My real estate career has spanned 25 years and continues to be one of the most rewarding and fulfilling aspects of my life. It’s not only enabled me to meet new people and explore new places but it’s helped me provide for my family and given us the freedom to spend valuable quality time together. My diverse portfolio has seen me invest in everything from residential properties, commercial properties and development projects across Ireland, the UK and Europe. So, it’s fair to say I have a wealth of experience that could help any beginner looking to dip their toe into property development. In this beginner's guide, I’ll walk you through the first steps to getting your foot on the investment ladder.
Ask Yourself ‘Why?’
My advice to any real estate beginner is to ask what is motivating your desire to invest in property. At this early stage, it’s crucial to define your investment goals and set a clear intention about what outcome you want. Are you kickstarting a career, or simply looking to generate additional passive income? Is this an investment for a family member or are you more focused on long-term accumulation of wealth? By focusing on the end result, you’ll start to refine your options and from there you can explore the types of investments available to you.
Get to Grips With Investment Property Categories.
There are a myriad of ways to invest in property, each with their unique challenges and rewards:
Buy-to-let: This tends to be the most popular investment type and does exactly as it says: a developer will buy a property and either make small renovations or simply place it straight onto the rental market. This would be a medium to long-term investment delivering a consistent passive income. It’s worth noting that rental properties in the UK are consistently in demand. In England and Wales in 2021, 37.3% (or approximately 9.3 million) of homes were rentals. A survey conducted a year later in England alone showed that private landlords account for a significant chunk of the rental market with 18% (around 4.3 million) of homes.
Buy-to-sell: In this case, a developer would buy an existing property or piece of land, build or renovate it, and then sell it for a profit. This would result in an instant return on your investment resulting in a one-off payment to either reinvest or save. It’s worth noting that while the housing market has become more volatile in the last year, with rising mortgage rates and the increased cost of living, Savills predicts a 7% increase in house prices in 2026. While the Office for Budget Responsibility (OBR) predicts property prices will increase by 3.5% in 2027.
Learn How to Secure Real Estate Financing.
Keeping an eye on your numbers is crucial for any effective investment strategy. A well-managed and thorough cash flow strategy will help deliver a more profitable investment. When defining your strategy, it’s worth looking at what finance options are available to you. This will vary based on where in the world you live as well as your personal financial situation. There are many options available for new investors to leverage:
Buy-to-let mortgages: These are aimed at property investors and share some similarities with your classic mortgage. However, there are some key differences. A buy-to-let mortgage usually demands a higher deposit and comes with larger interest charges. For that reason, it’s crucial that you understand the average rent in your property’s locale and can therefore estimate what you need to charge in order to cover fees while also delivering a return on your investment.
Buy-to-sell mortgage/flexible mortgage: If you’re planning on flipping a property then you’ll need a specific mortgage that allows you to sell so soon after your purchase. As above, you will encounter higher interest fees and will require a larger deposit than would be required with a personal mortgage. However, there are a number of different types of Buy-to-sell mortgages including fixed-rate, variable-rate and interest-only, which means you are able to choose the one that aligns most closely with your financial strategy and risk tolerance.
Bridging loans: If you need access to capital quickly, then bridging loans are a great option. These are most commonly employed when an investor wants to buy another property before selling an existing one. So, for example, you can apply for a bridging loan using your existing property as capital and then repay that loan when your property sells. You're able to borrow anything from around £75,000 up to £500,000 and the rates tend to be incredibly competitive. The main benefit here is that these loans are often activated quicker than other types of funding options meaning you are able to snap up your next investment without delay.
Property development finance: In most cases, development finance is used by investors working on large-scale projects but they’re also available to residential property developers. These are a great option if you’re aiming to make significant renovations to your property or land. The thing to note here is that when borrowing you won’t be assessed on the current valuation of your property but the predicated value you will sell the property for once the renovations are complete. This is known as Loan to Gross Development Value (LTGDV). The loan terms are in most cases shorter, between 1 to 5 years.
Conduct a Thorough Market Analysis.
Now you have a grasp on the finances, you’re able to start looking for your dream investment. I suggest starting with an analysis, looking at what’s happening in the local property market. For example, which areas are seeing an increase in buyers/renters or investment? Where are commercial developers currently investing? What is that area going to look like 5 or 10 years from now? As always, my advice is: location, location, location - it’s an old adage but its longevity proves its worth. Understanding the area that surrounds a property is vital and will determine its long-term profitability and the success of the investment. You can read more about this here. (Insert a link to the Location Matters post).
Implement a Real Estate Risk Management Strategy.
Finally, let’s talk about risk. There’s a risk with every investment we make, but it’s worth thinking about the level of risk you can withstand, personally and more crucially, financially. As we have seen over the last year, the real estate landscape has experienced some turbulence - things can change quickly and although that’s not something to fear, it is vital you’re prepared.
By doing that early due diligence and research, you’ll be able to mitigate potential risks. Conduct a thorough survey of the property and get a strong idea of any potential weaknesses early on; immerse yourself in the local area and stay abreast of any development plans. Be aware of the market and follow future trends to better understand your future ROI. Finally, and most importantly, if you’re taking out a loan then maintain a strong loan-to-value ratio. Ideally, this means you’ll ensure that the money owed is no greater than the value of the property.
