The Worst Mistakes Amateur Property Developers Make

The possibility of getting a second income through property developing can be tempting for many. There are dreams of making a quick buck by giving a house a lick of paint or the idea of working your way up the property ladder by turning over properties in a short period of time for profit. But for many amateur property developers a lot more time and money is wasted than they would have liked.

From over-valuing a property to unexpected costs, here are a few of the worst mistakes amateur property developers make:

Borrowing More Than Can be Afforded

Many lenders often believe that they should borrow as much money that they possibly can from the banks but this can often lead to problems. Where possible you should not borrow more than you can afford. Even if you think the sale of the property will make you a millionaire. Shop around for the best deals from development finance lenders and be realistic about your budget.

Buying in the Wrong Area

What new property investors need to learn is how to spot a good area to invest. You don’t want to be in an extremely expensive area and not every run down area is up-and-coming. And once you have found the perfect area if the house is on a main road, has no parking or poor transport links expect to take a discounted price.

One of the easiest ways of figuring out if the area is ‘right’ and if it is likely to sell is to simply ask yourself “would I like to live here?” Because if you wouldn’t live there how can you expect anyone else to.

Picking the Wrong Builder

Some builders will see you coming – the perfect amateur developer to con out of their money. So make sure to do your research, know your prices as not to get fleeced. You hear of all these horror stories such as on Cowboy Builders where work is below standard or simply not completed so make sure to use a well reputed builder.

Get references from previous customers and make sure to get a fixed price contract so if they drag out the work it won’t cost you anymore money.

The Quality Conundrum

Finding the balance between fittings and fixtures that look expensive but cost little can be tricky for a first time property developer. The finish of the property will also greatly depend on your budget and your intent for the home – will you rent or sell?

If you intend on renting then you can usually get away with a generally lower quality of finish. However you still want items that are long lasting or you will end up forking out a fortune in repairs. If furnishing to sell on then a higher quality is often required as if not buyers would expect a discount from the asking price in order to afford to replace these bits.

Not Thinking Before Acting – Planning Permission

Amateur developers are often so eager to get started that they start ripping things down before their planning permission comes through. Never assume permission will be granted or you may find yourself rebuilding what you’ve knocked down or the opposite.

Are you thinking about a career in property developing? Make sure not to make these mistakes!

Top Tips on Becoming a Commercial Landlord

Although the economic downturn hasn’t been kind to many, rock bottom property prices have presented an opportunity for many people to buy houses and office blocks with the intentions of becoming a landlord.

However, being a landlord isn’t as simple as many people think. There are many things you need to deal with. Here are some of the top tips to follow when you plan on becoming a commercial landlord:

Think about the property

When you’re buying a property there are many things you will need to consider – mainly the space that’s available and the location of the building. Generally, the bigger the space available the more money you will be able to charge your tenants per month and if this is close to a city centre or business hub then you’ll reap the rewards. If you are buying a building in order to develop it, then ensure your plans open up lots of useable space and create a pleasant, safe environment.

It’s a long term game

Letting commercial properties is a more long-term game than its residential counterpart, so you may find that offering longer business leases is a great way to get more loyal tenants. This may mean that you charge them less per calendar month to rent the property, but it will save you money in the long run as you won’t have to replace the tenants every year or so. Ensure that you have a policy about giving notice before they plan on vacating the premises, so that you’re given time to find someone to fill the void.

Getting the best finance

As a landlord, having the best possible finance package can have a huge impact, as the mortgage will have a huge impact on the rent you need to charge. In order to get the best possible rates you should contact a commercial mortgage broker who will be able to secure a finance package to suit your needs.

Keep up with legal requirements

Before you let out the property, you need to make sure that you’re complying with all the legal requirements described by the Code for Leasing Business Premises in England and Wales. This helps to not only protect the tenants but gives you a checklist for drawing up terms of contract for leasing the property. Following all the legal requirements will give you an excellent standing as a landlord and can enhance your rights.

Willing to adjust

Businesses fluctuate all the time, which can impact on the space they require. If you are able to reduce or increase the space the business requires in relatively short amounts of times then you may see huge benefits. Targeting SMEs specifically is a great way to fill your commercial properties with paying tenants that could expand to fill out the property. It could be that once you’ve found a company to fill the space they will be there until you decide to sell the building.

What is the future of retail in South Wales?

Wales is currently at a tipping point when it comes to retail, something needs to be done in order to revitalise town centres across the country. Many towns are a barren wasteland of empty buildings and charity shops, a factor that needs to change if retail is to make a comeback.

A new survey by the Centre for Retail Research has estimated that around a third of all shops in Wales are at a real risk of closure. Before we can make any suggestions as to how this can be prevented, we need to understand why retail is suffering.

Online shopping

In recent years, more and more stores have started to offer online shopping which allows you to browse a larger range from the comfort of your own home. Shops have essentially shot themselves in the foot with this move, as many regular shoppers find that there are many more benefits to making their purchases online. As a result, the high street shops see a large reduction in their sales, affecting their profit margin to a point where management have to consider closing the store down. When this happens the high street is drastically hit as there is even less incentive for people to visit when the big name shops are no longer there.

How can this be changed

Internet shopping is here to stay; however, with smart retail operations, businesses may be able to make an impact. Instead of taking out large commercial mortgages for a huge physical space, shops need to use both online and offline retail options – helping to bring foot-traffic back to town centres with ‘in store only’ offers and deals. Companies taking out commercial finance in Cardiff or Swansea for shops in the city centre can pay less for premium space as they require less footage. This is better financially for most large retailers and gives customers a greater incentive to visit their local high streets.

Changes to business rates

The Welsh Government has decided to follow the rest of the UK in postponing any changes to business rates by two years, meaning that there will be no change until 2017. Had they decided to re-evaluate the rates in 2015 as planned, we could have seen a drop of up to 30%. However, rates are still reasonably low, with commercial finance in Cardiff being taken out at the pre-recession values of April 2008. To encourage more businesses to take root in Welsh towns, the government should offer more support to retail businesses, which would eventually lead to a stronger economy.

Empty shops

As it currently stands, around one fifth of Welsh shops are empty – this is a significant proportion of the high street and something which needs to change. Many buildings are being used by charity shops who currently receive a reduced rate on rental; however, this may change as a result of a new review into business rates for charities. Unless businesses and charities start receiving lower rates it is unlikely that new companies will be seen taking out commercial finance to start up new shops, cafes and businesses.

Finding the rental properties that buyers don’t want

It may sound simple, but the secret of the successful buy-to-let investor is to spot what makes a property idea; for the rental market before arranging a competitive commercial finance quote.

The perfect rental property will be seen as a completely unsuitable by many buyers – after all, the priorities of renters and buyers can vary greatly. The secret is finding a property that buyers are turning their noses up at yet renters would snap up in a second. Here’s what to look out for:

Location, location, location

It goes without saying that location is important for every market. However, the type of location that a buyer and a renter will want is generally very different. For instance, a buyer will be very reluctant to arrange a long-term mortgage for first-floor property in the middle of town, but a renter will relish living close to local amenities – at least for a relatively short period of time.

Transport links

Likewise, the same will go for homes that back onto a railway line or a busy road. Because they can be quite loud places to be, properties on good transport links aren’t ideal for young families and so won’t be as popular with buyers. However, upwardly-mobile people, who are less worried about long-term issues and just want a place that’s got great transport links, will snap up a well-placed property like this in seconds.

Less outside space

We all love a nice garden or yard, but it’s fair to say that it carries less weight for renters than for buyers. Those in a let property are likely to be younger, with a more varied lifestyle and so will have less need for an outside space. So if you spot an empty property with no outside space, it may make sense to arrange a commercial mortgage and rent it out.

Small spaces

Likewise, smaller areas are a goldmine for buy-to-let investors, because people are more likely to rent a box-shaped room for a short period of time than buy it and be saddled with it long-term. However, be aware that smaller spaces will probably enjoy a quite steady turnover of renters.

Run-down properties

As a property investor, you’ll have doubtless come across properties that need a little work doing to them before they can be sold on or rented. Houses such as these are perfect for rental property as you can use its future earning potential in order to justify the investment to a potential commercial mortgage investor – particularly if it is in a lucrative rental area. All you’d have to do is let the lender know how much you expect to earn after the work is done and they’ll be more likely to lend the money.

Above commercial properties

Sometimes, when a commercial investor buys a shop or commercial premises, the property will also come with an upstairs flat or house as part of the investment which could be rented out. Residential buyers will be put off (both superficially and logistically) from arranging finance for a property above a shop, but it can be perfect for arranging commercial finance and finding someone to rent the property to.

From little starts, big businesses grow

You can’t expect to have a huge, international company within months of starting up – this just isn’t a reality. However, it isn’t out of the question that your small business could become a huge sensation over a longer time period. After all, everyone has to start somewhere!

Did you know that some of the biggest businesses actually started out as companies run from the family home? Here are the 10 of the most famous start-ups that made it big!

Amazon

Now known as the largest and most trusted online retailer in the world, Amazon started off from very humble beginnings in 1994. The idea started off as an online bookstore which was run entirely from Jeff Bezos’ home in Bellevue, Washington. In under 20 years this project went from being a tiny online shop into a merchandising behemoth, selling almost anything you can think of!

Apple

This elite digital retailer hasn’t always been as prestigious as it is now. In fact, when it first started out it only consisted of Steve Jobs and Steve Wozniak who built computers in their garage and sold them to local retailers. Thirty years later and Apple is now considered the most valuable technology company there is – from small beginnings this computer giant is now everywhere.

Google

The one company synonymous with the internet was nowhere to be found before 1998, now “Google it” is a common phrase found in households around the world! This phenomenon began by being built by university students operating out of a single car garage; it quickly expanded beyond their expectations. This just goes to show that if you have a business idea and pursue it with a clever corporate head, whilst ensuring you get the best commercial mortgage, then you too could dominate an entire market.

Harley Davidson

You don’t just have to be a computer genius to make a business work; back in 1901 Harley Davidson was started from a 15-foot wooden shed in Wisconsin. This may possibly be the least likely place you’d expect a globally recognised brand to start from, but William S. Harley and Arthur Davidson made their dreams a reality. In 2013, Harley Davidson marked their £100 year anniversary, a landmark they reached with an operating income of nearly $830 million!

Lotus Cars

Another automotive achievement that started small, being built in a stables – Lotus really embraced the term Horsepower to create premier racing cars that are sought after by enthusiasts across the globe. The first ever Lotus was built using a 1930s Austin Seven and a power drill – after a bit of money came in, Chapman was able to buy in his own parts and mechanics and invest in the best commercial mortgage to move out of the stables and into a proper garage.

Yankee Candles

Probably the only brand of candles your know about, Yankee Candles came about when 16 year old Michael Kittredge melted crayons into a candle as a gift for his mother. This simple gesture got noticed by friends and family which resulted in Kittredge mass-producing candles to order. It took Kittredge four years to outgrow his family’s garage and move the company forward.

None of these businesses started out expecting to be huge, a factor that many entrepreneurs are trying to force on their company. Start out with what you know and don’t be afraid to take chances and your business may also end up on this list!

Five things You Need to Know About Commercial Mortgages

So, you’ve been shown around the perfect commercial property. You’ve examined each little nook and cranny, analysed the transport links and done some serious maths that tells you the exact profit percentage you can expect to make in 1, 3, 5 and 10 years’ time. You may even have a workforce that’s itching to move into their new office, business contacts who’ll be interested in renting it out or have secured planning permission to develop the site further into offices or retail space.

Once you’ve decided you want it, you just need to find the finance. That means securing a commercial mortgage. Here are the five things you need to know about commercial mortgages:

They’re similar to residential mortgages

You find a property that you love and you use it as collateral in order to secure a mortgage, over a period of up to 25 years. The concept of commercial mortgages is similar to their residential counterparts.

They’re essential if you’re going to use the property for business

A few years ago, mortgage providers were flexible enough to allow you a residential mortgage even if you intended to use the property for business purposes such as renting it out or using it as an office. Nowadays the industry is much stricter and that isn’t the case – if you’re planning to make money using your property you’ll need a commercial mortgage.

They’re a cheap business loan

Many investors will look to business loans as a way of securing investment for their company. But because a commercial mortgage uses the property as collateral in the deal, there’s significantly less risk incurred for the lender. As a result, an investor can use a commercial mortgage to ensure a larger loan with more competitive interest rates than they’d get from a regular business loan.

You’ll need to justify your earnings

Like a residential mortgage, when you’re trying to secure commercial finance you’ll have to justify your earnings and expected revenues to your lender. If you’re a business acting as an owner occupier for the property, the lender will want proof that your company is viable, with healthy audited accounts. But if you’re an investor, the mortgage provider will want to know how the figures stack up, with projections on how much you expect to earn from the property over the years. They’ll also examine your credit history and any other assets that you own.

Now’s a good time to borrow

The Funding for Lending Scheme (FLS) was announced in August 2012 in an attempt to increase bank lending to around £60 billion. It can help anyone who wants a commercial mortgage. The scheme allows banks to borrow money cheaply from the Bank of England so that in turn they offer investment to small businesses at more competitive rates. The initiative runs until 2015, so strike while the iron’s hot – lending is currently at a below-market rate, while some lenders are also incentivising borrowers with attractive cashback schemes.

Top ten tips for starting a business

Have you got a great money making idea but you don’t know where to start? With these top tips you’ll be ready to lay the foundations for your own business in no time!

In the UK alone there are hundreds of people every year who cast off their old jobs or escape unemployment by starting their own company – here are the steps to take towards success:

1.  It all starts with a really good business idea

Once you’ve convinced yourself that starting up a business is the way to go, you will need to have a good idea for what your business is going to do. Be realistic, play on your strengths, qualifications and things that will actually bring in the cash. This will require a lot of research and will probably have the greatest changes from start to finish.

2. Create a business plan

Take lots of notes when doing your research, they will help you create an accurate and detailed business plan. You need to be able to show that your business idea will turn into cold hard cash, giving you a viable business. This can’t just be sketched across a legal pad – any potential financers will need to see your plan so make sure it’s written up professionally and coherently.

3. Figure out where you’re getting money from

Start-ups don’t have to be expensive, many can be done using nothing but a computer! However, it’s always good to plan in advance where your money will be coming from. How are you planning on handling your finances and tax? It is a good idea to enlist the help of an accountant and a lawyer to ensure that everything is run legally.

4. Find the best business bank account

If you’re setting up as a limited company then you will need to have a business bank account, but just like personal accounts each one is different – be sure to have a shop around to find the account most suited to your needs. When applying for a business account you will need to show your business plan, luckily you’ve followed tip number 2 and that’s already sorted!

5. Where are you operating from?

Many online businesses can be run from the comfort of your home, however this can interfere with your personal life and may appear unprofessional. A good solution is to invest in office space, purchasing the property will help reduce your overheads and boost your business assets. By using commercial mortgage brokers and lenders, you will be able to get the best deals on mortgages, suited to your individual needs.

6. Sell your story

People are interesting, especially people who do things that others haven’t done themselves – like starting up a business. Tell people who you are, what you came from and what your plans for the future are. This is a form of self-marketing, drawing people into your life and driving them towards your business, creating a strong relationship with potential customers.

7. Prepare for obstacles

Businesses can be compared to white water rafting, sometimes it’s plain sailing but more often than not there are lots of rocky patches in the way. With careful planning you can tactically avoid most of these obstacles but sometimes things happen too fast and you can end up hitting these tricky-to-navigate waters. If you’re prepared for them then you will know what you need to do to avoid disaster; if you haven’t taken difficulties into consideration then you may be in a lot of trouble!

8. Going alone or finding partners?

Once you have all your business ideas and initial work down you will need to decide how you’re planning on continuing. There are perks to both going it alone and bringing in partners, it will depend entirely on your preferences and how you wish to conduct business.

9. Insure everything

Accidents happen and unfortunately they can have a disastrous effect on a start-up business. If you accidently spill your coffee on your laptop that you run your business with then your entire business could potentially be ruined. By insuring everything you will be able to get back online quickly regardless of damage, theft or disaster. Whether you’re using your home as an office or if you have commercial property it is important that you take out public liability cover to protect yourself legally.

10. No time like the present

Don’t wait around for things to happen for you, if you want to start a business go out and do it! Figure out what you want to do, plan your business and finances, work from home or find commercial mortgage brokers and lenders to upgrade you to office buildings, market yourself and prepare for hardships. If you follow all these steps your business will be up and running in no time allowing you to enjoy being your own boss.

Why would you choose to use commercial mortgage brokers

In the business world, it’s considered folly by many businesspeople and investors to work with agencies and brokers.  After all, it’s tough to become successful by paying someone to do something that you could easily do yourself.

However, when it comes to getting a commercial mortgage, one of the worst things you could do for your new property is to go it alone. We can’t stress enough how essential it is to work with a commercial mortgage broker. Here’s why:

Speed and simplicity

Any entrepreneur knows that there just aren’t hours in the day to get the job done. So, as a result, a truly successful entrepreneur is well versed in the value of delegation – trusting capable people with the tasks you don’t have the time for. Time is money, after all. Working with commercial mortgage brokers and lenders ensures that it’s they who are spending hours and days sourcing the most competitive rates, not you, while you’ve the time to source the next big deal.

Knowledge

Part of being a good entrepreneur is accepting when others might know a little more than you and trusting their knowledge. Unless you possess an encyclopaedic knowledge of commercial property law and interest rate fluctuations, you probably won’t know as much as the average commercial broker, so the wise thing to do is listen to them and trust in the fact that they’ll help you to get the best rates. Because of their expertise when it comes to commercial property, they may even be able to let you know potential pitfalls in a deal you may not have noticed, or investment opportunities you’d otherwise turn your nose up at.

Contacts

Part of good business is building up a huge list of varied contacts who can help you out in times of trouble. That’s where you can really make the most of a good commercial mortgage broker, who will be able to boast a not inconsiderable amount of contacts in the banking and mortgage industry who’ll be able to offer better terms than you could ever hope to find elsewhere. Not only will a good broker know who can offer the best deals for specific industries and individual needs, but they’ll know the little ways that they can relate to lenders on an individual level – increasing your chances of landing a competitively-priced mortgage.

The inside track

You’ll know that in business it’s essential to be first to potential investment opportunities. Investors and entrepreneurs often operate in a dog eat dog world and if you find yourself hesitating over a potentially lucrative deal you can guarantee that someone else will swoop in and take the glory for themselves. If you’re in cahoots with a trusted commercial broker, they’ll be able to give you a window into lucrative deals that are yet to see the light of day – allowing you to swoop into a money-making scheme before anyone else notices it.

Virtual offices vs. traditional bricks and mortar: The effect of the virtual on the commercial letting market.

With an ever increasing internet presence in everyday business many people are now switching to a virtual office over traditional bricks and mortar. A virtual office is an online space which provides a company with address and communication services. It is a professional alternative to a physical office space, at a lower cost.

Virtual offices are becoming increasingly popular among new businesses or start-ups as they allow an individual to dip their toe into the virtual market in order to test the waters of success. With train tickets raising by, on average, 6% per year and fuel prices on the rise virtual offices are becoming ever more popular.

According to a TUC analysis of data from the Labour Force Survey, the number of people working from home has risen 13% in five years. However with a recovering economy, office space in the UK’s biggest cities is still being snapped up, much to the pleasure of commercial mortgage brokers working to get their clients the best deals on business properties. So which do you choose? Is a virtual office or a traditional office better for your business? Time to weigh up the benefits.

Location

You can sleep in! A virtual office allows employees to work from home or from anywhere with an internet connection meaning there is no need to commute on a daily basis. Working from home cuts out the costs of commuting as well as the time spent stuck in traffic.

As there is no physical space when working in a VO, meetings are held online. Companies will not meet with clients in person but rather in a virtual environment. There is no need to sign paperwork or deals. This may be of benefit as it cuts out travel time and costs however may be disadvantageous if your business prides itself of the personal touches and you will be missing out of the wow factor of a finely furnished office space. The success of physical premises lies greatly in its location; setting up office in a business-focused city can create buzz and boost your brand, but you have to make sure it’s easy for visitors and employees alike to commute to.
A virtual office cuts out expenses such as leasing or buying a property as well as other out-goings such as utility bills.

Pick and Choose

A reduce in costs means a company can be more selective. It allows freedom to choose who you work with. If overhead costs are reduced then more time and money can be spent on improving relationships with existing clients and improving referral rates.

Flexibility

No more nine ‘til five! Traditional offices often have a number of fixed hours per day with the offices closing at night and on weekends. A virtual office provides employees with a customised work schedule which is flexible. As long as the work is submitted on time there is not a fixed number of working hours. VO’s allow an employee to take breaks whenever they like or to complete tasks in their own time. The lack of fixed hours however may be a drawback to some individuals as it blurs the lines between home and work life with a lack of routine.

Paper vs. Electronic

Virtual offices offer many technological advantages. Many VO’s use Telephone Integration Software which eliminates the need to employ a receptionist. A virtual office takes up little physical storage space also. Information is stored in online office systems, this cuts down on filing and shelving. This data is then backed up on external hard drives. Although a great space saver without physical copies, printer costs may become an added expense.

Is a virtual office right for you? Well that may depend on the type of business as well as some of the features highlighted above. Everyone has their own way of doing things and some businesses simply work better in a physical space. One thing is for certain, virtual offices are withstanding the recession in a time where some traditional offices are remaining vacant.

Image credit: http://www.flickr.com/photos/ishane/

Reasons for re-mortgaging your business property

Remortgaging your commercial property is one of the best ways to quickly improve your finances or save a fortune. If you remortgage £100,000 and manage to cut just 1% off the interest then you could save £1,000 a year or £80 a month! There are three main reasons you may to want to re-mortgage, these are: To save money, to raise money or to consolidate your debts. Here are the reasons why re-mortgaging your property with a business finance broker is a good idea:

Playing the field

Trying to find the best possible deal can be a real challenge if you’re not up to date with all the banking requirements or know who the best lenders are for your business. Experienced commercial financial brokers will have strong knowledge of the best places to look to find lower rates or lenders willing to increase your mortgage. If you’re the type of person who goes out and checks the prices of anything you want to buy then you’ll probably want to do the same with your mortgage – brokers are able to reach every lender in order to get you the best possible remortgage deal.

Cash boost

If your business’s income has increased or the property is worth more, then you could potentially increase your mortgage in order to help pay for major outgoings. If you’re planning on developing your current office by having a redecoration, extension or if you simply need to gain funding in order to pursue a business venture. Commercial finance brokers are able to expertly package your business to appeal to lenders, helping to get your business the finances it needs at the best possible market rates.

Split your debts

Through remortgaging your business you can gain access to some of its equity in order to consolidate some of your other debts which may be at a higher interest. If you’ve had to take out a bridging loan to acquire land or an auction property, then remortgaging an existing property can help to pay off this debt. You need to ensure that the remortgage rates you receive are lower than the interest on the debts to make sure that you save money by remortgaging.

Room for development

Taking out a commercial remortgage could provide you with the funding necessary to invest in additional land or business premises. This extra cash flow comes at a lower interest than many other forms of finance, helping you to rapidly grow your business without finding yourself having to repay expensive loans. Before you decide to take out a remortgage in order to pay for additional land or property it is a good idea to talk to a commercial finance broker. Professional brokers are able to assess your situation and find the best financial solution for your company, whether this is taking out a commercial remortgage or looking into alternative forms of finance.