Development - Would you proceed ?

[thesilentpartner]

The initial message was deleted from this topic on 26 March 2009 at 07:03

[groomi]

Well you may make far more if you wait a few years, but on the other hand a cool million could be useful in 2010...

You may even be able to reduce the build cost at the moment as there are contractors out there practically buying work just to keep their guys employed.

[mas99]

Valued when, by whom and with what assumptions?

Of course nobody can really give an opinion because we dont know the location or the target market.

[rsv gone!]

mas99 said:

Valued when, by whom and with what assumptions?

Of course nobody can really give an opinion because we dont know the location or the target market.

I don't know how anyone can pin a value on property nowadays. There will need to be a lot more science in it than an Estate Agent's guestimation given current climate and funding problems.

[rsv gone!]

Without giving us all the details, what property types and where (roughly)? I'm guessing maybe 10 houses, which would need to sell at £270K?

[Sam_68]

All I will say is that with that sort of profit margin, yes, we'd proceed.

If you're as confident as you can be of your figures, go for it!

[DjSki]

If you can't decide yourself and are asking people on here then surely the answer is STOP!

Would have thought that if in the current market that you have convinced a sceptical bank to lend you the money though then it COULD be a goer.

[Piglet]

DjSki said:

If you can't decide yourself and are asking people on here then surely the answer is STOP!

+1

[groomi]

Piglet said:

DjSki said:

If you can't decide yourself and are asking people on here then surely the answer is STOP!

+1

I think there is often an assumption that people ask questions here without carrying out any further research at all. I think it's fairly obvious that someone looking at investing this sum of money is going to have carried out various forms of research and due dilligence - general opinion gathering from strangers on the internet merely being one angle of this.

[ShadownINja]

thesilentpartner said:

The values have been carried out by two local estate agents & an independant valuer employed on behalf of the bank to check the figures themselves.

TBH what makes these experts so good that they can predict the price in a falling market in 2 years time? If they are that good, they should quit their jobs and get jobs as traders cos they would be rich beyond their wildest dreams by this time next year. I take it all back, of course, if they were doing their job in 1930, too.

Edited by ShadownINja on Wednesday 31st December 22:52

[ShadownINja]

Ah, my mistake!

[JOETHETOE]

This would really depend on the area for me.

instinct says:- Real problem is the mortgage market, new build properties are not flavour of the month at the moment.

Is there no way you can "stall" for a while? I doubt there will be other parties falling over themselves to purchase off your vendor at the moment so could make sense for all involved.

That said it does depend on the area, there are still some areas that will always sell, will just take longer.

[Hobo]

I would say its a definate goer as long as the valuations given are realistic, but only you know this.

[NoelWatson]

thesilentpartner said:

Just signed up for some more land for our next development. Now, taking into account the current climate would you proceed on the following basis:

Land - £ 450,000
Build Cost - £ 1,000,000 (all quoted with 10% contingency)
Misc Costs (arch/eng, planning, stamp, interest, est. ag., adver., etc) - £ 250,000
TOTAL BUILD COST - £ 1,700,000

The development has been valued (in the last week or so) at £ 2,700,000.

Start date: April 2009
Completion date: Approx. October 2010

Personally, cannot see any reason not to go ahead with it as the margin is great enough by far to cover what I see as potential drop in value & still return a healthy profit.

What do you all think ? Would you proceed or hold off ?

Market is pricing in another 35% falls over the next three years so I guess it depends whether you think that is pessimistic or optimistic

http://www.tfspropertyderivatives.com/pdf/RISK&amp...

[NoelWatson]

thesilentpartner said:

Ah, 'the market'. The oracle.

If you don't make I'll take what 'they' say with a pinch of salt & go with my own gut feeling, as ultimately it is my money & hence my risk.

So why bother asking people's opinions when if you get an answer you don't like, you choose to ignore it?

[Piglet]

groomi said:

Piglet said:

DjSki said:

If you can't decide yourself and are asking people on here then surely the answer is STOP!

+1

I think there is often an assumption that people ask questions here without carrying out any further research at all. I think it's fairly obvious that someone looking at investing this sum of money is going to have carried out various forms of research and due dilligence - general opinion gathering from strangers on the internet merely being one angle of this.

How on earth can anyone give any real opinion though with virtually no data about the project? Any views are as worthless as a chocolate teapot. We know nothing about the standard of built, the area, the target market or anything

[Sam_68]

Piglet said:

How on earth can anyone give any real opinion though with virtually no data about the project?

Ultimately, all we really need to know is the predicted profit margin, which the OP has given us enough information to calculate.

At the moment, all our projects have to go for Board Approval at head office before we can make a start on site. Certainly, we give them a lot of detailed information to provide evidence that the bottom-line margin has been calculated realistically, but ultimately there's a simple 'pass mark' percentage (which I'm not willing to divulge for commercial reasons).

All I will say is that, assuming the OP has done his sums right (and I've no reason to think otherwise), he'd get the approval of our board to start on the development, tommorrow.

Indeed, if he chooses not to proceed, he may wish to contact me via my profile. Some of our Regions are facing a shortfall in land supply/numbers and are looking for land at suitable margins. Depending upon the type and location of the development, we might be willing to take it of his hands for a small, but quick, profit.

[Mr POD]

To break even you need to sell all 6 properties at an average price of £284K

To make your £1m you need to sell at an average of £450K


Any figure between those 2 is profit !!!!

£1.7m left in the bank is worth what ? £100K in a year ? So you Really need to sell all 6 for £310K each to make it worth while.

Could you Sell 3 off plan for £450K ? Thus meaning that you'd only need to sell the other 3 at £117K to break even.

[anonymous-user]

Surely it's the maket view that matters?? Those are the people that will be buying these houses, not your fellow developers.

[NoelWatson]

thesilentpartner said:

I was interested in other developers views as, like me, they are the ones putting thier money on the line.

Edited by thesilentpartner on Friday 2nd January 13:04

As are the people betting on the housing futures