Buying land with planning
Discussion
We have been offered some land that has planning permission to build a single large property on. Is there generally money to be made on purchasing land with planning if to build on? Or has the money been made getting the planning by the land owner, hence wiping out the developers margin. We can do all the groundworks up to DPC and self funding.
Opinions welcome!
Opinions welcome!
I’ve been offered a few plots on a similar basis over the years and on doing the numbers in each case there wasn’t any profit to be had in the building of the property. Whoever was selling the plot was taking no risk and taking all the profit. I didn’t go ahead with any of them.
Edited by PhilboSE on Wednesday 22 January 20:24
C722 said:
We have been offered some land that has planning permission to build a single large property on. Is there generally money to be made on purchasing land with planning if to build on? Or has the money been made getting the planning by the land owner, hence wiping out the developers margin. We can do all the groundworks up to DPC and self funding.
Opinions welcome!
I guess it depends on how much you can buy the land for, what the PP is for and how much it will cost to build v what it is worth when completeOpinions welcome!
Traditionally it has been a simple split 1/3 build cost 1/3 land 1/3 profit.
It is possible to make money but you need to work out what the resultant property is worth, what the property will cost to build (not forgetting a margin for unknowns or inflation). Whats left can be shared between land cost and profit. If the land cost takes it all then walk away.
Of course self builds operate on a slightly different model as they arent looking to make a profit
It is possible to make money but you need to work out what the resultant property is worth, what the property will cost to build (not forgetting a margin for unknowns or inflation). Whats left can be shared between land cost and profit. If the land cost takes it all then walk away.
Of course self builds operate on a slightly different model as they arent looking to make a profit
As above in theory it is a third land / build / profit.
This will work for a large builder who buys a large site for x houses.
For a self builder it won't.
I have just built a house. I had to buy a house an pay the cost of a house , knock it down and build another.
There is a profit but not close to a third.
The land seller will have to price it to be attractive to a self builder but the definition of attractive won't be 1/3 profit.
The only justification for self build is you get what you want at a small discount. If you use man maths you can justify doing it but the true cost of alternative housing , time , finance , hassle etc is unlikely to generate a meaningful return other than the general tendency for property prices to rise and the element of premium a new build may attract. Even then you can't sell rapidly or you get a cil charge.
Do it because you want to not as you will make a profit.
This will work for a large builder who buys a large site for x houses.
For a self builder it won't.
I have just built a house. I had to buy a house an pay the cost of a house , knock it down and build another.
There is a profit but not close to a third.
The land seller will have to price it to be attractive to a self builder but the definition of attractive won't be 1/3 profit.
The only justification for self build is you get what you want at a small discount. If you use man maths you can justify doing it but the true cost of alternative housing , time , finance , hassle etc is unlikely to generate a meaningful return other than the general tendency for property prices to rise and the element of premium a new build may attract. Even then you can't sell rapidly or you get a cil charge.
Do it because you want to not as you will make a profit.
Chrisgr31 said:
Traditionally it has been a simple split 1/3 build cost 1/3 land 1/3 profit.
No it hasn’t. And it’s even less relevant on a single large plot. A fag packet residual appraisal makes sense, a meaningless rule of thumb that no one who really knows about land buying uses makes no sense.
If my land director came to me with sites valued on that basis, he would soon be looking for a new job.
Op
You need to do some maths
Value of finished house minus land price minus total build cost minus funding cost minus marketing cost = profit
If profit is under 15 percent of value of the finished house think twice especially if you have no contingency in your build cost. On a single plot most developers target 20% minimum.
You need to do some maths
Value of finished house minus land price minus total build cost minus funding cost minus marketing cost = profit
If profit is under 15 percent of value of the finished house think twice especially if you have no contingency in your build cost. On a single plot most developers target 20% minimum.
TownIdiot said:
In theory there should be enough for everyone, but it seems most landowners want to take the lions share, especially since build costs have increased so much.
Some builders do too. I got one quote in about two years ago where, after line after line of itemised work (much of which was gently or padded in terms of the length of time it would take and with not insignificant £ attached) there was a final line item… “profit”. This was not an arrangement where there was some commercial aspect, e.g. it wasn’t build to sell with the builders working at cost, but rather a case of them billing at full rate and then wanting additional “profit” on top. Have never seen this before, but it didn’t go down well.
It’s hard to get to proper build costs until you actually have the site and design locked in. Before that builders are much less likely to be interested in spending time on what could simply turn out to be someone’s dreams.
blueg33 said:
Op
You need to do some maths
Value of finished house minus land price minus total build cost minus funding cost minus marketing cost = profit
If profit is under 15 percent of value of the finished house think twice especially if you have no contingency in your build cost. On a single plot most developers target 20% minimum.
It all depends if the OP is doing this as a commercial endeavour or as a self-builder who wants to build his home to live in for a number of years.You need to do some maths
Value of finished house minus land price minus total build cost minus funding cost minus marketing cost = profit
If profit is under 15 percent of value of the finished house think twice especially if you have no contingency in your build cost. On a single plot most developers target 20% minimum.
Tricky one.
Our land up here is worth maybe £3-5k/acre at the moment, we carved off just under an acre that we managed to get planning permission for and sold it for £75k. The new owner then sold it on for £65k (!) and it’s still sitting undeveloped some 6 years later. Both of the buyers had intended to build but came to the conclusion that build costs outweigh likely house value.
If you can self build you may be able to make a profit but it depends so much on house prices in your area.
Our land up here is worth maybe £3-5k/acre at the moment, we carved off just under an acre that we managed to get planning permission for and sold it for £75k. The new owner then sold it on for £65k (!) and it’s still sitting undeveloped some 6 years later. Both of the buyers had intended to build but came to the conclusion that build costs outweigh likely house value.
If you can self build you may be able to make a profit but it depends so much on house prices in your area.
AyBee said:
There's a reason the land owner is selling it with permission only and not with a building on top...
Not necessarily - my GF got PP for a build on her land, which increased the value of the overall house sale. She had neither time time or money to orchestrate the build, but getting the PP was simple and, moderately inexpensiveGriffith4ever said:
AyBee said:
There's a reason the land owner is selling it with permission only and not with a building on top...
Not necessarily - my GF got PP for a build on her land, which increased the value of the overall house sale. She had neither time time or money to orchestrate the build, but getting the PP was simple and, moderately inexpensiveEven more annoying is overage/uplift - a proper case of heads I win, tails you lose for the owner...
Griffith4ever said:
AyBee said:
There's a reason the land owner is selling it with permission only and not with a building on top...
Not necessarily - my GF got PP for a build on her land, which increased the value of the overall house sale. She had neither time time or money to orchestrate the build, but getting the PP was simple and, moderately inexpensiveTownIdiot said:
Griffith4ever said:
AyBee said:
There's a reason the land owner is selling it with permission only and not with a building on top...
Not necessarily - my GF got PP for a build on her land, which increased the value of the overall house sale. She had neither time time or money to orchestrate the build, but getting the PP was simple and, moderately inexpensiveGassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff