Obvious things to look out for that a lot of people don’t see.
Do not over spec you developments; you need to do just enough to sell them. If you do, this is your profit down the drain.
Keep it neutral; it’s better to have something that buyers cannot dislike, rather than trying to please with your own taste.
Don’t let your architect go overboard designing an over complicated scheme. Remember, they are not interested in your profit, but do want impressive properties built that they can refer to.
Don’t let the Estate Agent tell you that you need a top specification to get the best price, going overboard on specification will always help sell the properties, but if you cannot get a better price it just makes the agent’s job easier to sell them and comes out of your profit.
If you want to spend your cash somewhere, always go for quality where a potential buyer is likely to touch i.e. door, window handles and appliances leave a good impression.
If you agree a sale before the property is complete, NEVER agree to make changes to your specification. “Can you just move that wall” or “can we design our own kitchen or bathroom”. Don’t. It will all just end in tears.
Do not assume you have a sale if you have a deposit, whatever the amount. Until you have exchanged contracts, the buyer can walk away at any time and you will have to give all of the deposit back.
Never leave it to the Estate Agent to sell your properties, meet potential buyers yourself, as you are the seller and best placed to show them around. However, never haggle with a potential buyer yourself as you will sell for less than you wanted. Agents are for agreeing the price and managing the sale, no more. If you have built the right scheme and priced it correctly property sells its self.
Cash is king. Don’t hold out for a top price; if you can get a sale and move on to your next project then do so.
With flats, keep to small blocks, as you have to build them all before you can sell one; with houses you can build and sell according to how your sales are going.
If you are building Houses keep to small numbers. It’s better to have two sites with two houses rather than one with four, it spreads the risk. Not only that but buyers want to know whether the scheme is going to be finished soon, on a site with four houses the first one will very likely not want to be in occupation whilst you finish and sell the other three.
Start thinking in sq. ft and sq. m, not number of bedrooms, all experienced Development Valuers and Development Finance Lenders work with the floor area, not the number of bedrooms.
Never get carried away thinking you want to build the best, most luxurious development. It has no relevance, it should always be a business transaction that you want to spend only as much as you need and get the best price you can.
Never over develop i.e. say you are not going to build boxes, but that’s what you are doing. Just keep your box to the right size; otherwise you are just burning your money. Look at it this way: if the top house price in the street is £200k and the maximum achieved sq ft price is £200.00 and you can only build a 1,000 sq ft house. If you build a 1,200 sq ft one the chances are you have a great house for the buyer, but you will not make any profit.
If railways and water are close to the site try and keep it to flats as families do not like to be close to either.
How Much Profit?
As a general rule Developers look for 20%, some work on costs and others gross. So if you spent £200k you want £40k on costs or on end value the Property would be say £240k and so you would look for £48k.