Need some advice on a property........

[amar1]

Hi all

Basically i have an opportunity to purchase a decent size retail unit that has planning permission for 14 2 bed apartments with parking. Purchasing it should be ok, finances are in place. Raising the money for the build again should be fine.

But this is something that i have never done before so any developers out there who can give this newbie some advice?, any advice or guidence would be GREATLY appreciated as i think it could be great investment for me.

Thanks

[paoloh]

Make sure you get a very good project manager!

If you think it is beyond you, don't do it.

Hope this helps.

[Piglet]

Hmmm...not sure I'd be doing this now.

If you commit to the property how long can you afford to keep it before needing to make money back on it?

If you go ahead with the works how long before you really really need to sell 60% plus to recoup your investment?

If the answer to either of these is "not long" then it strikes me as a pretty big risk.

If you're not a major player in development and this opportunity has come your way, consider carefully whether it is because everyone else has turned it down.

[ScottNicol]

how much is the property if you dont mind me asking? Reason for asking is i am a developer and i am looking to sell my land bank and just curious to what other people are demanding for that product in the market at the moment. Is the site on the market or off it?

Answer to your questions, your not born knowing how to build flats or houses so you need to start somehwere as everyone has, make sure you are comftbale with the level of build, a block of apartments is usually pretty simple.

Good Luck

[amar1]

Thanks for the replies so far.

Currently retail unit on the site, price is 500k. I guess my main worry is the state of the property market, if i took it on will i be able to get rid of the apartments pretty sharply or another option is to sit on it for few years intially use it as my business premises.........alot to think about but any more comments will be welcomed.

Thanks

Edited by amar1 on Friday 9th November 10:56

[ScottNicol]

What is the location like ? the property market is not in as bad a state as the press are making out, there are lots and lots of people buying because of this press. By the time you started building you would be well into next year and you would be selling your apratments for in the spring / summer when people always look to buy.

35k per unit is not to pricey but not to cheap either, with full consent. what sort of price do you think you can sell the apartments for ?

[amar1]

Small development accross the road, 5 apartments and currently on sale for 100k but thats a 1 bed. Consent has been given for 2 bed apartments so your guess is as good as mine on the price

[paoloh]

Extra bed has to be worth £25k ish

[ginettag27]

You need to quickly work out what you can sell them for. Ideally you need to be looking at at least a 20% profit margin, anything less and it will be too close to call. I would be talking to Estate Agents about the possible sale price.

14 * 2 beds @ 125k (say) = 1,750,000 overall. You need to work out how much it will cost to do the work, on average 1000-1200 per square metre... How many square metres? That will give you a good idea of the viability.

What about amenities, schools (although not really on a 2 bed, but could be 1/2), Motorway access and parking. If you're aiming at the Professional market, which I think you are, you need to be aiming squarely at them, otherwise they won't touch it and no one else will.

What sort of location, in the country? i.e. South, Mids, North...

PM me if you want to discuss, although we're only an Architectural Service - if you need any drawings!

Edited by ginettag27 on Friday 9th November 12:31

[ScottNicol]

what is the sqft of the project ? what town is the project in ? i will do a quick calculation for you

[Hobo]

Based on a 12 month build

Development Value: £ 1,750,000 (14 x £ 125,000)

Build Cost: £ 805,000 (14 x £ 57,700) (Based on seperate subi's & you managing it)

Misc costs (interest charges, architect, solicitors, etc): £ 170,000

Total build cost: £ 975,000
Plus land value: £ 520,000
TOTAL: £ 1,495,000

Profit (pre-tax) £ 255,000

Only roughly but gives you an idea.

My main note to you would be do you have the contacts in the business to know to to go to for all the seperate components that make up the build process ? If not, that profit would soon be non existant.

Edited by Hobo on Friday 9th November 14:56

[Hobo]

The above is also based on you borrowing the full amount (or most of it), obviously if you're willing to put money in yourself then the £170k element would come down considerably.

[ScottNicol]

I have came up with totally different figures from that but still get around 300k profit. What price per sqft you building at ?

[Hobo]

I included architect fees which aren't needed (or not to the level I included) & also the interest costs I included are slighlty OTT.

£300k is probably right for an established developer with good contacts/buying power.

In all honesty for a first time developer with little experience I suspect this isn't a brilliant one.

[ScottNicol]

Amar kindly emailed me the consents application, the site just has outline planning, so high fees are needede to get to detailed as no detailed plans have been drawen up as yet!

[Hobo]

Well in that case I'd say 250k is a realistic profit.

250k on 1.75m though it not a good return in my eyes. Far better opportunities out there for new developers IMO (if you put the work in).

[ginettag27]

Hobo

Just out of interest how do you arrive at 56k per apartment, when they're 80sqm each in size??

Phil

[Hobo]

Have I missed where it says 80m2 each ???

I arrived at the figure by the costs of a development of apartments I have recently done. Apartments in this case being circa 70m2.

[ginettag27]

possibly not, but _these_ apartments are 80m2.. from the information sent.

[ScottNicol]

how can u say the apartments are 80m2 ? the site doesnt have full consent so there is no sepcific apartment size as yet !!