making money from building and land development
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Making money from building and land development.TRANSCRIPT
Pearson Park Hotel, Hull
Monday 6th September 2010
John & Debra Rice
Life before Property• John Rice• Chartered Quantity Surveyor , Chartered Builder & Construction
Contract Consultant• 25 years experience representing Private Clients and Contractors
on both major Building and Civil Engineering Projects , throughout UK, Europe , Middle East and Far East.
• Member of Royal Institution of Chartered Surveyors (MRICS)• Member of Chartered Institute of Building (MCIOB)• Associate of The Chartered Institute of Arbitrators (ACI Arb)
Life before Property
• Debra Rice• Registered General Nurse following 3 years
initial training in Sheffield.• 20 years experience providing nursing care in
UK and abroad.• Rehabilitation of young adults / adolescents with
spinal injuries and lower limb amputations. • Emergency Medical Evacuations throughout the
World.
Copyright © Carlile 2006
The Awakening!• Prior to our marriage we travelled the World for 9
months.• Purchase of first Property Investment book in
Adelaide , Australia – Building Wealth through Investment Property – Jan Somers.
• The fascination begins!!!
The Rat Race!
• Our first house was bought in Summer 1994.
• Married November 1994.• Full time employment John 9 to 5 , Debs
often nights and most weekends.• After two years, in Summer of 1996 we
Took Action and spent the next three years in P.R. China.
Return from China
• John goes self employed setting up his own consultancy business.
• Debs goes self employed through a Specialist Nursing Agency.
• Took Action – Summer 1999 bought our first ever investment properties in West End of Glasgow.
Copyright © Carlile 2006
Where you are today and where you will be in 1 year is determined by 3 factors.
1. The books you read and knowledge you gain.
2. The people you meet and associate with.
3. The actions you take.
Planning
Section 54A of the Act provides“Where in making a determination under the
Planning Acts , regard is to be had to the development plan, the determination shall be made in accordance with the plan unless material consequences indicate otherwise.”
Local Plan
• UDP– Local plan– Most councils publish on their websites
• www.councilname.gov.uk• www.direct.gov.uk
Planning• Developer• Self Builder• Home Improver• Property InvestorNEED to understand how to get or indeed
how to avoid need for planning permission.
No shortage of land – key is planning permission.
Planning• Land without Planning Permission.
• Land with Outline Planning Permission.
• Land with Detailed Planning Permission.
Remember it is the granting of planning permission that gives the land its value.
Getting Planning• Useful Websites – Planning Generally
– www.planning-applications.co.uk/laaz.htm– www.ukplanning.com– www.planningalerts.com– www.planningportal.gov.uk
• Useful Websites – Development Plans– www.direct.gov.uk/en/HomeAndCommunity
Finding a Plot Twin Approaches to Finding Land
• MarketedBuy a Plot with Planning Permission already in place
• Off MarketFinding an opportunity– Time and Energy– Planning Knowledge essential– Minimise Risk – Use Options– Greater Return
Finding a Plot• Which Plots Maximise Profit
– A location which is desirable to both yourself and potential buyers
– A location where value can be improved by good design and building scheme
– Plot itself will support a large dwelling
• Sales / End Value determinants are– Location– Look and quality of product– Size of building
Research• OS Maps
– www.ordnancesurvey.co.uk– www.bing.com– www.goview.co.uk– www.promap.co.uk
Key Considerations
– Access is paramount– Availability of Services critical– Legal – Covenants/Ransom Strips/Boundary– Environmental Issues – T.P.O.s– Ecological Issues
Assessing the PlotPhysical Constraints
Copyright © Rice 2009
What will fit on the plot?– 10m * 10m– 2 storey– 200m2– 2152sqft– 4 / 5 bed
detached
– 3 storey– 300m2– 3229 sqft– 2nr 3 bed
semis
6m
1m
1m
6m
10m by 10m
Assessing the PlotFinancial – What’s The Deal
• What to pay for the Plot– End value of the completed project (GDV)– Less
• Plot costs• Acquisition costs• Build costs• Contingencies • Finance costs
• Any PROFIT you wish to make
Assessing your plotFinancial
• Estimated construction costs– Quantity Surveyor – Builders quote (caution)– Builders merchant– www.buildthedream.co.uk material cost– www.selfbuildit.co.uk very approximate– www.homebuilding.co.uk/buildcosts– Cost per sq/ft – very approximate– CONTINGENCY 10%
Financing
Self Build Development
Single dwellings
“Residential” finance
Multiple dwellings
Development finance
Very similar in lots of other ways
Copyright © Carlile 2006
24th January 2008
30th January 2008
31st January 2008 – Bonnie Scotland ?
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The Deal Part 1• House with two Plots of land each with Outline
Planning Permission for a Residential Dwelling.• Offers over £350k.• Our Bid Price £390k.• Actual Value of Existing House £350k.• Buy Price of Land £40k• Progressed OPP to DPP cost £5k.• Two plots of land sold for £100k each £200k Profit solely on Land Deal• £200k minus £45k £155k
The Deal Part 2
• Actual Value of Existing House £350k.• Cost of Renovation £35k.• Value of Renovated House £455k.
Profit solely on Renovation
• £455k minus £385k £70k
.
Summary
• Profit on Land £155k• Profit on Renovation £70k
Total Profit £225k
No Capital Gains Tax – P.P.R.
• Land £40k• Build 2 Houses @ £170k £340k £380k
Re-Sale Value £280k each £560k
Total Profit less 40% C.G.T. £108k
No Brainer – We Sell The Land!
DECISION TIME
• Land Sold by Us £200k• Land Sold by Developer £300k
Profit £100k
Total Profit less 40% C.G.T./Legals £50k
NEXT STAGE
• Land Bought by Developer £300k• Cost to build 2 @ £170k £340k On Market at £320k each £640k
Profit Nil
THE ACTUAL DEVELOPER
First bite of cherry always sweetest.
Improve your knowledge.
Do your due diligence.
Have Fun – Developing is Fabulous
KEY LESSONS