developers can stumble blindly into a barrage of expenses they never anticipated. It’s vital to account for these costs long before the ball gets rolling. Structural surveys need to be detailed and put into place without delay. External agents will need to be compensated fairly for their input. Talented contractors may need to be hired to speed up work processes without sacrificing quality. You’ll need to cover repairs or reconstructions if you don’t have the required warranties in place. 

Carefully curate the projected timeline of your development projects. Detail the schedule of securing planning permission, land preparation, interior design, and even marketing for sale. Account for any delays where you can. It’s recommended that you work with an accountant to ensure your fiscal plans are viable and that all can be sustainably funded.