Residential property development can be a rewarding journey, but it’s not without challenges.
Whether you’re a first-time developer or seasoned pro, it’s easy to make mistakes and trigger costly delays. We’ve seen it all before and want to help you steer clear of these pitfalls.
Our guide highlights the 10 most common mistakes we’ve seen property developers make, with practical steps you can take to avoid them, and keep your project on track.
1. Not doing thorough due diligence
This one can’t be stressed enough. Skipping or rushing through due diligence can scupper your project before you even break ground. Failing to understand the property you’re working with – whether building condition, market demand, or legal restrictions – can cause big issues.
How to avoid it:
Take time to fully understand the property and the area. Look at local market trends, check for planning restrictions, and make 100% sure you know what you’re getting into. You can’t afford to make assumptions – get all the facts before you start.
2. Underestimating costs and budget
Your budget is your project’s lifeline. One of the biggest mistakes is underestimating costs, and assuming everything will go to plan. In reality, there are always unexpected costs, like materials price hikes, additional regulatory fees and more. These can quickly mount up and eat your margins.
How to avoid it:
Be realistic, not optimistic. Break down your budget – detailing costs for construction, materials, permits etc – and get multiple quotes from suppliers Build in a contingency fund of at least 10-20%. And closely monitor your spending during the project, to help you stay on track.
3. Picking the wrong contractor or team
It’s crucial to have the right people around you. Hiring the wrong contractor, architect, or project manager can result in delays, budget overruns, and poor-quality work. We’ve seen too many developers opt for the cheapest bid and regret it later when quality suffers or the project stalls.
How to avoid it:
Do your homework. Check references, ask for examples of past work, and read reviews. Look for contractors and teams that have successfully completed projects like yours. Be clear about your goals and expectations, and create solid contracts, outlining scope, timeline, and costs.
4. Ignoring cash-flow management
Some developers think once funding is secured everything will fall into place. But managing cash flow during the project is critical. Failing to align project timelines and milestones with available funds can cause a cash crunch mid-project. This could delay payments to suppliers or even halt work entirely.
How to avoid it:
Have a clear cash-flow plan and regularly review it. Make sure you’ve secured sufficient funding for the whole project – not just the initial stages. Consider flexible funding options to give you breathing room if cash-flow issues arise. Speak to your lender early to agree a plan and be prepared to adapt.
5. Not keeping an eye on the market
The property market is in constant flux, with changes in demand, pricing and preference. Many developers fail to observe and anticipate market shifts, meaning their project becomes less viable and, ultimately, less profitable than they initially expected.
How to avoid it:
Keep an eye on trends in the local and wider property market. Fully understand your target audience and what they are looking for. Pay attention to economic factors like interest rates or local pricing spikes. Staying informed will help you make smarter decisions to inform your development strategy.
6. Overlooking planning and legal requirements
Navigating planning and legal requirements can be tricky, costly and time consuming. Making assumptions about what is permitted or bypassing legal process can result in delays and, in some cases, fines or the need to undo construction work that fails to meet requirements.
How to avoid it:
Before you break ground, ensure all your planning permissions are in order. Engage a solicitor or planning consultant to guide you through the process. This may seem like a hassle, but it’s far cheaper and less stressful to get everything approved upfront than to fix issues later.
7. Not accounting for delays
Delays happen. Whether due to bad weather, supply chain issues, planning delays, contractor performance or problems with permits. Developers often fail to plan for these setbacks, which can lead to frustration, unexpected costs and lengthened timelines.
How to avoid it:
Factor delays into your project plan from the start. This could mean building in extra construction time or allocating budget for unexpected costs. Work closely with your team to ensure everyone’s aware of timelines and the importance of sticking to them. But be prepared for things to go off course.
8. Failing to manage risk
Property development carries more than its fair share of risks. Whether financial, legal, or build-related, all risks should be identified and mitigated early. Sadly, many developers fail to properly prepare, and projects are negatively impacted or even derailed completely.
How to avoid it:
Conduct a thorough assessment to identify risks early in the project – financial, environmental, construction, legal – and put plans in place to mitigate them. Consider getting legal advice, obtaining tailored insurance, hiring specialist contractors, and maintaining a suitable contingency fund.
9. Not marketing early enough
Once your development is complete, you’ll likely need to sell or rent your property. Many developers make the mistake of waiting until completion to begin marketing their property. This can result in a delayed sale or lengthy void periods, ultimately impacting your returns.
How to avoid it:
Start marketing early. Once construction begins, build interest through online platforms, estate agents, and marketing campaigns. Make sure your properties are visible and well-presented to attract buyers or renters from day one. The sooner you go to market, the quicker you’ll fill your properties.
10. Failing to build a strong brand
Property development is a competitive business and a strong brand can give you an edge. Many developers overlook the importance of branding, but it can play a huge role in attracting investors, partners, and clients to your projects.
How to avoid it:
Consider what sets you apart from other developers – the quality of your work, your approach to sustainability, your reputation for delivering on time/budget and so on. Ensure your branding reflects your company values, while keeping it consistent and memorable.
Checklist: keep your project on track
Whether you’re new to the industry or a seasoned developer, learning from these mistakes can help you complete your projects on time, within budget, and with the best possible returns. Here are some handy tips to keep in mind.
- Always perform thorough due diligence on the property and area
- Create a detailed, realistic budget with a suitable contingency fund
- Vet your contractors thoroughly for appropriate experience and reliability
- Track and manage your cash flow closely throughout the project
- Monitor the property market and adjust your strategy accordingly
- Ensure all planning and legal requirements are in place before starting
- Account for potential delays and include buffer time in your schedule
- Identify and mitigate risks with insurance and professional guidance
- Market your property early to generate interest and ensure occupancy
- Build a strong brand that reflects the quality of your developments
Together we build
At CrowdProperty, we’ve helped thousands of developers avoid these pitfalls – from the first site appraisal to the final sale. Our tailored funding solutions and trusted network of professionals mean you can focus on project delivery.
We understand the challenges of property development, and we can support you throughout your project. If you’re a developer looking for funding, propose your project, call us on 0203 012 0166 or email our Direct Team.