Planning a Smaller-Scale Property Development: What to Consider on Projects up to £5 Million
Whether you’re an experienced investor looking to diversify your portfolio or an entrepreneur embarking on your first development, planning a smaller-scale property project, typically up to £5 million, requires just as much diligence as larger ventures. While the capital commitment may be more accessible, the complexity, risk, and opportunity remain significant. Here are the key factors to consider before breaking ground.
1. Clarify Your Objectives
Start with the end in mind. Are you building to sell, to rent, or to hold as a long-term investment? Your goals will shape your financial modelling, design decisions, and marketing strategy.
- A development aimed at resale may prioritise curb appeal and market trends
- A build-to-rent project will focus on durability, low maintenance, and strong yield performance
2. Location Is Everything – But Think Beyond Postcode
The old adage still rings true: location is critical. But on smaller developments, micro-location plays an outsized role.
- Is the site walkable?
- Is there demand for your proposed unit type in the immediate area?
Investigate local planning trends and recent sales performance to ensure alignment with demand. Pay attention to nearby infrastructure improvements – future transport links or new schools can change the game.
3. Budget for More Than the Build
While the headline build cost is important, it’s not the full picture.
Factor in:
- Stamp duty
- Professional fees (architects, planners, structural engineers)
- Financing costs
- Marketing expenses
- Contingency funds (10–15% for the unexpected)
In smaller developments, overruns can significantly impact returns.
4. Understand Planning Constraints Early
Smaller sites can sometimes fall under permitted development rights (PDR), especially conversions of office or commercial space. However, it’s crucial to understand:
- Local planning policies
- Design constraints (e.g. conservation area guidelines)
- Section 106 or Community Infrastructure Levy (CIL) obligations
Tip: Consulting a planning consultant early can save you months – and money.
5. Build the Right Team
Smaller doesn’t mean simpler. Limited budgets often require creative problem-solving and tighter project control.
- Choose an architect and contractor experienced in small-to-medium residential or mixed-use schemes
- Appoint a clear project manager, this could be you or a hired expert, to coordinate professionals, maintain timelines, and protect your financial interests
6. Finance with Flexibility in Mind
Funding smaller developments can be more nuanced than it seems. Traditional high-street lenders may not be agile enough.
- Bridging finance or development loans are common routes
- Structure finance with adequate drawdowns and realistic timescales
- Prepare detailed appraisals and exit strategies (sales, refinancing, or letting)
Tip: Consult a financial specialist on tax planning, compliance, and cash flow. Their input can make your project more tax-efficient and sustainable.
7. Exit Strategy: Plan Multiple Scenarios
Markets shift. Even in a buoyant economy, local conditions can change between planning approval and completion.
- Have a Plan A (e.g. sell all units off-plan)
- Also prepare a Plan B (e.g. retain and rent, refinance, or staggered sales)
Smaller developers are often better positioned to pivot – but only with forward-thinking planning.
8. Think About ESG and Buyer Expectations
Sustainability is no longer optional. From EPC requirements to demand for greener homes, buyers and tenants expect:
- Energy-efficient, low-impact properties
- Smart technology
- Efficient insulation
- Renewable energy options
These add value and can set your development apart.
Final Thoughts
Smaller property developments can offer strong returns, greater agility, and manageable risk – but only with tight planning, the right team, and clear financial goals. Engaging the right professionals early can make the difference between success and surprise.
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