The basic concept of property development is simple you buy a site or property for one price. Then spend your construction budget on the construction phase of the project. Then achieve the sales price or GDV as it is referred to in the industry, that’s Gross Development Value. The difference between the cost of the purchase price with the construction costs added and the uplift to the gross development value leaves the gross development profit minus finance costs and professional fees. What’s left is the net development profit, so there are three main figures which much be absolutely correct to achieve the gross development profit. These are the site purchase price, the construction costs and the gross development value, if the first two are too large or the last too small, the development will fail commercially. Before you commit to undertake any property development you should carry out a property development appraisal. This will vary in size and complexity in line with the size and complexity of the development. Working backward check the gross development values by looking at suitable comparables, other properties of similar size, location and specification, and what sales prices they have achieved. For the build costs on simple developments ask good local contractors to give you some provisional build costs. For larger or more complex property development it is worth considering employing the services of a Quantity Surveyor or QS as they are often called or an experienced development manager. They will be able to advise not just on build costs but also on the soft costs, professional fees, structural engineers, architects, connection charges for statutory supplies, gas, electric, water, etc and 106’s or other planning related costs. The last variable cost is the land, site or property purchase price. This is often where property developers make the most profit by buying a site cheaply and then obtaining a change of use by sub division or other planning gains. The value of the site usually increases sometime dramatically when planning permission is gained. This uplift in capital value is called a planning gain, this cash locked into the site or property give any development a good financial start. It is possible to reduce costs through the project by tight controls on the build costs and property development finance charges but these savings are no substitute for buying wisely and obtaining a profitable planning gain.
Tips for modern home extensions
April 21, 2012
Home extensions have moved on dramatically over the last ten years, previously they where just built to match the existing house. Now home owners often chose to add a contemporary home extension. One of the biggest items on home owner’s wish list is usually a light and airy space. This can be achieved in a number of ways using double aspect windows, this is windows in the same room on different elevations. This allows sunlight to entry a room as the sun moves during the day. This has the most noticeable effect in spring and autumn. The other is the use of roof lights or Velux windows, a roof window will let in far more light than a conventional window. So many home owners chose to opt for an open or warm roof design adding extra ceiling height and a feeling of space and grandeur. The use of glass and glass technology has become more prevalent in recent years. This can be added in the form of by-folding doors, glass partitions, stair cases and even complete glass roofs, supported with structural glass beams and glass purlins. Do not forget to make your home extension equally spectacular in the evenings with the use of cleaver lighting design. Think just as much about the items that you do not want to see, plan storage carefully and socket positions. Beautiful home extensions are soon spoilt by clutter and trailing electrical appliance cables. Think too about the position of external items, gas and electric meter boxes, drainage man holes and rodding eyes. Guttering can be used to hide joints where old and new brickwork meet so take the time to consider these items. Get input from a good architect someone with experience of the type of home extension you want. Ask contractors for their advice, they have often spent hundreds of thousands of pounds of other client’s money and are in a unique position to have seen what has worked well and ideas that were less successful. It is another good idea to visit exhibitions like the building and renovation show, the ideal home exhibition or grand designs live. These shows often feature exhibitors who are selling the latest materials and product technology. Look at their sales literature are there any pictures of similar projects for inspiration?
Do I need a planning consultant?
April 20, 2012
If you have property or land that you want to change the use on you may well go to an architect but often the best person for this job is a planning consultant. If it is a larger residential scheme or a commercial scheme it is probably best left to the expert, a planning consultant. They work more like a lawyer than an architect looking at case law and precedence rather than drawing plans and asking for approval. The first stage for a larger scheme is to start with a feasibility study these can be as little as a thousand pounds which considered against the capital value of the planning gain is relevantly small. The planning gain is the value of the site once planning permission is granted minus the value of the site preplanning. Some planning consultants will “work at risk”, this when they carry out various studies transport, need for the new proposed development and finding a suitable case to put forward for the development. They do not charge for the work they carry out instead they take a percentage of the planning gain. This is speculative on their part because if the development does not go ahead they do not get paid. It also acts as motivation to make sure they make the maximum effort to obtain the planning application.
Planning minister dismayed at the UK’s attitude towards planning
April 19, 2012
There has been much debate about planning and the built environment recently after the release of the National Planning Framework document in late March. Many in the industry are dismayed at the negative attitude of many to any changes to the built environment. New development creates opportunities and often much needed jobs. There have also been discussions over the high costs of planning and infrastructure charges that can often cause border line developments to remain at design stage. With banks, lenders and private investors taking renewed interest in speculative property development funding the review of planning charges and infrastructure levy’s has proved very timely. One developer had reportedly paid planning fees of 2million pounds on an 8million pound scheme in London. With these figures it really illustrates the need for a sensible review of planning charges. These can be a barrier to many schemes and hold back desperately needed houses and other residential and commercial property development schemes.
Green builders call for brown field development sites as well as rural acceptance schemes
April 15, 2012
Green building experts look to brown field sites to create the most environmentally friendly developments. The use of existing brown field sites can save not only on infrastructure costs in both monetary and environmental terms but also allows the reuse of floor slabs as arrogate and the possibility of reclaiming other materials such as bricks and roof coverings. There is also increased interest in the use of rural exception schemes that allows locals to buy new rural developments at discounted rates. These schemes use covenants on the properties sold to allow them to be sold at a discount to market value to genuine local residents. They work through land owners being given some of the planning gain by selling agricultural land between its value as agricultural land and its value as a potential development plot. The savings in the land purchase price is then passed onto the local buyers in the form of a percentage discount from market value like those used in the right to buy scheme. These discounts are then passed onto other local residents when the property is sold on in the future. The rural acceptance scheme has three fold benefits, the land owner receives uplift in value, local people get access to affordable housing, and the local authority get new build development properties towards their development targets.
Stuck with a development site you can’t finance?
April 7, 2012
Obtaining development finance has never been easy but in recent times it has proved impossible for many potential development site owners. The two biggest obstacles that effects site owner’s attempts to obtain speculative development finance is either an existing charge or finance on the site. Many speculative development finance providers simple will not consider lending on a site that is not unencumbered and already has outstanding finance charged against it. The other thing that banks and development funding providers have increasingly looked at to minimise their risk is development experience. First time or novice developers are finding it very challenging to obtain suitable development funding without the correct development team in place. Those that are able to overcome these obstacles are finding that their development sites no longer stack up because the percentages that the banks will lend are so restricted. The best way to overcome these issues is by making sure you have the correct members on the development team or carrying out a joint venture property development. Having an experienced quantity surveyor will not only give the banks confidence it will also help control build costs, assist with drawdown valuations and increase the opportunities for improved finance structures and cash flow management. Another way around these challenges is to use a private investor to clear off bridging or other finance charged on the site. This can be expensive with private investors expecting returns between twenty and fifty percent dependant on financial input and their risk levels. These considerations can often be weighed against the interest charges on existing finance or funds that are tied up in sites that the owner or development team are unable to build out.
Ten tips before you plan your home extension
April 5, 2012
It might sound simple but take a little time to plan the size and shape of your extension, will you still be able to get the wheelie bin out, how will it affect the layout and light of your existing home?
Work out the maximum and minim budget for your home extension and reserve some contingency for the costs you forget or unforeseen items.
Spend time with your architect or builder making sure that you get exactly what you want, check all the details how the roof will finish will there be windows that will be difficult to clean and maintain once it is built?
Have a chat with your neighbours about your plans, and make sure you chose a contractor who can work with you and your neighbours to minimise the mess and disruption.
Make sure you have all the correct permissions in place planning applications and building regulations applications, are there any tree preservation orders and have you made the necessary arrangements?
Don’t be afraid to change things before you get started, once a build is underway it can be a lot more difficult and costly.
Make sure you have appointed the correct contractor, check there pervious work and references, have they worked on this type of project before?
Agree with your contractor there hours of work where they will park their vans, place skips and how this will affect your neighbours.
Make sure all costs and extras are agreed prior to the project starting and there is a proper process in place for additional costs or draw down of contingency.
Zero VAT rate on alteration to listed buildings just a distance memory
March 31, 2012
The chancellor has cut the zero vat rates for alterations to listed buildings at a time when many in the property and construction industry are looking for VAT cuts on all building alterations. The Royal Institute of Chartered Surveyors are amongst a growing group of organisations and leading individual calling for cuts in VAT for all property alterations. Improvements to existing housing stock offers a greener alterative than new build properties. Many older properties can be converted and renovated into high standard, energy efficient homes and a cut in VAT would encourage more green renovations. These property renovations are a key step to improving the energy efficiency of the existing UK housing stock and preventing wasteful demolition and unnecessary new build developments.
Perfect time for a home extensions and outside living?
March 30, 2012
Spring has arrived and many people are starting to think about outside living, so how is the best way to bring your garden into your home. One of the best ways to achieve this is though large openings with bi-folding or sliding doors. To create a large opening or knock through rooms it is simply a case of inserting a RSJ or steel beam. This requires permission from the local authority building control department in the form of either a full plans building regulation submission or a building notice. Once you have the opening in place it’s time to choose your doors, the main options are aluminium, UPVC or timber in soft or hardwood. The increased light and feeling of space can transform even a modest house or room into a bright and light space. With some home owners taking out both internal and external walls it can transform small boxy rooms into one large family living space with lots of light and views over the garden. You may also require the services of a structural engineer who for a few hundred pounds can allow you to indulge in the most contemporary designs and home extensions. Modern contemporary home extensions can be finished in a mixture of traditional brick, stone, coloured renders or cedar cladding. The contrast of modern finishes against a traditional building with clean lines, glass and sharp coloured render finishes can create an impact that will be the envy of family and friends.
