EddScott

Myself and a work collleague have been discussing the viability of purchasing a plot of land with enough room to build 2 houses.

The whole excercise is to make some money on each property once completed by selling them immediately. The plot is on offer at £160K and with a self build mortgage of around £300,000 that gives us £70K to build the houses with. Each house would then be offered on the market for around £210K and if sold for £200K thats £50K each in profit.

Although I can imagine it will be very stressful at times it just sounds far to easy to make £50K. Has anyone actually done this sort of thing? I've spoken to people who say they've made good money renovating properties but my colleague thinks theres more money to be made in self build. I've no idea how to build a house and am not in the building trade so all work would have to be paid for.

If anyone has done this in the past I'd value any input into whether this sort of thing is a good idea or can turn into an ugly nightmare.

davegtt

If you can find a builder to build you a £200k house for £70k then yes its easy. Although from my experience I struggled finding one when I had a similar plan a couple of years back.

Unless off course your in the trade to build them yourselves and get it all sorted.

Kuro

there's a homebuilding and renvation show at the NEC in march that might be worth attending.

We've been considering lately, seems like a very sensible way to move up the property ladder, hardest elemnt by far looks to be finding a suitable plot with OPP.

RON

Mmmm that s a tough one, we built a new house, but on land that we already owned, the plot was valued at 200k, we spent 125k, but it took me 18 months of doing it and not working, so factor in 2yrs wages aswell on this build, and it is as already said, only really do-able if you can get the right builder, the right plot, and 2 buyers, ok, so our house is valued at 400k now, but it took a lot of work, a lot of stress, the difference is that we live in the house, at no point did we do it to make money....
Developers seem to work on a 1/3rd basis..... plot, 1/3rd. build costs, 1/3rd, so called profit, 1/3rd.....
You can reclaim the VAT on newbuilds aswell, that helps a bit!!

davegtt

RON, so technically, if you sold your house you only have £75k profit. minus 2 yrs wages ontop its not really been that very beneficial apart from the fact that you got the house you want in the end?

EddScott

If it averages a 1/3 (supposedly) then we aren't that far off - 70 plot, 70 build and hopefully 70 profit. The lad I'm planning to do all this with knows builders etc so he is asking for rough price ideas with a view to contract over a certain period of time and have particular jobs of the build completed by specific dates.

I was hoping that the project could be finished in 12 months, 18 is too long.

There is a derelict bungalow on the site that needs to be demolished. It has leccy and water but no gas but alot of the outlying villages round Pembrokeshire don't have gas.

The more I think about it the more it sounds like a huge risk IMO. However, perfect world its done and dusted with £50K profit sat in the bank after a year sounds very tempting.

Petem95

If only it was as easy as that

For a start does the plot have planning permission for 2 4-bed houses or whatever you plan to built?

Secondly do you have the time to manage the whole project, which is likely to take over 6months?

Thirdly even timber frames homes dont come dirt cheap - 70k to build a house that sells at 210k sounds optimistic....

And lastly the housing market isnt what it was a few years ago - what happens if you've built the houses, gone over-budget, turned grey from all the stress and then cant sell??!!

Im not saying you cant do this and make money, but property isnt the 'get-rich-quick' thing it was (however all these proporty programmes on the TV might suggest otherwise!)

RON

Technically Dave yeh, it wouldn't have been worth doing for the profit alone, but bear in mind that once we had a shell, i did the rest, windows, doors, wiring, plumbing, stud walling, insulation, putting plasterboard up, underfloor heating up and down, kitchen, utilty, bathroom, showerroom, tiling, decorating, garden.... need i go on...??
But... look at what we got...



ps, my workshop was already on the site, hence part of the reason why we did it.... it helped only living 100yds away aswell....

EddScott

Its not quite 70K to sell a 210K house. There is the land itself which is 80K per house so in total each house to us has cost £150K.

The details from the estate agents says that planning permission has been granted for "2 new residential dwellings". There are a string of conditions from the council but they seem pretty standard stuff concerning drainage, driveways etc. The land is just off the main A40 so quite well situated being about 15 mins each way of two main towns.

So by the sounds of it, everything is in place its just a case of getting the job done on time, in budget and then flogged on ASAP. I watched a couple of house programs over the holiday and it is quite easy to get sucked into the idea that its easty money.

Account deleted by request

You ain't going to build it for 70k - not a hope in hell with current price of tradesmen & materials.

You need to also add at least 20% to your expected build cost because if you have not done this before you WILL go over budget. There is only a tiny percentage of any new build that are done to budget - let alone 2 people who have not done it before.

Any developer worth his money would only take a project on like this with a worst case scenario profit of at least 35%.

You would stand a better chance of having someone project manage the site - in my experience people that don't know what they are doing end up spending twice as much as it could have cost because of simple mistakes.

All the best with it either way.

Chop

Neil W

Been looking into property refurb and plan to do a couple this year with mybrother in law.

Just trying to find our first property to purchase but this is taking longer than expected.

Any recommendations where to look much appreciated!

tarmac terror

iTrader: (2)

I looked at doing this a few years ago, the other half's father owns a farm and offered me a corner of a field to build in.

I was advised that unless I could line up three building contractors, three plumbers, three joiners and three sparks it could become very difficult. When offered the opportunity to go work on a larger development where there is more money to be made quickly, many contractors will push your project down the list of priorities. Even with carefully planned milestone payments I was advised to ensure I had the second and third line of defence, in terms of standby contractors.

A Project Manager with a proven track record in the construction industry should save you more than he costs compared with trying to project manage the build yourself with little or no PM experience.

Is the profit from your project going to be considered an income, and consequently taxable?

TT

RON

EDD, there's one more thing to be noted...... unless you actually move into the house, you will be stung for 40% income tax.... that'll take the grin off yer face when you thin you've made a tidy some.....

davegtt

Does look very nice Ron

As Chopper says, £70k to build a house that would be worth £200k is very optimistic, I suggest you speak to a builder, he may well blow your idea out of the water....

dpb

Bit of norman influence there Ron.?..with the flint red brick.

Nice job..

mightyyid

That is by the far the biggest thing - glad someone mentioned it. I think you have to live in it for over either a year or two years before you can sell it on without losing money. 60% of whatever you end up with makes a big difference, plus you'll go over budget, plus, as many people do, you realise you will live in it a bit and therefore do things your way rather than the best way - so upspec the kitchen to make it nicer to cook in, etc etc...

Tax is the killer UNLESS you live in it!

Andy

sti-04!!

I am doing this but the property is for myself, got the plot for a half decent price & its just under an acre, planning permission is in place & the kit ordered.
I should be looking at roughly 12 months from now to completion.

Its the way forward, an due to the fact i am building it mainly for me & my family, it will all be worth it

unclebuck

Buy plot, build house, sell house and make money - pay 40% tax on profit

Doh...!

LG John

Planning permission is the key here. My old man bought an old industrial like building for £80k confident he could get planning permission for conversion to housing. He came up with a scheme for flats and got planning permission. In total he probably spent £10-15k on fees but then sold the building/land for £200k 8 months later. It was stressful at times but he made a nice profit and didn't have to build a thing.

Personally I would look to buy buildings/land and raise the value of them by securing planning permission for residential use on them. Then, given you don't seem to have many contacts in the building trade, sell the land and take your profit. Someone who knows that they can build the approved houses cheap for a profit will buy it

unclebuck

There seem to be a few people around who make money this way.

Getting OPP or DPP on a plot seems to be a real black art though, probably requiring contacts in the local planning office ( ) secret handshakes, being a member of the local Lodge, and greasing a number of palms.

MikeCardiff

iTrader: (2)

A couple of big points :

1. You need to check EXACTLY what the planning permission covers - you need to get proper plans of what you plan on building FIRST and get them over to the council - no point buying the land then finding out you can't build big enough houses to make a profit, or there are limitations that are going to make the houses less attractive to sell.

2. If it WAS as easy as you say, then everyone would do it - there is a good reason most people who have houses built do it - because they want to live in them, not sell them on to make money !

3. Builders know what profit can be made on a new build house, and will charge you up the **** accordingly - most builders seem to operate on a quote system that is 'as much as we can get away with charging for the job'.

4. To build houses to sell at £200K each, I'd say you're looking at at least £100K just in build costs if everything goes to plan ( this is including architects and a project manager, as there is no way you can run the site yourself if you've never done it before - especially not if working in another job as well - plus your selling fees, mortgage payments for the 12 months etc.. ).

This would make your realistic pretax profit around £20K per house IF you can sell at £200K ( remember the market is pretty static now, and each month your house doesnt sell, you're paying the mortgage on it ! ) - split that between the two of you and thats £20K each, then take off your 40% tax and the figures dont look quite so appealing for 12 months work.

Far better plan if you want to do this sort of thing is renovate something run down - you'll make less profit, but it will take much less time, less risk as the initial outlay will be less, and a whole lot less hassle. If you can do 2 houses like this a year, you can make some decent money from it.

Most of the developers I know consider 20% a very good return on their investment - this is either for a refurb or a new build - and these are people that do it all the time, have their own builders etc... so I think your profit dreams are a bit over the top.

LG John

As a planning officer I can confirm that it really isn't like that. If you want to bribe/nobble someone your best bet is a few of the councillors Obtaining planning permission is about being realistic and once you decide to push for a site you have to be firm but reasonable and try to put your case forward as to why it is consistent with development plan policy as best you can.

My dad has approached me regarding a few sites quite enthusiastic and I've shot them down instantly. Others might have wasted time and money trying to take then through the planning system when it has no hope. Then when they fail the 'blame the planners' when ultimately their site selection was to blame. Some sites simply cannot be developed in the way you might hope.

If you see a site that you feel has potential then sound it out with the planning authority. I give the same advice to people that are clearly looking to profiteer that I do to ordinary punters and most planners are the same. With a little preapplication discussion you can save yourself a lot of money/time right from the outset.

OllyK

And don't forget fees etc on top of all this. Mind you, you can claim the VAT back on a new build!

MattN

there's no minimum time you have to live in a house.

If it is your main residence then there is no income tax to pay. You could have 1 and your mate the other, you can split the title once the houses are built. However this leads to more complications. As you have moved in to make it your prime residence you'll have the mortgage and bills to pay whilst the house is being sold.

Agent/solicitor fee's on 2 200k house must be near the 10k mark. If you live there a couple of thou on flooring etc.

How much do you trust your mate? As you'd each own a house it would be up to your good nature to split the proceeds accordingly if one house sells for more, or sells quicker etc.

Dr Hu

about the 40% tax bit......

If you 'Do a Beeny' and renovate old houses to sell do you still have to pay tax or is it a new build thing?

If you do...she never mentions that in the 'look how much you've made' summing up.....

Account deleted by request

Yes you do pay 40% on property renovation...unless you only own 1 property at any given time and you can say it is your main residence. That way you may never *live* in the house but for the pupose of inland revenue they can't argue different.

They might say "why have you moved 3/4 times in 12 months and made so much profit?" all you have to say is " i never settle or didn't like neighbours or nicer house came on the market" They can't then prove any different.

Yes I am talking from personal experience

chop

dpb

Forgive me for me being simple but if you had a property abroad at the same time would the british residence be classed as second property and therefore due the 40% ..?

Karl 227

Ron, respect to you sir, what a lovely house

mightyyid

Depends how nice you want to be... tell them by all means but it will hardly help you. No reason to tell them is there - think how many people own properties abroad now adays. Some depends on the country it is, but as the home abroad will be a 'holiday home' and not your main residence, it would all depend where you spend most of your time - home or abroad, and thus relevant to local tax laws in each country. If your house in the UK was not your primary residence, it would still be your only residence here thus liable for 40% tax.

Andy

richardg

we have been advised in the past that if you live in a new property for around a year, then the revenue are less likely to see your project as a money-making exercise as you will have lived in it for a reasonable length of time. bear that in mind.
so in the past, i know people who have built one house, lived in it for a year (starting the second plot a couple of months after moving) and then moving into the second house after 12 months.
ps i am a project manager for a development company