Even if you’re working on just one project, property development can involve various stages, from land purchases and renovations to leasing and eventual sales, and each has its own financial impact. When you don’t have a clear system in place, it becomes harder to keep track of construction costs and budgets.
A property development accountant can step in to help you organise everything. With their help, you can track transactions properly and keep your financial records accurate. They make sure that you’re compliant with regulations throughout the entire development process so that you’re not caught off guard later.
Breaking down your development budget
Do you need help seeing the full picture when planning your property development budget? A property development accountant can map out the main cost components in your development budget:
- Land acquisition, which can take up around 20% to 40% of your total project value
- Construction costs, often sitting between 40% and 60%
- Professional fees for architects and consultants, typically 10% to 15%
- Financing costs, which depend on your loan terms and project timeline
They’ll also encourage you to set aside contingency funds — usually around 10% to 20% — to create some breathing room if something unexpected comes up, like planning delays or unforeseen site conditions that increase costs.
On top of that, a property development accountant helps you plan for other expenses you might overlook, such as:
- Marketing and sales costs
- Tax liabilities like VAT and corporation tax
- All your ongoing operating expenses throughout the development phase
Factoring in tax from the start
Don’t make the mistake of focusing solely on build costs. If you don’t account for taxes, you might face unexpected liabilities that can impact your overall profit. You can always stay ahead of this by working with a property development accountant. With their support, you can understand all the taxes that apply to your project, including VAT and Corporation Tax.
They can also guide you through more complex areas, like how VAT applies to commercial property transactions and capital allowances on qualifying assets. With their help, you get a clearer picture of your actual costs and profits so you can plan your project with much more confidence.
Managing your cash flow throughout the project
Cash flow is one of the biggest challenges you’ll face in property development, since you’re often putting in a lot of money upfront but the returns don’t come in until much later. If you can’t manage your cash flow, you might find yourself without enough cash on hand to pay contractors and suppliers.
Your financing structure has a direct impact on how that cash flow plays out. Besides the loan amount, you also need to factor in:
- Arrangement fees
- Interest payments
- Exit fees
In most cases, your development finance can sit anywhere between 6% and 12% per year. You can also expect additional fees of around 1% to 2% of your loan value.
Your property development accountant can model different financing scenarios to help you understand how they affect your profitability before you commit. They can also help you keep everything on track so that you don’t make decisions blindly. They monitor your cash flow and adjust your budget when needed, so your project stays afloat even when market conditions shift.
Leave the numbers to our specialist accountants
At Allenby Accountants, you’ll meet industry experts with experience in property development to guide you through everything related to your construction costs and budgets. Our property development accountant will take care of the accounting and bookkeeping for you, and advise you on matters like taxation and cash flow management. Call us at 0208 914 8887 and set up your free initial consultation.
