Funding a housing development

[bradders]

Have been offered the opportunity to get involved in the funding of a new housing development - planning was passed previously for 64 houses, although the builder passing is not involved going forward, and the designs will need to be altered. Opportunity offered by the landowner, who has been taken on a wild goose chase by two developers previously - he is considering developing himself rather than selling the land to a developer.

Has anyone on here ever been involved in such, and does anyone know of an info resource for things to look out for?

Very niave questions, I accept - but you have to start somewhere!

Cheers, Bradders.

[Jobbo]

If you have the 'opportunity' to be involved in funding, you need to instruct solicitors to review the title etc to make sure the development is possible; you need a binding agreement with a developer to actually build the development and you need to make sure no money is released until there is security for that (so no more than the basic land value at this stage). Don't go into this without advice from a solicitor the whole way along.

[TimCrighton]

Hi Bradders, this is certainly something that I might be able to assist with. I will drop you a message. T

Now sent, didn't appear to send first time round, so apologies if received twice!

Edited by TimCrighton on Wednesday 6th April 12:44

[bradders]

TimCrighton said:

Hi Bradders, this is certainly something that I might be able to assist with. I will drop you a message. T

Now sent, didn't appear to send first time round, so apologies if received twice!

Edited by TimCrighton on Wednesday 6th April 12:44

Message sent with further details. Cheers, Bradders.

[bradders]

Jobbo said:

If you have the 'opportunity' to be involved in funding, you need to instruct solicitors to review the title etc to make sure the development is possible; you need a binding agreement with a developer to actually build the development and you need to make sure no money is released until there is security for that (so no more than the basic land value at this stage). Don't go into this without advice from a solicitor the whole way along.

Thanks, and noted. Not quite at the stage of handing over money - more looking into the possibilities of it all at the moment. I was introduced to this yesterday, from a standing start - there is not even a developer involved as yet - only me and the landowner, who I have known for many years.

[Jobbo]

Good luck with it, then - and bear in mind that you need just as much protection, if not more, when it's a deal with somebody you know

[bradders]

Jobbo said:

Good luck with it, then - and bear in mind that you need just as much protection, if not more, when it's a deal with somebody you know

Indeed - learned that lesson some time ago!

[pimpin gimp]

Where is the development? If it's anywhere in the south west or east I can recommend an excellent engineering consultancy to work on the scheme, admittedly I do work for them, but we've just been nominated for an NCE award so it's not just me blowing my own trumpet!!
We do structural and Civils work, and a 60odd plot scheme wouldn't be a problem at all.

[bradders]

pimpin gimp said:

Where is the development? If it's anywhere in the south west or east I can recommend an excellent engineering consultancy to work on the scheme, admittedly I do work for them, but we've just been nominated for an NCE award so it's not just me blowing my own trumpet!!
We do structural and Civils work, and a 60odd plot scheme wouldn't be a problem at all.

Thanks Ryan - unfortunately, the development is in West Yorks.

Cheers, Mark

[C Lee Farquar]

I've been supplying to a site of 60 new homes from day one. The only observation I have is that they are hemorrhaging cash daily and will be for some time before the show houses are built. I wouldn't even like to guess what sort of money they will have spent before they have a chance to get any back.

Things have been further complicated by recent requirements on drainage, rainwater and protecting every shrub and tree.

[bradders]

C Lee Farquar said:

I've been supplying to a site of 60 new homes from day one. The only observation I have is that they are hemorrhaging cash daily and will be for some time before the show houses are built. I wouldn't even like to guess what sort of money they will have spent before they have a chance to get any back.

Things have been further complicated by recent requirements on drainage, rainwater and protecting every shrub and tree.

Interesting - any chance you could ask what they've spent so far? I am expecting it to be well into 7 figures.

[C Lee Farquar]

bradders said:

Interesting - any chance you could ask what they've spent so far? I am expecting it to be well into 7 figures.

I'm dealing with the groundwork contractors and not privy to the finances, sorry. Well into 7 figures before seeing any cash back would seem a good starting point.

[Evo141n]

For 64 homes and and a site of associated size this is easily going to hit 7 figues if not 8.

[bradders]

Evo141n said:

For 64 homes and and a site of associated size this is easily going to hit 7 figues if not 8.

Average selling price on the estate adjoining was 150-200K. Build and sale was staggered - the adjacent estate was built and sold over a period of 2 years, and is now almost completely sold and finished. So, if build costs were projected to hit 8 figures, then it would be a non starter for anyone, wouldn't it?

To be honest, calculating costs was not the purpose of the thread - but it seems to have descended that way. I am much more interested in pitfalls and things to consider other than funding costs at this stage - the funding is the only part that I am sure about.

Out of interest Evo141n, as we are discussing costs now, where did you get the opinion that costs would escalate towards 8 figures from? Are you involved in the estate building game - a QS perhaps? Would be interested to hear your findings on this one.

[bartesque]

Bradders

Has a site investigation been carried out? you need to be satisfied that the ground conditions are suitable (otherwise can be costly for foundations) that the ground is not contaminated and that all mains services water/elec/drainage are available

you will need to have a Structural Civil Engineer on board in the long term

PM sent

[Johnboy Mac]

Interesting. I don't see any mention of who is actually going carry out the build. Are you considering building yourself i.e. hiring labour, sub contractors, architects etc etc or are you going to contract it out to building company to carry out the complete build?

If you or the land owner have no hands on development experience I'd strongly advise you to consider contacting out the complete project. Wish you well, great hearing about enterprising people.


Edit: I'm presuming the correct type of finance, planning permission (& conditions) are all in order & viable.

Edited by Johnboy Mac on Monday 11th April 10:06

[Boshly]

Not my type of work but my gut feeling would be 64 houses at an average of 1100sqft (mixed development of 1,2 & 3 beds terrace, semi and detached) at approx £75/sqft gives you around the £5m build cost then you have infrastructure costs which could be as small as £300k if all in place to over £1m?? You also need to build in professional fees and sales and marketing coats. Professional fees should incorporate all your survey, ground remediation/investigation, design, cost management and supervision.

Don't forget a contingency or services (which can be quite significant).

Calculate a GDV, from reasonable current selling costs (are your houses going to be a simar size and similar finish to next door) subtract all your costs including finance costs if applicable, add a 20% margin and that should roughly be the 'value' attributed to the land.

As I said not really my bag as our build costs are significantly higher due to location and property type, but I'm guessing as a ball park that should be reasonable. Any local builders or architects or QS's should be able to quote you rough sqft build costs.

Hope it helps and is successful (though after re-reading I may have been considerably teaching my Grandmother to suck eggs, apologies if so).

[bradders]

Johnboy Mac said:

Interesting. I don't see any mention of who is actually going carry out the build. Are you considering building yourself i.e. hiring labour, sub contractors, architects etc etc or are you going to contract it out to building company to carry out the complete build?

If you or the land owner have no hands on development experience I'd strongly advise you to consider contacting out the complete project. Wish you well, great hearing about enterprising people.


Edit: I'm presuming the correct type of finance, planning permission (& conditions) are all in order & viable.

Edited by Johnboy Mac on Monday 11th April 10:06

Thanks for the wishes - landowner already has someone lined up for the build - I will be looking at them very closely. Like you recommend, if I am to be involved, then the project will be contracted out to a building company with prior experience in this area. I will be looking at the existing documentation this week, so should have a better idea of where things stand after that time.

[bradders]

Boshly said:

Not my type of work but my gut feeling would be 64 houses at an average of 1100sqft (mixed development of 1,2 & 3 beds terrace, semi and detached) at approx £75/sqft gives you around the £5m build cost then you have infrastructure costs which could be as small as £300k if all in place to over £1m?? You also need to build in professional fees and sales and marketing coats. Professional fees should incorporate all your survey, ground remediation/investigation, design, cost management and supervision.

Don't forget a contingency or services (which can be quite significant).

Calculate a GDV, from reasonable current selling costs (are your houses going to be a simar size and similar finish to next door) subtract all your costs including finance costs if applicable, add a 20% margin and that should roughly be the 'value' attributed to the land.

As I said not really my bag as our build costs are significantly higher due to location and property type, but I'm guessing as a ball park that should be reasonable. Any local builders or architects or QS's should be able to quote you rough sqft build costs.

Hope it helps and is successful (though after re-reading I may have been considerably teaching my Grandmother to suck eggs, apologies if so).

Thanks for the advice. All welcome, and not viewed in the suck eggs sense. Even the most prepared can miss out the obvious at times!

[Johnboy Mac]

bradders said:

landowner already has someone lined up for the build

That would be a concern for me.