Developing retirement properties...

[greentown]

Also posted this in Homes forum... I've been chewing over investing in bungalows in the Whitstable area for a couple of years and I'm finally in a position to take my plans forward. The areas I've identified are well-known retirement roads in a prosperous seaside location but I'm a newcomer to 'full-time' development and wanted to see if I was making any very obvious mistakes in my thought processes.

I'm looking at 2 bed properties with gardens like these:

1. http://www.rightmove.co.uk/property-...-40540820.h...

2. http://www.rightmove.co.uk/property-...-23138184.h...

3. http://www.rightmove.co.uk/property-...-40561745.h...

I'm looking at properties which are fundamentally sound and habitable rather than total wrecks, which mainly need thorough redecoration/light renovation and which, ideally, have relatively simple flaws which if fixed, would make them instantly more saleable. Ideally turnaround would be 6/8weeks after purchase and with a spend of up to £15k max on any individual refurbishment.

In all of the properties above, I'm fairly sure there's scope for price negotiation and when polished up, I would look at selling prices of around £185K - £195K - so gross profits of around £10 - £20k per property.

As I'm new to this, I would really welcome the feedback of anyone who's done this. Are my anticipated profits too low to make it worthwhile? Are they realistic? And if anyone knows the areas I'm looking in, I'd welcome your thoughts on the local market.

[nw28840]

The links are not working....

[DonkeyApple]

It's all about facilities. Retirement homes need to be on bus routes, walkable to shops, meals on wheels, carers, the right NHS facilities etc.

[greentown]

Thanks - sorry about the dud links - let's try again.

1. http://www.rightmove.co.uk/property-for-sale/prope...

2. http://www.rightmove.co.uk/property-for-sale/prope...

3. http://www.rightmove.co.uk/property-for-sale/prope...

I've researched this area for buses into Whitstable and Canterbury, large Sainsburys, small Tesco, library, doctors and dentists and low crime and walking distance to the seafront.

Overall, it's the sort of place I wouldn't mind retiring to when the time comes for me which, I think, gives me a sense of sincerity and belief in the project - I wouldn't feel I was selling something to people which I didn't genuinely value myself.

[Kudos]

Why tie yourself to just retirement properties?

[greentown]

I know the location.
The properties are cheap to buy.
There's an ageing population so an ongoing market/supply of buyers.
The buyers are cash buyers usually trading down so no survey and mortgage issues.

It's not a restriction it's a specialisation in a niche market.

[Kudos]

greentown said:

I know the location.
The properties are cheap to buy.
There's an ageing population so an ongoing market/supply of buyers.
The buyers are cash buyers usually trading down so no survey and mortgage issues.

It's not a restriction it's a specialisation in a niche market.

A good property in right location will always sell. I wouldn't want to restrict myself to making any development suitable only for pensioners as this cuts out a large swathe of other prospects.

I typically go with a neutral finish which gives scope for buyer to do with whatever they want.

But, you know your marketplace better than us so do whats right for you.

[greentown]

I think that's fair enough - it's a truism of all property developing and whether I was developing for young, old, rich or poor - a neutral finish would appeal to more buyers.

I'm looking at retirement properties because I live in an area where lots of people retire - it's the biggest share of the market.

They are cash buyers.

There is a regular turnover of their properties so a ready supply of stock and buyers.

I'm not saying this isn't also true of other market segments but I just happen to live in this area and it would add to my costs to try and go and operate in any other market segment.

I work with what I've got. If the place was full of FTBs I'd be developing for them but it isn't.

[Deva Link]

greentown said:

In all of the properties above, I'm fairly sure there's scope for price negotiation and when polished up, I would look at selling prices of around £185K - £195K - so gross profits of around £10 - £20k per property.

That's nothing like enough margin.

And people generally won't pay extra for refurbed property - there was a thread just rectly from someone trying to sell a refurbed bungalow and he was was getting nowhere.

What are property prices doing generally in that area? These things work if prices are going up anyway, but in a flat or falling market they don't.

[greentown]

You're right - I need to work harder on my intended purchase prices to increase the potential profit.

Prices down here are steady. Refurbished bungalows are going at about £10k ish more than they went at 18-24 months ago. Not spectacular but ticking over.

The difficulty is that prices for the 'projects' are also up about £10k ish over the same period.

I think there's scope to do deals though - establishing a positive relationship with vendors and agents will, I hope, improve my chances on the negotiation front.

There's definitely a distinct market for projects as opposed to finished houses though.

[DonkeyApple]

As an aside, I've often thought that the niche retirement property for a pensioner is not a bungalow but a house that has been split into two flats. The pensioner can live on the ground floor but would also receive inflation proof rental yield from their tennents upstairs.

Run by a management company that sourced quality tennents and enforced well defined rules it would be an interesting niche as most old people don't want to go and live amongst other old people and such a structure would give a more vibrant social balance.

[greentown]

That's a really good idea - and would also allow the possibility of having live in carers/family should the need arise.

[DonkeyApple]

greentown said:

That's a really good idea - and would also allow the possibility of having live in carers/family should the need arise.

I'm sure it has its flaws but I've thought for a long time it was something worth taking further.