7 acres - housing association want we think
Discussion
blueg33 said:
0.5 percent yield is a big number when it comes to gdv. Its nearly 20 percent more.
But no RSL will buy a site that size assuming all units are rented. It will be a blend of tenures.
Your build cost is about right assuming no special materials.
IMO if the op sells to an RSL/HA then they will not be maximising the land value.
You are an expert in your field and I find banter interesting and a learning experience.But no RSL will buy a site that size assuming all units are rented. It will be a blend of tenures.
Your build cost is about right assuming no special materials.
IMO if the op sells to an RSL/HA then they will not be maximising the land value.
Surely purchased properties in line with market would exceed the 5.5 yield valuations so increasing the valuation?
There is no way of valuing this exactly as it's subjective... but I learnt well from working at a national house builder as an accountant.
The assumed rental yield is created by the lender, and 5.5 is definitely on the low side and can only be achieved if long term backed by a government long term rental backer as you would find in social housing, but still it is on the competitive side, seen similar investments coming in at near 7 per cent within a more competitive market.
blueg33 said:
Here I am 
Op - It sounds like you are being oferred an option with a £10k premium, this is common where the land is not currently allocated.
The land will be valued on a residual valuation basis, ie the Gross development value less the development costs. Often with options you would then be paid circa 85% of this value.
But, this needs negotiating on your behalf by a professional. You should be able to achieve 100% of the open market value less planning costs etc. Expect to pay a good agent at least 2% of the land value.
I know the patch reasonably well, pm the agents details as its important he knows what he is doing.
A housing association will generate a lower land value (typically) than a regular resi developer. If an HA can get planning then a regular developer may be able to get it also.
What you need to know is:
What is the Local Plan/UDP status?
What is the acreage (density of development is criticak to land value)
What are the typical selling prices for new houses inthe area
What tenure mix is the HA applying
The agent needs to obtain the developers land appraisal and you need to run that past me or someone like me.
Feel free to PM me and I canlet you have my phone number as it will be easier to chat this through, I will have a little time on monday.
If you want to know why I think I may know a bit about this, I have been a housebuilding Land Director for 20 years the first 10 in the southwest, I now deal with development and investment into supported living and extracare for HA's and development of hospitals and health centres across the UK. My supported living business buys a site a week for housing association development. A subsidiary is the UK's largest builder of affordable housing.
Some great advice in this post and he has picked up on the fact that a Housing Association is involved.Op - It sounds like you are being oferred an option with a £10k premium, this is common where the land is not currently allocated.
The land will be valued on a residual valuation basis, ie the Gross development value less the development costs. Often with options you would then be paid circa 85% of this value.
But, this needs negotiating on your behalf by a professional. You should be able to achieve 100% of the open market value less planning costs etc. Expect to pay a good agent at least 2% of the land value.
I know the patch reasonably well, pm the agents details as its important he knows what he is doing.
A housing association will generate a lower land value (typically) than a regular resi developer. If an HA can get planning then a regular developer may be able to get it also.
What you need to know is:
What is the Local Plan/UDP status?
What is the acreage (density of development is criticak to land value)
What are the typical selling prices for new houses inthe area
What tenure mix is the HA applying
The agent needs to obtain the developers land appraisal and you need to run that past me or someone like me.
Feel free to PM me and I canlet you have my phone number as it will be easier to chat this through, I will have a little time on monday.
If you want to know why I think I may know a bit about this, I have been a housebuilding Land Director for 20 years the first 10 in the southwest, I now deal with development and investment into supported living and extracare for HA's and development of hospitals and health centres across the UK. My supported living business buys a site a week for housing association development. A subsidiary is the UK's largest builder of affordable housing.
It is not something to be rushed or pressured in to. Yes the capital receipt will be lovely but its worth waiting a few months to get it right. Its also worth commenting that if they do buy an option what is that option committing the OP too? Guaranteed price in x years.
Consider that valuations can vary by 10% and still be accepted as correct by the RICS. At the sort of values being mentioned on here that is a lot of money and being 10% higher would pay a lot of fees to valuers, agents etc.
As BlueG33 says - understanding the status of your land (ie, does the land need promoting into the local plan, prior to an application being made) is important as a first step.
If your land is allocated then you are one step closer to being able to realise some value in your land.
to my mind an HA is never going to be able to maximise land values. from my experience - they simply aren't that commercially minded for a start.
In any event - the contract (or Option agreement) needs to protect you as the owners. Your agent should be advising you on this.
If it's an option then there are various tweaks you should try to put into your agreement so that you maximise the receipt to you and your family. But first of all - do you understand what people mean by 85% OMV? I assume so. Has the agent told you what is deducted prior to you receiving your 85%?
Is there a cap on planning costs for example?
Is there sales and planning overage?
clawback?
Just because it's an HA doesn't mean they wont try to pull a fast one on you (capture a consent, pay you off and then go again for an enhanced permission).
So too - the HA might capture a consent and then sell it on - you should have a clause that captures an element of this uplift.
I'd also be urging the HA to ensure that they run a viability assessment/affordable housing toolkit on the site to ensure they maximise the tenures of the units. There is a marked difference between discounted market sale and social rented (or market rent as it's now known).
You need to have somebody working on your side of the fence that is tweaking the contract as much as they can in your favour and more important suggesting tweaks to the planning application to maximise the development potential of your land.
It's about working every angle to maximise the land receipt for you. If I was a developer I'd be working every angle (design efficiency, build cost optimisation, specification to maximise resi values, finance, land negotiation to maximise profit) - you need an agent or someone to do that for you but on the land element.
Has your agent gone to any other developers? why haven't they come forward? it can't be that 'bad' an area can it? I'd assume one of the big boys or regional players would be interested? if not - I know plenty of strategic guys that option up this type of development and then sell on to a developer once they've captured a consent (obviously we have to work on the clawback clause in these cases!).
If your land is allocated then you are one step closer to being able to realise some value in your land.
to my mind an HA is never going to be able to maximise land values. from my experience - they simply aren't that commercially minded for a start.
In any event - the contract (or Option agreement) needs to protect you as the owners. Your agent should be advising you on this.
If it's an option then there are various tweaks you should try to put into your agreement so that you maximise the receipt to you and your family. But first of all - do you understand what people mean by 85% OMV? I assume so. Has the agent told you what is deducted prior to you receiving your 85%?
Is there a cap on planning costs for example?
Is there sales and planning overage?
clawback?
Just because it's an HA doesn't mean they wont try to pull a fast one on you (capture a consent, pay you off and then go again for an enhanced permission).
So too - the HA might capture a consent and then sell it on - you should have a clause that captures an element of this uplift.
I'd also be urging the HA to ensure that they run a viability assessment/affordable housing toolkit on the site to ensure they maximise the tenures of the units. There is a marked difference between discounted market sale and social rented (or market rent as it's now known).
You need to have somebody working on your side of the fence that is tweaking the contract as much as they can in your favour and more important suggesting tweaks to the planning application to maximise the development potential of your land.
It's about working every angle to maximise the land receipt for you. If I was a developer I'd be working every angle (design efficiency, build cost optimisation, specification to maximise resi values, finance, land negotiation to maximise profit) - you need an agent or someone to do that for you but on the land element.
Has your agent gone to any other developers? why haven't they come forward? it can't be that 'bad' an area can it? I'd assume one of the big boys or regional players would be interested? if not - I know plenty of strategic guys that option up this type of development and then sell on to a developer once they've captured a consent (obviously we have to work on the clawback clause in these cases!).
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