Developing Costs

oneillk

I was reading the messages in the thread 'Apartment building costs', and was just wondering about some of them.
Many people say that you should start (developing) with a small scale project, eg, buy a semi-d, convert attic and sell on etc. Thats sounds great and i would defo love to do something like this but what i dont understand is how this can be profitable, ie. when you take out solicitor, auctioneer, architect, builder etc.
I assume you could expect 6-10k for professional fees alone even for a small project. so if i bought a semi-d for 210k, converted attic etc and sold for 230k, i wouldn really make a profit,
Would I?????

rooferPete

Hi,

In fairness you would have a bargain with any half decent property at 210k, yes you are right the 20k wouldn't cover the attic let alone the fees at buying and more at selling.

The only way a project like that works is if you get lucky and buy in a good location and I don't mean D.4, a good location has access to good shopping, schools, entertainment but most of all public transport.

Most of these projects are undertaken by builders who can use the project as a filler, so no half days for labourers and tradesmen on staff.

You need a nice chunk of change to fund the project or the nice bank will be taking most of any profit, another item is if you have to rush the project today chances are you will lose price increases like the last few years.

A house in the right location and you don't have to touch it to get at least 10% pa at today's rates of increases.

The problem for everybody is the spec buyer is pushing up the prices for the first time buyer and if the house is affordable with potential the first time buyer is doing the same thing to the the spec buyer.

The house you are looking for is on the wanted list of a lot of people

.

squire1

Why not buy a do'er up'er? Buy a run down property in a decent location and do a refurb/extension. This way you will maximise your potential profit. Lot of work though and there are a lot of other developers out there looking for the same property and they are like hen's teeth.

lomb

oneillk wrote:

I assume you could expect 6-10k for professional fees alone even for a small project. so if i bought a semi-d for 210k, converted attic etc and sold for 230k, i wouldn really make a profit,
Would I?????

no, stamp duty kills it, however, as rooferpete says prices are rising 10% a year, so that helps cover that 'loss'
also theres interest to be factored as well, it helps if u are living in it because u have to charge urself for that anyway.
the best houses to develop starting small are corner houses where there is sufficent site size to accomodate another house and where it wouldnt be seen as loss of visual ammenity or overdevelopment. u will always pay for it though and u still might not make a thing, also at this stage u may know nothing about planning and the 'gamble' that it can be if its a corner site, try the sites with planning for sale on myhome. if u buy one of these u will learn alot from dealing with architects for specs, engineers, tendering the job, dealing with solicitors and the contractor and finally flogging it.u may have to form a limited company to reclaim the vat on the constuction and then to charge the new buyer. or u could develop it iun ur own name just paying vat to the contractor for the brick element, but then ul have to sell it as used to a new buyer i persume and stamp duty will payable. hopefully u will make something out of it and i am sure 100% that u will learn ALOT, which is the main thing. also u avoid the intricicies and risks and knowledge of the planning system that u dont need at this stage to be honest.

skorn

I'm an architect and I steer clear of little developements like that.
More trouble that they are worth.
If you are a DIY person and passionate about renovating then maybe.
But if you after a quick buck I wouldn't recommend it, most people loose more than they make.
A bit like gambling I guess.