When you are going to do a development part of that process is going to involve creating a business plan. When you apply for finance you are going to need this to demonstrate that you know what you are doing and have a proper, well-considered business plan in place.
As I’ve mentioned before the better you create your business plan the better the chances of getting finance quickly and efficiently. I’ve put together a brief summary of the various stages your business plan should include. It’s rough and ready but I if you need to do a good business plan then let this be your guide. I was schmoozing one of my finance guys one day over lunch and he confided to me that most of the business plans they get for developments are a “dog’s breakfast” and they often get rejected because of it.
One of the reasons he liked working with me, he told me, was that by business plans are well laid out, easy to read and understand and straight to the point… no waffle. If doing this get’s you across the line then you can buy me a bottle of good wine to thank me 🙂 You should read through the rest of this page for guidance on completing your business plan.
Executive Summary This section of your plan should be a bulleted list summarising the main points of the plan. It is intended to give a reader — be it a potential investor or a bank manager — an overview of your proposed project at a glance. Make it sound attractive but don’t hype your project. If you feel you have to do that to make it sound attractive then you should ask yourself whether the project is worth doing!
Property Development Business Plan It may be best to write the rest of the plan and do this bit last. Your executive summary should contain the following:
- Project type: refurbishment / new build / conversion etc.
- Property type: villa / block of flats / semi etc.
- Finance: Joint Venture partner / mortgage / bank loan etc.
- Project length: 6 months / 1 year etc.
- Exit strategy: let property / sell on lease option / sell at auction etc.
- Any other important points of your project.
This is your chance to sell the project to your investor. Remember that your potential investor is interested in what is in it for them.
- Does your project have local resident/neighbour support
- Have you had success with similar projects in the past?
- Do you have environmental reports/land use studies?
- How does local demographics support your proposition?
- Include all relevant facts and supporting information, photos, plans and schematics.
Description of Development A detailed description of your project from a practical point of view. Include the following: Location
- The current state of property in question (unless of course, it’s a new build)
- Scope of proposed works
- Photos of site/property, if available.
Planning Permits Will planning permission or any licences be required, if so have they been applied for? If planning an HMO / multi-let, will you require a licence? What permits are already in place and which ones need to be applied for? Will architects be required for the project? If so has an appropriate one been sourced? Have they done similar previous projects? What will they add to the project? Contractors What contractors and/or suppliers will be required? Have quotes/costings been solicited? Time Scales What is the realistic schedule for the project? Include relevant project milestones. Exit Strategy How will the profit be realised? Will you…
- Let the property?
- Sell on open market?
- What is the back-up exit strategy? All smart developers have a plan B, in case the market changes.
Risk Analysis What are the potential risks to your project? How will you manage them if they occur? Financials A full financial analysis for your project. You may want to attach a separate spreadsheet. Be sure to include the following costs:
- mortgage application fees & carry costs
- solicitor fees
- surveyor fees
- auction fees
- letting agent fees
- estate agent fees
- finder fees
- capital gains and any other applicable taxes
- sales projections
- income projections
- projected returns
- balance sheet
- cashflow statement.
- “Property Development Business Plan Template… Instant Download”
Conclusion When you’re done, be sure to get your advisors to review your plan for you. I’d love to hear about your project — drop me a note in the comments below!