Presenter: Now, every time I switch on the television, there seems to be some programme about houses. Property development, that is, buying houses, working on them to increase their value, and then selling them on again, seems like an attractive money-making opportunity to many people. But the property development is a difficult thing to get right, and in the studio today, we have Marcus Lawton who is going to tell us a bit about where a lot of people make mistakes. Marcus, is it true that making money from property development isn’t as easy as it looks on TV?

Marcus: Absolutely. There are several reasons why people go wrong, and the first is that many people fail to realise that in property development, you make your money when you buy a house, not when you sell it.  If you spend too much money on a house, you will never make a profit out of it.  So you really need to learn how to haggle over the asking price. Every pound you can knock off is money in your pocket.

Presenter: Is buying a house at an auction a good idea?

Marcus: Oh, it is.  It’s a great way to pick up a bargain.  But it’s easy to get too excited about making a purchase, and you can end up paying more than a house is worth. It’s important to give yourself a limit and stick to it.  It’s also tempting at auctions to buy a house that you know nothing about, and that’s a real mistake too. You need to really do your homework before you make such a big purchase.

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Presenter: What sort of things do you need to find out?

Marcus: All sorts. One important thing is the location. Property is always sought after if it’s near a good school, and has nice green areas nearby.  People often assume that the best property to invest in is one that’s in the nicest, smartest part of town. But you’ll pay over the odds for a house there, and you’re profit margins won’t be any bigger. Things like access to public transport and shops and services are actually far more important. You’ve also really got to consider how much the cost of refurbishing the place is going to be and how much you will realistically get for the property once you’re ready to sell it.  Don’t go overboard when doing the place up. Many people fall into the trap of trying to recreate their dream home. But you need to consider who is likely to want to live there in the future, and what sort of decor and fitting they will need. A professional couple may want a nice finish, but if you plan to let it out to students, for example, there’s no point spending a fortune on a nice kitchen or bathroom. 

Presenter: So, how can you ensure that you’re getting a bargain?

Marcus: Look for the right seller.  An estate agent will be able to tell you about anyone who needs a quick sale and will be prepared to sell for less.  People might be moving abroad, or getting a divorce, and those are the types of people who are more likely to accept a lower offer.
Don’t just rely on agencies either, look at ads in the newspaper.  People often advertise there if they want to keep their fees low. You can do a deal directly with them, and you won’t have to go through an estate agent. And keep an eye open as you’re driving around. If you see an old, run down house that looks as if it has potential, just knock on the door and ask if the owner has considered selling. That’s how I bought my first house. It might seem a bit daunting, just going up to the door like that, but what’s the worst that can happen?  They can only say no.  If you come across a house that doesn’t look lived in, you can always contact the land registry and find out who owns it. They may be prepared to sell it, but they just aren’t actively looking for buyers.