By Ritchie Clapson CEng MIStructE, propertyCEO
A podcast, selling on Amazon, dog walking – there are any number of ways to earn extra cash outside of your regular day job. One of the most profitable has to be small-scale property development.
You could take a tired residential house, do it up, and then sell it at a profit – £50,000 is a reasonable sum to expect (a number of factors such as location can push this number higher or drop it lower). But a bolder move is to take an existing commercial building of some type (a shop, an office, or a light industrial unit) and converting it into flats, where you would be targeting a profit of between £100,000 and £500,000 for each project.
If you like the idea of becoming involved in property development, here’s what you need:
- Organisational skills
- People skills
- Management skills
- Decision-making skills
- Hard work
- Determination
So, what exactly will you, the developer, be doing? Well, at a high level, your job breaks down into several key roles:
- You’ll need to establish your business, strategy, and brand, and decide what type of development you’re going to tackle.
- You’ll have to recruit your team of professionals, including architects, solicitors, project managers, structural engineers, etc.
- You’ll need to be able to find a supply of good quality, profitable deals. These will need to be analysed to sort the wheat from the chaff and decide which ones are worth pursuing.
- You’ll be arranging the finance for your first project, working with both commercial lenders and private investors.
Property development is not a difficult market to enter, and if you do it well, it can produce life-changing results. Here are my top tips for optimising your property-based side hustle (they’re also useful for other, less profitable side hustles, but if you really want to wash other people’s windows, cat sit, or make jewellery, you be you):
Just Get Started
It’s okay to be nervous about taking on a side hustle, but plenty of people have taken the same path before you. One way to build confidence is to connect with communities in the same niche you’re looking to get into. Connecting with others on the same journey as you can be incredibly empowering and may help remove some of those fears.
Avoid Perfectionism
We all want to do a good job, but aiming for perfection can trip you up, or prevent you from taking even the first steps. Too many people aim for perfection at the outset and never get out of the blocks. But you also need to keep an eye on any perfectionist leanings when you do start. For example, if you’re converting an old office building into flats, do you really need the kitchen work surfaces to be the expensive imported marble of your ideal/dream home? Don’t let perfectionism eat into your profits.
Avoid Burnout
Do you have any plans to be the wealthiest person in the graveyard? There’s no point in working all hours on your side hustle if you don’t enjoy the fruit of your labours. Be sure that your side hustle doesn’t compromise your day job, or your home life.
Systemise and Outsource
Outsourcing can often make good financial sense. Websites such as fiverr.com, upwork.com, and peopleperhour.com allow you to tap into the global gig economy to make marketing your side hustle cost effective. And just as you won’t be laying any bricks, painting any walls, or fitting any windows, you shouldn’t be micro managing your small-scale property development project – that’s what a project manager is for.
Know Your Market
A little research can go a long way. Make sure you understand the area you are serving. Don’t build four-bedroom flats for families if the demand is for one or two bedroom flats for single professionals or couples with no kids.
Separate Your Personal and Business Finances
Set up a business bank account and ensure that all the transactions relating to your side hustle go through it – not through your personal bank account. This applies to both your income and expenses. Ultimately, you’ll pay yourself the profits, but make sure the money goes into your business account first. This will make it far easier to manage your business effectively in the long run. Also, make sure you have a rainy-day fund for emergencies, and take advantage of the many online software tools that are available for managing your finances – they will make life a lot easier for you.
Pay Your Taxes
Depending on how much money you currently earn, you will likely owe taxes on any side hustle profits. While some may be tempted to ‘forget’ to declare it, the last thing you want is an unexpected tax bill. Automatically set aside some of your profits to pay tax and do your research to understand what tax is payable. Ideally, speak to an accountant to get a professional opinion – it won’t cost a fortune and they may even be able to save you tax.
Set Realistic Goals
Set annual and quarterly targets for your business and let these guide your weekly activity and goals. Also, celebrate your successes as you go, as this will keep you motivated. You’ll invariably have bumps in the road on your journey but don’t let that put you off, they happen to everyone.
Your side hustle will only ever fail if you give up. Learning from pitfalls and mistakes is part of every successful business’s history; you only need to look at the failed early endeavours of some of today’s billionaires. Not only did they manage to get started, but they also learned from their mistakes and moved onwards and upwards. You may not reach their dizzy heights with your own side hustle, but you can still learn from their journey.
