Starting property developing for a living

trogg

I could post this on ‘landlord zone’ or ‘singing pig’ but I think MSE is my best bet due to the amount of information given to others in the past.

Bit of a long story but due to health reasons I’ve decided to go down the property development route,

The property I am buying is a three story end terraced with a single roomed shop with a cellar .

I intend to turn it into a HMO (5 bed) and keep the shop as a shop or office.
This will be the only property that I will keep, so I’ll have some income and I will be able to use the property as security for other purchases.

It’s been empty for over 20 years , so you can think imagine the amount of work that will be required , everything.

For starters I’ll need insurance , property will be empty for 12 to 18 months depending on planning etc.
it’s going to be difficult to get insurance for part residential part retail empty development.

Any help/advice/ideas appreciated

moneysavinmonkey

do not go into property developing for health reasons,
particularly in the current market climate.

Is it too late to back out of the deal?

TJ27

If it's a 3 storey HMO with 5 people then you're going to need a licence. The standards for this sort of property are quite high. There are an awful lot of things to consider if you go ahead. In my opinion a 2 storey non HMO is a far better option if you have no experience.

Get some advice regarding facilities and fire precautions before renovating. You don't want to do the work, only to be told by the council that it's not suitable.

chappers

Where would you want to start .
HMO check your council will let you for a start where I am they are so strict its almost impossible to create any more HMOs, as has been said there is compliance and licensing to be taken into account.
There are some specialist insurers out there you may be able to get some insurance which treats it as a building site essentially try Zurich as astarting point.
If you are going to develop it as a long term investment I wouldn't worry about the current market too much especially if it has been empty for so long (assuming you will be getting it dirt cheap).
splitting your risk between retail and residential is a good idea provided the area is still suitable for retail rental eg it is on amain shopping street. If it is an old side street shop in what is now a residential area it might not be so worthwhile, you may be better off applying for change of use and using the whole lot as residential.You will under the goverment plan have to prove it is no longer viable as a retail unit (20 years un-used should be enough).
There is obviously the main financial considerations would your money be better off invested rather than being put into a rennovation or can you borrow enough against the property and would your yeild then be sufficient aginst your borrowing.
Will you be able to sell up without any loss if you find you need to bail out after completing the rennovation or part way through.
Don't forget all your fees and proffesional costs and ongoing costs for running the rental and maintanence

Then the nuts and bolts is your health up to running such a project, it will be stressful at times.
You need to get an architect on board.
any planning requirements
Covenants and restrictions pertaining to the use of the building, Access for the tennants to the area above the shop.

The list goes on and on

trogg

moneysavinmonkey ...... Was a self employed gas engineer untill last year, had to give up because some days i could work and others i could hardly walk.
Not a good enough excuse for customers who had a day of work and were waiting for me to fit their new fire and fireplace. I understand the market conditions,and the deal is done.:eek:

TJ27 ...... Going to talk to the coucil about it, will be taking the property back to a shell, so will be able to install fire alarms etc once I've got approval/regs.

chappers ...... loads of info ... ta, will give Zurich a ring in the morning.

think I need to give some more information, Buying property for £60000, expecting to spend £30-£40000 on it.

On a main road within 10 minutes walk of a main Hospital, Bus stops for 8 different services within a 30 second walk.

Hard to value it, but a 4 bed terrace house 200 yards away is up for £180000 and another just around the corner is £190000, although both have been on sale for some time.

I will need to remortgage the property once its done to pay off purchase and renovation costs.

18 months ago pp was applied for.
To turn the whole of the ground floor into one large shop with a new entrance and staircase to the upper parts, the upper parts would be 4 bed sits.

pp was refused because:-

1) bed sits were too small,
2) lack of amenities (nowhere for bins, bikes and no garden area)
3)No parking (highway agency)

however 1 and 2 will not be a problem with my proposal.

Although there is two parking spaces to the front, this would interfere with the shop.

My idea is if there are so many bus services there is no need to have a car, and my target market would be nurses and student doctors of the local Hospital.

I would build a shed (brick) for bikes.

Other shops on the same road have flats above them with no parking, although I don't think any of them are HMOs.

According to the council web site, they are interested in cutting traffic by discouraging driving and encouraging cycling.

moneysavinmonkey

hi thanks for coming back and posting more information. Without knowing the full details of your ill health but given the bit you have told us I'm really wondering how you are going to manage developing a three storey building?
Obviously I don't know your personal circumstances but you are taking on a lot of physical hard work as well as stress here.

I would also comment for the size of project you are taking on that your budget looks small.

I would also hazard a guess there is going to be some major problem perhaps structurally or with the planning permission as to why the building has been vacant for so long. Have you had a full survey done and got quotes from builders/architects?

If the deal is already done, perhaps you could still make a profit without too much hassle by just getting the planning permission and then selling the project on?

SquatNow

{must...put...gun...down}

teabelly

One thing you also need to budget for is the change to business rates. If the shop is empty after only 3 months you still have to pay rates on it. This used to be 6 months so make sure you budget for it.

BTL mortgages on flats above shops/other commercial premises are tricky. Parking will be an issue as the people living there will have deliveries, friends, family etc who will need somewhere to park.

If you are only buying it for 60k and similar are going for 180k then it would be much easier just to do a straight refurb and turn it into a nice house with 2 parking spaces. You could then refinance it and rent it out, pulling out the equity to fund your next project. Or turn it into 2 flats. One with the cellar and one with the roof space. As you have 2 parking spaces then it should be ok planning wise.

I also think you can claim the VAT back on the refurb costs as it has been empty for so long. Worth checking it out and see whether there are any grants you can pick up too.

Bf109

An HMO? What is?

hermanmunster_3

House in Multiple Occupation - more than a specific number of unrelated people


http://www.communities.gov.uk/housing/rentingandletting/privaterenting/housesmultiple/

SquatNow

I really REALLY dislike amatuer property developers.

You know the ones I mean... the ones who have watched too much property !!!!!! and have convinced themselves that being a "property developer" is a valid occupation.

Lets be honest, if they are successful, then they have just become a project manager.

So why not just get a job as a project manager?