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I have a business opportunity.An aquaintance lives in the best part of town in a run down house sitting in an acre of land.He hasn't any money but can get planning consent for five detached houses.He is prepared to put in the land at the market value of the house if I match it with capital towards development.It looks to me like a scheme that would stack up.The only thing that would scupper it is price falls of 30%+.At that level we would break even.We both want a house and I have a possible cash buyer for a third.

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I have a business opportunity.An aquaintance lives in the best part of town in a run down house sitting in an acre of land.He hasn't any money but can get planning consent for five detached houses.He is prepared to put in the land at the market value of the house if I match it with capital towards development.It looks to me like a scheme that would stack up.The only thing that would scupper it is price falls of 30%+.At that level we would break even.We both want a house and I have a possible cash buyer for a third.

Opinions?

Um, would that be some horrible garden fill-in? And would it involve demolishing an old house?

On the face of it, you're talking about the productive side of property: actually creating something new. Against that, it's always horrible when someone replaces a decent house with some ghastly new-build. Would another option be to invest in fixing up the old house to a high standard, and perhaps extending to create several units without the full horror of turning a nice patch of land into newbuild?

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Um, would that be some horrible garden fill-in? And would it involve demolishing an old house?

On the face of it, you're talking about the productive side of property: actually creating something new. Against that, it's always horrible when someone replaces a decent house with some ghastly new-build. Would another option be to invest in fixing up the old house to a high standard, and perhaps extending to create several units without the full horror of turning a nice patch of land into newbuild?

Eh?

Are you suggesting it's not possible to build a nice new house?

I agree that very few are nice, but it's perfectly possible.

Anyway this is a money-making proposition it appears, I don't think the OP is considering aesthetics that closely. ;)

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I have a business opportunity.An aquaintance lives in the best part of town in a run down house sitting in an acre of land.He hasn't any money but can get planning consent for five detached houses.He is prepared to put in the land at the market value of the house if I match it with capital towards development.It looks to me like a scheme that would stack up.The only thing that would scupper it is price falls of 30%+.At that level we would break even.We both want a house and I have a possible cash buyer for a third.

Opinions?

Kirstie Allsop would be proud.

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On the face of it, you're talking about the productive side of property: actually creating something new.

It is not productive if the new something is not needed.

It sounds to me like a venture that is only being considered because of the still excessive availability of credit and bubble level valuation of houses.

Having said this the OP may well make some money out of it, but let us not pretend there is anything productive in it. This is more of the same.

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Surely the operative words are "can get planning permission". In the respect that I thought that in order to get planning permission you have to take the views of the local residents into account and also get past a planning commitee. I didn't think there were any forgone conclusions as regards planning permission, but I don't know for sure.

If it's a nice area then the people living around it are more likely to be nimbys and post objections IMO.

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I suppose that I sort of expected a lot of the flak that this thread has attracted.But before you get the idea that I am just some sort of trougher I might state that I came to this by quite simply asking if the guy wanted to sell me a building plot.The intention was to put up something reasonably modest,build cost around £150k.

It only came about when he said that the local planners had intimated that some bigger development was acceptable.The old house is early 20th century and in quite a poor state of repair,it would probably take quite a lot of money just to bring it up to scratch,and you would still have an old energy inefficient property.

So the plan is to build ultra energy efficient houses,as close as is possible to the 2016 standard.And it provides four extra units without any significant environmental impact.Neither of us expect to get rich out of this but it is just possible that by selling the three we dont need that our two will cost us far less than buying the equivalent house on the open market.Quite frankly I am at a loss to see what we are doing wrong.We are increasing the housing supply,improving the environment(the plot is a mess at the moment) and putting up pleasant houses that will be a pleasure for people to live in.

Ok our motives are not altruistic,but neither are they exploitative.

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I suppose that I sort of expected a lot of the flak that this thread has attracted.

about par for the course for this site these days.

anyway good on you IMHO - you are looking to increase the supply of housing.

which in my book is a darned good thing...

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If you can make it work for you then why not? Everybody else is out to make as much for themselves as they can anyway.

It just sounds like it will be crowded to me - 1 house + garden into 5 houses + very small gardens?

Also, you mentioned it is in East Anglia, near the coast, in a sought after area which sounds a lot like the north Norfolk coast? A lot of that is already high-priced second homes for rich Londoners so you're not exactly helping the locals with housing.

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I suppose that I sort of expected a lot of the flak that this thread has attracted.

Just one single negative post. You didn't get any flak at all, stop moaning :).

Some more flak a.k.a crude questioning of your reasoning:

- who are you going to sell those houses to considering the market is dead and nobody is buying?

- And what do you expect interest rates to be in two or three years, when you are ready to sell and waiting for someone, anyone to bite? Will you have sufficient reserves to wait x years for this market to recover?

One more thing, I've seen a number of these projects up close and I've yet to see one that ended anywhere close to budget.

<Edit to add: I'm not trying to be be judgemental here, you are trying to take care of yourself and IMO that's the best most of us can do.>

Edited by _w_

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If you can make it work for you then why not? Everybody else is out to make as much for themselves as they can anyway.

It just sounds like it will be crowded to me - 1 house + garden into 5 houses + very small gardens?

Also, you mentioned it is in East Anglia, near the coast, in a sought after area which sounds a lot like the north Norfolk coast? A lot of that is already high-priced second homes for rich Londoners so you're not exactly helping the locals with housing.

The site is actually in excess of an acre,it's not N Norfolk but an area that is far more mixed.He was originally approached by a devoper who wanted to put 10-12 units on but he wants a house with space and so do I.The area of town is quite sought after,more of a village environment.

As for selling the OP pointed out that it stacks up unless prices fall in excess of 30%.I would of course be extremely cautious if I had to fund this on borrowed money but as I have the cash to build the first two units I don't see a problem there.Obviously if by the time I had completed two houses things were in complete meltdown it would be wise not to build the other three.

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I suppose that I sort of expected a lot of the flak that this thread has attracted.But before you get the idea that I am just some sort of trougher I might state that I came to this by quite simply asking if the guy wanted to sell me a building plot.The intention was to put up something reasonably modest,build cost around £150k.

It only came about when he said that the local planners had intimated that some bigger development was acceptable.The old house is early 20th century and in quite a poor state of repair,it would probably take quite a lot of money just to bring it up to scratch,and you would still have an old energy inefficient property.

So the plan is to build ultra energy efficient houses,as close as is possible to the 2016 standard.And it provides four extra units without any significant environmental impact.Neither of us expect to get rich out of this but it is just possible that by selling the three we dont need that our two will cost us far less than buying the equivalent house on the open market.Quite frankly I am at a loss to see what we are doing wrong.We are increasing the housing supply,improving the environment(the plot is a mess at the moment) and putting up pleasant houses that will be a pleasure for people to live in.

Ok our motives are not altruistic,but neither are they exploitative.

+ 1

If you can take price falls of up to 30% I think you are reasonably safe, as long as you do it ASAP, of course. Prices should not fall 30% nominal in just 1 year, but they might in say 3 years? Or 4? Not so sure about prices in 2 years either.

Another option is for the land owner to share in this risk more equally. As it is, if I understood you, with the land "price" fixed from now, he is in a much safer position than you.

about par for the course for this site these days.

anyway good on you IMHO - you are looking to increase the supply of housing.

which in my book is a darned good thing...

+ 1

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(...)

As for selling the OP pointed out that it stacks up unless prices fall in excess of 30%.I would of course be extremely cautious if I had to fund this on borrowed money but as I have the cash to build the first two units I don't see a problem there.Obviously if by the time I had completed two houses things were in complete meltdown it would be wise not to build the other three.

Now I think you have a timing problem. You are in effect buying all the land now, and planning to build them slowly, during the next few years. IMHO, I think this is unwise, in a falling market.

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Why is your aquaintance getting you involved?

surely he could just get the planning permission, then sell the land at an enormous profit. No need for your money.

Maybe it is because he knows that there isn't money to be had.

If it all goes balls up, you're left holding the debts, and they are left holding the land and the houses.

Edited to add:

win-win for him; lose lose for you.

Edited by Lepista

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Why is your aquaintance getting you involved?

surely he could just get the planning permission, then sell the land at an enormous profit. No need for your money.

Maybe it is because he knows that there isn't money to be had.

If it all goes balls up, you're left holding the debts, and they are left holding the land and the houses.

Edited to add:

win-win for him; lose lose for you.

I am failing to grasp something here.How can it possibly be win-win for him? He is putting in an acre of land with planning consent and I am not paying him a penny.What I am doing is putting cash into the project to the equivalent market value of the house i.e about £350k. We are then doing the development with borrowed money,the costs and profits split equally.

I have ball park build cost figures of £175k per house and current market prices of £350k.Hence by allowing a fall of 30% to £245k and overshoot of costs to £200k still leaces £45k profit per house.

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I am failing to grasp something here.How can it possibly be win-win for him? He is putting in an acre of land with planning consent and I am not paying him a penny.What I am doing is putting cash into the project to the equivalent market value of the house i.e about £350k. We are then doing the development with borrowed money,the costs and profits split equally.

I have ball park build cost figures of £175k per house and current market prices of £350k.Hence by allowing a fall of 30% to £245k and overshoot of costs to £200k still leaces £45k profit per house.

In case you haven't noticed, 5 times 45K is less than the value of the house that you knocked down. So what's in it for the land owner?

If he can get PP for 5 times 350K houses on his plot, he should be able to sell it for up to 700K.

I think your build costs are too high.

tim

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What the going rate for a detached new-build these days?

I was quoted 350k not inc land for a 8m by 8m two story bog std house.

2750 per sq meter. He can shove his quote up his ****

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What the going rate for a detached new-build these days?

I was quoted 350k not inc land for a 8m by 8m two story bog std house.

2750 per sq meter. He can shove his quote up his ****

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I have a business opportunity.An aquaintance lives in the best part of town in a run down house sitting in an acre of land.He hasn't any money but can get planning consent for five detached houses.He is prepared to put in the land at the market value of the house if I match it with capital towards development.It looks to me like a scheme that would stack up.The only thing that would scupper it is price falls of 30%+.At that level we would break even.We both want a house and I have a possible cash buyer for a third.

Opinions?

Why hasn't your mate already got the planning permission? If he actually goes and gets the planning persmission then he'll have added a lot to the value of the property, and he can probably sell it to a developer at a tidy profit.

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I agree on the land valuation.You can't legislate for how individuals want to go about their business.A developer did try to buy it from him at £450k,which I thought was nicking it.They gave him the same old,same old,falling market etc.At the end of the day he wants a nice house on a good sized plot and will be well pleased if he ends up getting the house at no cost.I think I just knocked on his door at the right time,anyway will keep the comrades informed on progress.

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I am failing to grasp something here.How can it possibly be win-win for him? He is putting in an acre of land with planning consent and I am not paying him a penny. What I am doing is putting cash into the project to the equivalent market value of the house i.e about £350k. We are then doing the development with borrowed money,the costs and profits split equally.

I have ball park build cost figures of £175k per house and current market prices of £350k.Hence by allowing a fall of 30% to £245k and overshoot of costs to £200k still leaces £45k profit per house.

I think the confusion is arising because it is not clear if you are buying the land from him upfront or not. See, you just wrote:

What I am doing is putting cash into the project to the equivalent market value of the house i.e about £350k. We are then doing the development with borrowed money.

Looks like you bought 100% of the land from him, and then, if you have profits, you will still give him 50% of your profits. Why?

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I think the confusion is arising because it is not clear if you are buying the land from him upfront or not. See, you just wrote:

Looks like you bought 100% of the land from him, and then, if you have profits, you will still give him 50% of your profits. Why?

Yes,I see why that would be a bad deal for me. In fact we are forming a company with assets comprising of his land and my £350k. The intention is then to build the five houses using that money plus borrowed money.I have budgeted £200k per unti for detached 4/5 bed houses.That may seem high but the intention is to fit extensive solar heating panels,plus allowing for buyers to choose good quality kitchens/bathrooms.

So the projected outcome will be this: We have five houses and owe £650k.Hopefully the sale of three will cover this,hence by original question about 30% falls from current values.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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