A Quick Guide to Key Steps in the Property Development Process
As any reasonably experienced property developer will tell you, no two development projects are exactly the same. The sheer range of variables to consider in every case - along with the number of other agencies and contractors liable to become involved at various stages of the process - means that a degree of variance from project to project is more or less guaranteed.
However, most well-versed professionals would also agree that, among the many key things you’ll learn over the years, familiarising yourself with a base model for approaching the key property development process steps remains very worthwhile. Despite all the dozens of quirks and idiosyncrasies you might encounter on any given project, it’s likely that a fairly standard initial ‘barebones' schematic will look something like the following:
Step 1: Initial concepts and planning
This is where you should be seeking to really consolidate the core idea behind the whole plan, long before any wheels are actually set in motion. As odd as it may sound, stage one is often best begun by giving yourself a little Q&A session.
Early on, make sure you’re able to provide honest, concise and clearly defined answers to questions like:
- Why do you want to get involved with this development initiative?
- Are you looking for a ‘quick flip’ profit, or to boost longer-term capital growth through letting?
- Are you going solo, or will it be a joint venture? Either way, what sort of business or personal profile do you see yourself operating the venture under?
- At what stage do you expect to bring others on board - perhaps to help manage properties, or assist with legal or construction aspects - in areas you’re less familiar with?
- Have you carefully weighed up all the potential pros and cons, both in the short- and longer-term? Which might present the most pressing obstacles, and how will you mitigate them?
- Are all the finances in place already? If not, what remains to be addressed, and how are you covering yourself against risk?
- What’s your exit strategy (in other words, how do you ideally see this ending in your favour)?
When asking yourself these and other important questions, writing up your answers into a cohesive property development business plan is always a shrewd idea.
Once you’ve done all that, part two of this stage will naturally be to scout out potential investment opportunities. Be it a plot of land in a completely raw state, or an existing high-end development with great potential for rental yields, this is something we’ll tackle in a separate guide - it’s an entire topic in its own right!
Step 2: Pre-purchasing and development approval
Once you’ve honed in on the property you think best suits your plans and expectations, you’ll begin the heavily negotiation-based process of figuring out exactly how many of your initial concepts for the development you might actually be able to carry through to completion on site.
This can be a complex and fairly slow-paced stage to work through at times, often involving a lot of paperwork wrangling between numerous local authorities, town planners, contractors and legal bodies. Comprehensive feasibility studies - both financial and practical - will be of key importance to all sides in the negotiations, so be sure to have solid groundwork in place on both fronts.
Step 3: Deal-closing
With any luck, the inevitable contractual back-and-forth process works out in your favour in a reasonable amount of time, and in a way that leaves you plenty of scope to develop along the lines you’d initially planned. If so, it could rapidly be approaching the time when you actually buy in. Before you do, be certain that you fully understand all terms as laid out in any negotiated documentation - and don’t be afraid to seek a qualified outside opinion if you feel unsure or vague on any aspect, no matter how minor it may look in the grand scheme of things.
Accountants and lawyers, bankers and brokers should all be consulted to your satisfaction and theirs before any transactions go ahead. Now is the time to drill down into the fine detail, ensure you’re fully versed in any amended terms and conditions around the sale itself, and try to plan ahead as far as possible with regard to any future entitlements or caveats.
It’s also the time to consider how best to put a credible bid in: while this will depend to a large extent on the type of sale in question, it certainly pays to be aware of potential differences in professional and cultural approaches to auctions, direct purchases, international sales, and more. Consulting an experienced property development sales team can be extremely helpful here.
Step 4: Drafting your designs, engineering works or renovations
Based on your initial planning and aims for the project - both short- and long-term - work closely with your architects, building contractors and craftspeople to draw up detailed plans for each stage of any construction or design work you’ll need to carry out on the property.
Again, this can be a somewhat slow-moving process at times. Depending on the type of development you’re involved in, you may need to liaise with surveyors, town planners, numerous types of engineers from a variety of disciplines, landscape designers, building supervisors, and many more besides. Naturally you’ll be acting in a traditional developer role during this stage, and seeking to maximise potential ROI from the property or site, while gathering a plethora of quotes and securing another discrete set of financial arrangements.
However, it’s also sensible to put yourself in the shoes of any prospective future tenants or buyers while drafting planned works and improvements to your development plot. Consider who they’re likely to be, and how the cultures, services and lifestyles inherent to the immediate area might affect their individual wants and needs in the future.
Always keep checking your ideas against any approvals or permissions you already have, as well as any you might wish to explore further down the line. (And, it goes almost without saying, against your carefully structured budget!)
Step 5: Construction, improvements, and planning for completion
Once all the planning and design work has been drafted, approved, and agreed to as a detailed scheme of work, things will likely start moving forward in a more tangible and practical way quite quickly.
Your aim is to oversee the delivery of the project in its ‘finished’ state, within a given time frame and at a cost that aligns with the careful financial plans you’ve agreed to; in other words, timing and budget management are the key things to watch over closely here. It’s very often among the more expensive stages of the whole process, depending on the scope of your development plans, so careful management of funds (often via timed instalments of loan draw-downs) is going to be vital.
While these carefully supervised construction or improvement works are ongoing, you’ll ideally be preparing everything else for the final phase - which, if all goes reasonably smoothly, should be completion followed by sale or rental.
Whether your plans following completion amount to a quick sale exit strategy, or a longer-term property management role, it’s important not to let post-construction delays eat into your budget through accrued interest. Take any steps you can at this point (getting titles ready, for example) to help ease the project from expense-heavy construction into an ROI phase.
As you can see from this very brief overview, the full property development process is complex, but potentially extremely rewarding. To help keep your vision on track, it’s always worth being aware of the general road map underpinning a typical development workflow.
Even then, you’ll always need to be aware of the potential for unexpected occurrences or plot twists, of course. That’s why having a dedicated project management team on hand, helping to support each new project via a more holistic overview, can often prove so beneficial to even the most seasoned developers.