Property development - how do i?

[rootsnall]

It is a family member... the wifes old man... and he is keeping it off the market for a week for us although a neighbour has been enquiring.
Its not a knock down price but reflects the poor state its in.

A house converted into 4 flats of low satndard is going for 355000 on the same road... we are off to view this week....

We might not go for the 4 falt option but may just blitz it and get it ready for someone else to make a go at it...

Its all pie in the sky right now but there is definitely a margin in it for someone

355K - 250K - development costs = sounds a bit tight to me !? You've got a lot of sussing out to do but sounds like you are starting out on that process.

Sounds like a big house ? Probably on a big plot ? I'd also get an idea of how much the land on its own is worth, this may be the true value ie. the house itself is worth nothing particularly if you can build multiple newbuild flats on the plot.

[tim123]

What you need to do for the 'flats' option is to get the planning permission in place and then sell on like that. This is how you make a good return for very little money. You can add 50-100k to the price for about a 2K spend (plus a lot of waiting time)

TBH, it's foolish of the current owner not to have done this already so perhaps they have.

It's a lot of work turning a house into flats. You now have to comply with a load of fire and sound regulations that are very difficult to add, that 10 years ago weren't required.

You will add little value 'gutting' the place. The sort of buyer that will refurb isn't going to be put off by the need to strip out and the person who want's to buy to live in is still going to see an empty shell

HTH

tim

[tim123]

I've just looked at the return. You say 8K a month. Is that rental income?

8k for 4 flats is 2k per flat. (no points for my maths yet!)

It's gotta be in a pretty nice area for that monthly rent, so I'll exclude the possibility that it's in one of the areas where you can still get 8%+ rental return and stick with the 4% that seems to be the norm now.

Which means that in the current market it equates to a 550k sale price per flat.

And you can buy it for 250K and want to spend 100K on the conversion.

Something is wrong here.

tim

[kramer]

sorry i am suffering today....


my maths is liike this

buy cost.... 250000
Conversion to flats (including stamp duty/ solicitors/ estate agents/ interest payments) £100000

then 4 flats at a minimum sale value of £100000 per flat leaves £50000 over 6 months (development time scale)...

this equates to £6250/ month


which was a comparative value i was using for looking at the two separate options....

its all sounding very ambitious in my current state of mind

[tim123]

Oh I see, this is the monthly income you expect to make doing the development instead of your day job.

You obviously haven't watched enought property investing programs on the TV. There are two givens for a first time developer:

1) you won't make as much money as you think.
2) it will take you longer than you think.

This might be a good overall investment.

But if you look at it as 'income replacement' you would be better off sticking to the day job.

Though, looking at the numbers, 250K to buy, 100K to turn into 4 flats and 100K per flat selling price, IMHO the buying price is too high.

tim

[kramer]

its not an income replacement... i have no intention to stop contracting its just a comparitive value...

lets forget about it and concentrate on the deal as a whole...

why is the buying price to high?

Do you have experience of contract building services? Any recommended companies in the north west...

[milanbenes]

Milan in Dragon Mode

the house is costing ~250,000

please explain how 100,000 will cover converting the
house into four apartments, please explain this figure


and you are expecting 100,000 to convert a house into
four apartments ?

Milan.

[kramer]

yes

[milanbenes]

please share the numbers then

100,000 / 4 apartments = 25,000 per apartment

eg apartment 1 : 25,000 breakdown...

cost to convert this area of house to apartment
includes
- access
- creating rooms
- creating bathroom/toilet and all plumbing and electrics
- creating kitchen and all plumbing and electrics
- installing heating system and plumbing and electrics
- installing kitchen equipment
- installing bathroom and toilet equipment
- installing floors
- insulating for sound and heat

and you can do all that for 25k gbp ?

Milan.

[threaded]

From someone in that game £250k is exactly the wrong price. If you don't know why, then seriously, look somewhere else for a Plan B.

threaded in "too many t-shirts" mode