Which is more profitable? Selling house with planning permission or selling as building plot

111Penny123321

Hi
Was wondering if someone could assist me.

I have a property which we can either divide and sell as two semi-detached dwellings or, sell as a building plot with an architect designed house.  Assuming the same footprint for either development, which would net me the better return; the two semis or sell as building land with outline planning permission for one large house?
Many thanks for your time.

AdrianC

How much would the semis sell for?
How much would the large house sell for, and how much would it cost to get it to that position?
Which will sell more quickly and easily?

davidmcn

I would have thought it would depend largely on what the local market for the different types of property was.

greatcrested

Both projects would require Planning consent.

Why not get Planning consent for both and then buyers can choose which to do once they've bought.

princeofpounds

Probably two semis would be worth more, as there is a value for each 'dwelling', plus the conversion costs would be relatively modest and you would get to sell the existing value of the building as well.

But this is not cast-iron, as in some areas large plots with single houses (or the potential for them) can be worth more.

It should be easy to establish by looking at comparable properties nearby. I'm sure some local agents would be happy to give you an opinion with the hope that you would consider retaining them on any sale.

111Penny123321

Thank you for getting back so promptly.
In response to your helpful questions:
1) The semis would sell for between  £350- £375,000 each
2) Not sure how much the large house would sell for but around here at least  £950,000
3) Upfront costs? Only relevant planning permissions and surveys etc so about  £16,000
4) To which would sell more easily and quickly.  I'm fortunate to be in a position where I don't need to sell quickly.

The local market is a mix of small and large properties.  I'm leaning towards the two semis because both would have approximately 1/3rd of an acre of land with them and we could keep one as close to transport etc.  I'm afraid we have to make our minds up but estate agents are telling us anything they think we want to hear just to get the sale whilst our architect needs his feet planting back firmly on the ground..... 

111Penny123321

princeofpounds said:

Probably two semis would be worth more, as there is a value for each 'dwelling', plus the conversion costs would be relatively modest and you would get to sell the existing value of the building as well.

We wouldn't be doing the conversion.  We would sell it off as a semi with planning permission then the buyer would do all the work.  Personally I think the semis are a good safe bet but perhaps I'm being a little too safe and missing an opportunity which rarely comes along in one's lifetime.

letsbetfair

How much is the current property worth, and how would it cost to split it into semis? Unless you're keen to take on a development yourself, why not sell with planning consent for both, and the buyer can decide the best option (and the best option should be reflected in the price achieved)?
That seems like a big premium for a new large house over two semis - I'm in a much cheaper area, but even a very nice detached house wouldn't sell for twice as much as a semi half the size. That could be a decision for the buyer, though.

FrugalCat

111Penny123321 said:

Thank you for getting back so promptly.
In response to your helpful questions:
1) The semis would sell for between  £350- £375,000 each
2) Not sure how much the large house would sell for but around here at least  £950,000
3) Upfront costs? Only relevant planning permissions and surveys etc so about  £16,000
4) To which would sell more easily and quickly.  I'm fortunate to be in a position where I don't need to sell quickly.

The local market is a mix of small and large properties.  I'm leaning towards the two semis because both would have approximately 1/3rd of an acre of land with them and we could keep one as close to transport etc.  I'm afraid we have to make our minds up but estate agents are telling us anything they think we want to hear just to get the sale whilst our architect needs his feet planting back firmly on the ground..... 

I'm guessing you're in the outskirts of London or wider SE - based on the price for the semis. Either development should have a market there.

The semis might be the more risk free approach;
1. Their size and price caters to a larger market, and one that can afford to be less picky - so you should be able to sell more easily
2. Design, planning and construction might prove easier and more "off the shelf"
3. Basic shelter carries a premium, as it is in short supply - so receiving this premium as often as possible will maximize your profit

As for selling planning vs self-build: There's a margin to be made in both, but if you've never built before it may make sense to sell that risk on: In the UK it's hard to find good contractors who don't take advantage of your good nature and lack of experience.
It's quite common for things to be carelessly broken, high value building components to disappear or simply some activity to take several times as long as you were told.
If there's one experience in life I don't want to repeat is paying a lazy, uneducated person the hourly wage of an engineer to come up with new excuses every day for why the build has not progressed as planned.
(Naturally this person didn't get paid for very long, but that comes with consequences and costs as well...)

AdrianC

111Penny123321 said:

Thank you for getting back so promptly.
In response to your helpful questions:
1) The semis would sell for between  £350- £375,000 each
2) Not sure how much the large house would sell for but around here at least  £950,000
3) Upfront costs? Only relevant planning permissions and surveys etc so about  £16,000
4) To which would sell more easily and quickly.  I'm fortunate to be in a position where I don't need to sell quickly.

There's your answer, then.

2 x Semis - £750k.
Large house - £950k - £16k = £934k. I make that £184k more than the two semis... Oh, wait. You're forgetting one detail. You've said the large house would be £950k, but there isn't a large house. There's a plot with PP. So subtract the build costs from that £950k.

111Penny123321

AdrianC said:

111Penny123321 said:

Thank you for getting back so promptly.
In response to your helpful questions:
1) The semis would sell for between  £350- £375,000 each
2) Not sure how much the large house would sell for but around here at least  £950,000
3) Upfront costs? Only relevant planning permissions and surveys etc so about  £16,000
4) To which would sell more easily and quickly.  I'm fortunate to be in a position where I don't need to sell quickly.

There's your answer, then.

2 x Semis - £750k.
Large house - £950k - £16k = £934k. I make that £184k more than the two semis... Oh, wait. You're forgetting one detail. You've said the large house would be £950k, but there isn't a large house. There's a plot with PP. So subtract the build costs from that £950k.

Thank you Adrian, I think you've hit it squarely on the head.  Two semis are going to be the better choice plus I have the option of keeping one.  Building land here does attract premium prices and plots this size are rare but if the difference is going to be marginal then I'm satisfied.

Thank you so much everyone for your help.  Really appreciated.