Property development - not always profitable

eddddy

There's lots of discussion about property development on this board. Just for people's interest, here's an example of how it can turn out bad. It looks like a developer lost at least £30k on this property, possibly a lot more.

(I have no connection with the property or developer, I just came across it during research.)

A 3 bed semi in need of refurb goes on the market in June 2012 for £199,995 :
http://www.zoopla.co.uk/property-history/49-clifton-road/welling/da16-1qd/18372409


It looks like it's bought by a developer and refurbed, and back on the market in March 2013 for £244,995 :
http://www.zoopla.co.uk/property-history/49-clifton-road/welling/da16-1qd/28361184


My guess is that it went under offer, got surveyed, and Japanese Knotweed was found in the garden. So, because of the knotweed, it ended up going to auction with a guide price of £180,000 and actually sold for £182,000
http://www.rightmove.co.uk/property-for-sale/property-44051945.html


In addition to refurb costs, there would have been SDLT, legal fees and auction fees adding to the losses.

I guess this example also demonstrates how profits could be made - if it wasn't for the knotweed, the developer could have made about £30k profit.

patricia..xx

Good. I'm trying to buy a house at the moment and keep coming across these badly done up houses that I would have been able to do so much nicer myself. If I see that same hideous cheapo kitchen in yet another house my heart sinks.

G_M

Blame the TV programmes that make it look easy.

And yes, when they tot up the profits they show purchase price and refurb costs to arrive at profit!

SDLT? Estate agent fees? Legal? Developers time (yes, it has a value)? Lost interest on cash? And a whole lot more....

You can make money, but it's a business and you need a business plan, and full budget.

verulamium

Excellent. Would love to see some of the local developers in our area fail. They have been snatching up almost every decently priced Victorian house suitable for a project here (allegedly through EA's kickbacks), gut the period features, or worse, turn them into flats, through their 'refurbishment' project and then stick these now boring looking B&Q homes back on the market for 100% more.

phoebe1989seb

patricia..xx wrote: »

Good. I'm trying to buy a house at the moment and keep coming across these badly done up houses that I would have been able to do so much nicer myself. If I see that same hideous cheapo kitchen in yet another house my heart sinks.

Couldn't agree more......

We've bought a few project houses and have never bought bought them with the intention of *flipping* so have always renovated them without too much thought for budget

Our last house we realised soon after buying was a mistake but despite this we went ahead and restored it as we would have had we intended to stay long term - ie, bespoke kitchen, high-end bathrooms (in neutral, classic style, not the latest trends that date quickly) and we inevitably lost money when we sold three years later......although we did achieve a sale within two weeks.

Otoh, a lot of the houses we looked at when buying our next house were bought by property developers, renovated badly and put back on the market for mega bucks.......looking at RM *sold prices* they seemed to get them too

One, in a village near our current house was sold in 2011 (when we bought our current house) for £270k. It had a corrugated iron roof (formerly thatched) and was a total tip inside, having been lived in by a hoarder that had done nothing to the house since the 1950s.

A builder bought it, gutted it, re-roofed (tiles, not thatch), re-wired and re-plastered throughout as well as clearing the 1/2 acre garden - but no heating, kitchen or bathrooms were fitted. It was sold as a *shell* for the asking price of £400,000 18 months later......

patricia..xx

At least it was rewired phoebe. We looked round loads in salisbury a few years back which had been replastered and painted but not rewired. I had a full on argument with an estate agent who tried to tell me it had been- the plugs were at least 40 years old and the light fittings were those rope types that I hadn't seen since my grandparents house in the early 80s.

Pixie5740

G_M wrote: »

Blame the TV programmes that make it look easy.

And yes, when they tot up the profits they show purchase price and refurb costs to arrive at profit!

SDLT? Estate agent fees? Legal? Developers time (yes, it has a value)? Lost interest on cash? And a whole lot more....

You can make money, but it's a business and you need a business plan, and full budget.

I agree. Programmes like Property Ladder show people adding 2-storey extensions for £12k or installing bathrooms for £1k which is a load of hairy testicles. What about labour costs?!

I would much rather buy a shell and make sure the work was carried out properly and to my standard than pay over the odds for a "developed" property.

lessonlearned

patricia..xx wrote: »

At least it was rewired phoebe. We looked round loads in salisbury a few years back which had been replastered and painted but not rewired. I had a full on argument with an estate agent who tried to tell me it had been- the plugs were at least 40 years old and the light fittings were those rope types that I hadn't seen since my grandparents house in the early 80s.

I agree property development is a serious business and not for the feint hearted. Slap dash amateurs can make money in a rising market but then come unstuck when the market stagnates.

There is a world of difference between a "makeover" and a full refurb.

My son bought a Grade II listed building, built in 1756 - it's gorgeous. It was listed and refurbed in 1994. Then it was neglected for the next 19 years…….

We are painstakingly rebuilding it and putting it back to rights. This is a long term project. Fortunately we regard this one as a personal private residence and are happy to take the time to get it right. I estimate 3 years minimum to bring it up to scratch. DS1 aims to live there for at least 5 years.

We inherited those rope type lights you mention. Our sparky has just had to earth them because it was not done in 1994. A death trap……

Re the old bakelite switches, plug sockets etc.

You can now buy modern facsimiles which are fully compliant with building regs and electrical safety certification. We need to replace a couple of bakelite light switches. Unfortunately they are not cheap, about £45 per switch. However, they will be more in keeping with the overall ethos of the building than modern white plastic ones.

And yes I do realise that a house built in 1756 wouldn't have had electricity in the first place. :rotfl: A facsimile of Victorian/Edwardian light switches will at least look better than cheap while plastic ones from Wickes or B&Q.

I think "authenticity" does have its limits.

Our aim is to restore the house, using traditional materials such as lime plaster, mortar etc, retaining it's original features and re-incorporating those that have been removed, whilst at the same time bringing comfort and safety up to 21st century standards.

Our current "flipper", which is the jumping off point for our new fledgling property development company, is a traditional Victorian terraced house.

We are taking exactly the same "light touch" approach here. New electrics, plumbing and re-plastering, whilst retaining the lovely original fireplaces, beautiful wooden floor boards and gorgeous minton tiled floor in the hallway. I just need to find two more fireplaces to replace the ones that have been ripped out. I also need to think about replacing some of the recent additions such as modern doors and carpentry.

I hate white plastic front doors on period properties……That will definitely have to go.:rotfl: