Happy Friday everyone. I hope you are all digging deep; however we think everyone is better off than us… they probably aren’t.
This week the blog is on my live case. As most of you will know, I have been a property investor for about 20 years, but only with vanilla properties with a small refurb thrown in. I have always wanted to do a development and with so many of our clients going that route, it was really making me envious.
Although I had savings, I don’t have enough experience in this area, so needed someone to work with.
When you chat as much as I do, it doesn’t take long to find out who’s got the appetite for this. I teamed up with someone I have known and worked with for a number of years, as well as his business partners. After talking about what we could do, we started looking for suitable properties. It’s important to have a team that can cover all areas; so we were able to delegate the roles of sourcing, development, finance and renting, a solid skill group.
Having not done a lot of sourcing, I really did underestimate its importance; It was time consuming enough just to look at the properties John found. We looked at all sorts, from converting churches all the way through to large HMOs. We finally decided on an ugly property in Upminster, Essex which had plenty of development opportunities.
The property is a 4 bed house with a 1 bed annex on a good sized plot. It was originally on the market for £750k, which was too high. We waited and it dropped to £650k, at which point we put in a cheeky offer of £550k. It was accepted, but they would not allow an option agreement so if we were to proceed we would have to take a chance on the planning.
We intend to build 5 or 6 flats, which will be COVID friendly and eco friendly. We will try and keep an existing wall, to avoid CIL, which again, reduces costs.
As we couldn’t get the option subject to planning, it was important to see what has happened to the immediate area. The road has a lot of new builds, both flats and houses, so we can see that the precedent has been set.
We will be getting planning after completion, so I sourced a no ERC product, which will allow us to rent it out for the short term. Any cash in will help towards costs. We also insisted on a 2 week gap between exchange and completion so we could start the works required before we rent it out. The property is a 60s house that had very elderly owners; it was really dated.
It is so important to check exactly what is needed to do to get it rented out, it needed to make financial sense, as it would all be knocked down. Just the painting of a large house is time consuming; it also needed some work to the electrics as they were definitely not tenant safe. As the owner removed all white goods, we sourced good second hand ones off Facebook market place. They will all be PAT tested to make sure they conform.
We chose this route to avoid bridging; due to the time scales involved in applying for planning. Bridging, as we know, is an important route in a lot of cases but during COVID, this can lengthen the timescales. When you don’t know your timescales it’s worth looking at a longer term and lower cost option. It really does depend on the property, thankfully this property is tired, but very habitable.
In the 3 months it’s taken to exchange, we have not been idle. We have instructed the Architect and progressing the drawings and planning.
We complete on the 19th February and it’s definitely given me something away from work and lack of social diary dates to get excited about.
We have benefitted from the maximum SDLT discount, but there are still plenty of deals to be done out there.