Reply to: Property development - how do i?

[Troll]

I have the opportunity to buy large property which is in some disrepair for a good price (250000).
I have 2 plans...either gut and tidy, making it ready for further developmant by someone else or I can take a bit more money and time and develop into 4 flats and make a similar monthly return over a longer period...its probably gonna work out at about 8 thousand a month.

This isn't something i have done before but i'm keen to have a go... unfortunately i don't have the capital to go into it so looking to borrow 100% of the project costs...
It appears 75% is as far as most residentail development lenders will go.. anyone have any experience of these loans etc...

According to my spy -there are a couple of projects currently in the pipeline at Hectors House that may have some bearing on your plans.
They affect situations where "improvements" such as conservatories or extensions have been carried out since purchase, and the other is where plots of land have been bought & have had houses built upon them.

Both scenarios will attract a liability & charges will be retrospectively applied with interest from the date of improvement or purchase of land, to the current date.

It's only fair

[threaded]

£250k dead is in 1% band !?

Just on the point, and that is the root cause of all the problems of that price.

You want to avoid 225k to 275k. Say you get knocked back on the planning permission, which is highly likely as you don't know the game. How do you sell and recoup your costs to that point? At 250 add on a few k for your out of pocket and, wham, the stamp duty has gone up and the house is more difficult to sell. One reason it is more difficult to sell is that anyone else don't want to be shelling out for the stamp duty either. Also say you have an accident and can't cover the mortgage, which is highly likely if you're new to the game, the bank won't play because they know the property will be more difficult to sell so they'll rape you on the interest rate or pull some other cunning stunt.

If you watch the market you'll see a fair few properties at 225K come on the market in HIMO areas, but they'll disappear real quick, generally to people with "connections" in the council planning department. Unless you have such connections, or know where the bodies are buried, such a business can be a fraught experience.

threaded in "Donnygate" mode

[tim123]

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?

I think that the buying price is too high because the number's don't stack.

ISTM that you will be lucky to get this conversion done for 100K "all in" costs.

So 350K spend, 50K profit = 15%. This is the absolute minimum you should expect for the building work/risk involved in a project of this type/size and it seems to be the maximum you are getting. If you hit a problem on the way you are out of pocket.

It might not be that the buying price is wrong, it could be that your estimated selling price ought to be higher or the conversion cost should be lower. I cannot comment upon the first, but think it highly unlikely to be the second (as you've seem to have calculated, you have a minimum of 10K in finance costs and 10K in legals).

However, the figures that you have quoted, are the sort of figures that a first time developer works on happily (until they have been caught by a problem property). The experience developer would walk away at that price unless they are going to do the structural work themself, which I guess you are not.

tim

[milanbenes]

kramer,

only joking, but there is a serious side to all of this

do your research

get some quotes from builders for the work
talk to the planning office

this is a valuable thread, there is a mountain of useful info
in this thread from people with experience which will start you off

good luck,

Milan.

[kramer]

this is a funny thread, can't wait for Kramer to reply

is Kramer a relation of El_Duder ?

Milan.

well you can't blame a lad for trying...

gooner - its a bit of a shocker that its taking 18 months for the conversion..

I guess i am a bit naive when it comes to this but i'm not gonna figure it out unless i ask the questions and have a go.

the finish on the flats will be adequate but the estimates were totally off the top of my head based on work around my house and people i know...

I'm not sorting oak floor and banisters thats for sure...

I think i definitely need to speak to planning office and a couple of builders but hey... its early days yet ..

This could be the adventure i need right now...

[milanbenes]

this is a funny thread, can't wait for Kramer to reply

is Kramer a relation of El_Duder ?

Milan.

[n5gooner]

mmmm ok some comments from someone who's been there and done that...

Planning permission can take up to 3 months, then may be refused. I'm no on an appeal to have my 6 bed house in Bromley converted into 2 flats, so far its taken 18 months.......

Conversions costs, with all the T&Cs from H&S will be more than 25k per flat, and with that are you looking to add all the finishing touches, expenses bathrooms, kitchens etc.

I'm looking at a conversion cost of about 40k per flat.

Then you have to look at what else there is on the market, parking, is there room for 4 flats, Bromley tell me they want 1.5 spaces per flat, off road, can you do that ??

You need to engage an architect, to do plans, three types will be needed and then submitted to the council, this will cost iro £1500 and you also need to engage a builder to give you an estimate of costs, for you sums, then get 4 more for comparison reasons.

Then consider the cost for splitting services, gas, electricity, water (will the water company want meters installed, splitting the electricity is costing me £1500 for two flats.)

what are you doing about outside space how are you considering splitting it.

Have you considered selling two of the flats to recoup some off your costs, but keep the freehold, so you have so residual value that you can call on in say 25 years....

there is lots and lots more to consider........if you want more info let me know....

[rootsnall]

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

£250k dead is in 1% band !?

[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

[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.

[kramer]

yes

[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]

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...

[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]

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