How to start a property business

The commercial property sector was valued at £1.3 trillion in 2023, so it’s clear that this is an industry set to follow a path of continued growth. So, if you’re considering starting a business in property, you’re entering a relatively stable market.

Entrepreneurs consider starting a property business for many reasons, one major reason is that owning a large asset like a property is a solid investment because it either holds its value or increases in value. It’s also an industry you can start learning at any age, as long as you have access to working capital and you’re willing to learn, the property industry can be very profitable.

If you’re looking to become a commercial property owner or developer, keep reading to learn how to start a business in property.

Different types of property businesses

If you know you want to get into the property business but don’t know what kind of avenue to explore, here are some options to consider:

Property development

Purchasing a property, renovating it and selling it can be a great way to build your property portfolio while hopefully turning a profit each time. This industry has a steep learning curve, and you’ll need good project management skills to oversee the work done to the property to keep it under budget and within scope to make as much money as possible when selling.

Commercial property

Becoming a commercial landlord, or purchasing commercial property for your own business use, can be a viable option for anyone looking to start a property company. Either rent out your property to companies looking for office space or premises, i.e. a retail store. Or keep the property and move your own business in. This is a great way to keep expenses predictable instead of dealing with a landlord who increases rent prices or delays building improvements. This way, you control your business base.

Property management

You might want to manage the tenants for commercial properties, but you don’t own the property; instead, you’re acting as a letting agent, facilitating communication between the tenant and landlord. In this business, you’d oversee maintenance of the properties, leasing, finding tenants and more.

Six steps to starting a property business

Not sure where to start? Here are six steps to help you get your business up and running.

1. Research the market and create a business plan

Always research the market you’re entering. Is it crowded? What is the competition doing? How can you do it better? Is it possible to turn a profit? When do you expect to turn a profit? Spend time researching everything before deciding on the type of business you want to start, and then go on to create a comprehensive business plan. Map out costs, how you’ll spend funds, cash flow forecast, etc. The process of creating a business plan forces you to confront market viability, financial position and more.

2. Set SMART goals

A great way to strategically plan for your new business is to set SMART goals. Specific, measurable, achievable, realistic, time-bound. These goals help you achieve within the realms of possibility, because if you over-achieve, it can damage morale and ultimately set your business off on the wrong foot.

3. Look into funding options

Purchasing property is expensive, particularly when a mortgage lender usually wants a deposit of around 25%. If you don’t have the personal funds to invest (or access to funds through a family and friend loan), you can research business financing options.

Some popular property loans include:

Commercial mortgages

A commercial mortgage works like a residential mortgage, although lenders typically want a higher deposit from you and lend with an LTV of 75%.

Commercial mortgages are a great way to split your loan repayments as you repay, with interest, on a monthly basis. This can be more affordable, and often the only way, to purchase commercial property.

Commercial bridging finance

If you plan to purchase property through an auction house, you might want to consider applying for commercial bridging finance. A bridging loan is one that ‘bridges’ the financial gap between buying and selling property. The bridging finance provider rapidly processes your loan application and releases funds in as little as a few days, so you can purchase your auction property without delay.

Repay the short-term loan when you sell a property or when you secure it with a mortgage. Make sure you know how you plan to repay the loan; the lender will always want to know your exit plan before lending.

Commercial property finance

If you plan to develop or renovate an existing property, you can apply for commercial property finance, which is a type of property development finance. You can spend these loans however you like; perhaps you plan to refit a retail store or make considerable changes to your property before relisting it — these types of loans can help you complete your project quickly.

4. Set up your business with HMRC

Before you start trading, you need to notify HMRC that your business exists. That means it’s time to register your business and choose a legal status. There are a few options when it comes to registering, you can choose to set up as a limited company, a partnership or a sole trader. Each comes with its pros and cons, and what might be right for your competitors might not be right for you.

It’s free to register as a partnership or a sole trader, but £50 to register as a limited company or a limited liability partnership. But all are relatively straightforward to set up, and all can be set up online. You can always ask your accountant to set your business up for you.

5. Ensure compliance with regulations

Regulations will differ depending on the type of property business you start. For example, if you handle customers’ money, you will need to register with a government-approved Client Money Protection (CMP) scheme. And you must comply with anti-money laundering regulations if you run a real estate business, which means conducting due diligence checks on customers. If you fail to comply, you can receive hefty fines and penalties and, in some cases, a prison sentence.

And, regardless of your business type, you must always comply with GDPR (data protection) regulations.

6. Choosing properties to purchase

Create a matrix to analyse houses to ensure they meet your specific requirements before making an offer to purchase. For example, if you’re purchasing commercial properties to let out, do you need decent footfall for a retail business, or, if it’s a commercial office block, is there parking nearby or transport links? It’s important you measure each available property against your requirements to avoid purchasing properties you’ll struggle to rent out or sell on.

How to start a property business with no money in the UK

If you don’t have any working capital, you’ll struggle to get your property business off the ground, because property is notoriously expensive. If you don’t have the personal funds, though, there are funding options available for startups and small businesses like yours.

The best way to find out what’s available is to use a business loan comparison tool like ours to find and compare eligible property loan options. Our self-serve platform is 100% free to use, and you’re under no obligation to accept any quotes offered.

Getting a quote is quick and easy and won’t affect your credit score.

See what property finance you can apply for today: compare business loans.