Self build/property development

[Lord Duckhunter]

To cut a long story short I have an opportunity to acquire a decent bit of land that's prime for development and it won't cost me anywhere near the going rate. Approx 50% of the houses down the road in question have been rebuilt in the past 6 years and early discussions with the council have indicated that they'll be no issue with planning for 2 houses. The problem is I can raise the cash to buy the land and build one, but would need to sell that one to have the cash to build the second, which we intend to live in. I know building 2 at the same time is cheaper but it's just not possible . I have absolutely no building skills or experience so will be relying on a builder to do everything.

 

I was wondering if anybody on here had any experience of this sort of thing and could advise of any pitfalls. Provided the first house is finished and sold by the end of the year, financially it'll be ok. An architect is all ready to start on the plans this week, and the finance is in place. I've been told 8-10 weeks for planning , 16-20 weeks for the build of one house. How likely is it to be finished by end of Dec ( because of the unusual way I'm paying for the land, it becomes a bit risky for me if it drags on until next year). And is it really possible for a novice to do something like this relatively smoothly?

 

 

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[RicardoSO30]

I can help you with this but can not PM you

[Special K]

My thoughts.

 

Get an Architect that is used to getting apps through the local Planning. You may be asked to provide additional / supplementary information as well as drawings.

Don't rely on the minimum 8 week period for consent approval. Beware of additional requirements with the consent. Small developments should be fine, though.

Review the design to ensue it's relatively economic to build and doesn't include too many fancy things.

If you use a Builder be clear about his scope of works and make as few alterations as possible. Employ them under a Minor Work JCT contract and establish a payment schedule and agreed durations prior to work commencing

You will need to employ Building Control - the LA have privatised departments now, but there are lots of private enterprises that can do this too.

You would be advised to employ a Structural Engineer for the structural design and calculations required for BC sign off.

If you are financing it yourself, then that's fine. Consider self build finance too. A google search will pull some up.

If it's in a built up area, that should be OK, but dealing with Gas, Elec, Water and Telecoms can be frustrating.

 

December should be achievable. You can always consider getting the PP and flipping the land for a profit, if you can find a buyer.

[hutch]

Provided the first house is finished and sold by the end of the year, financially it'll be ok.

If that is true, without any contingency, then now is the time to walk away. Ten months (forget December) from agreement in principle to buy the land to sold, paid for and money in the bank is far too optimistic. You need to consider where you will be if the project costs you 20% more than you think it will, and you don't bank the cash until the middle of 2018. If you can handle that, then crack on.

[Lord Duckhunter]

Thanks for the advise, I really wanted to gauge some opinions before spending money on expert advise. Everybody I speak to says go for it , but they're not neutrals they're friends who maybe won't tell me the harsh truth.

 

Basically we don't need to pay for the land until the end of the year ( I couldn't afford it if we need to pay now). It's owned by a family member and he wants it kept in the family if at all possible. Nobody else in the family is interested and are all behind us. However he needs the money at end of the year for his dream move , so really can't throw his generosity back in his face by not paying on-time. It was his idea to build & sell one to pay him. Leaving us with half the land with planning permission and enough money left to build one to live in.

 

Does anybody know the Capital gains tax implications. Can I offset the price of the whole land against capital gains. If I had to pay 600k for the whole land and get 800k for the first house, is it the 200k profit that's subject to capital gains. That's what I'm working on. If I can only offset 300k (half the land price) and have to pay CGT on 500k it's getting tighter and tighter.

 

Thanks in advance

 

 

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[buctootim]

Thanks for the advise, I really wanted to gauge some opinions before spending money on expert advise. Everybody I speak to says go for it , but they're not neutrals they're friends who maybe won't tell me the harsh truth.

 

Basically we don't need to pay for the land until the end of the year ( I couldn't afford it if we need to pay now). It's owned by a family member and he wants it kept in the family if at all possible. Nobody else in the family is interested and are all behind us. However he needs the money at end of the year for his dream move , so really can't throw his generosity back in his face by not paying on-time. It was his idea to build & sell one to pay him. Leaving us with half the land with planning permission and enough money left to build one to live in.

 

Does anybody know the Capital gains tax implications. Can I offset the price of the whole land against capital gains. If I had to pay 600k for the whole land and get 800k for the first house, is it the 200k profit that's subject to capital gains. That's what I'm working on. If I can only offset 300k (half the land price) and have to pay CGT on 500k it's getting tighter and tighter.

 

Thanks in advance

 

Have you thought about a development mortgage to make the financials less fraught? Worth investigating imo from what little I know (mainly watching Grand Designs).

http://www.uk-development-finance.co.uk/dev-mortgages-bing

[benjii]

Thanks for the advise, I really wanted to gauge some opinions before spending money on expert advise. Everybody I speak to says go for it , but they're not neutrals they're friends who maybe won't tell me the harsh truth.

 

Basically we don't need to pay for the land until the end of the year ( I couldn't afford it if we need to pay now). It's owned by a family member and he wants it kept in the family if at all possible. Nobody else in the family is interested and are all behind us. However he needs the money at end of the year for his dream move , so really can't throw his generosity back in his face by not paying on-time. It was his idea to build & sell one to pay him. Leaving us with half the land with planning permission and enough money left to build one to live in.

 

Does anybody know the Capital gains tax implications. Can I offset the price of the whole land against capital gains. If I had to pay 600k for the whole land and get 800k for the first house, is it the 200k profit that's subject to capital gains. That's what I'm working on. If I can only offset 300k (half the land price) and have to pay CGT on 500k it's getting tighter and tighter.

 

Thanks in advance

 

 

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So not only do you have the financial risk of something going wrong but it could also **** up a family member's "dream move"? Is it really worth getting involved?

 

Is the family member absolutely adamant that the land should stay within the family at the risk of up-risking their own dream move? And if you plan on selling half of it anyway ASAP then how does that square with their wishes?

 

I would pay some money for the expert advice ASAP if you're determined in principle to go ahead!

[rallyboy]

If I was you I would be wary.

If there is any borrowing or a deadline involved then trouble is likely to appear when you least need it.

While there are profits to be made, you need a lot of wiggle room to prevent it turning into two years of hell.

Approach with extreme caution - and expert advice.

[Lord Duckhunter]

So not only do you have the financial risk of something going wrong but it could also **** up a family member's "dream move"? Is it really worth getting involved?

 

Is the family member absolutely adamant that the land should stay within the family at the risk of up-risking their own dream move? And if you plan on selling half of it anyway ASAP then how does that square with their wishes?

 

I would pay some money for the expert advice ASAP if you're determined in principle to go ahead!

 

It's my Mrs family & yes for various emotional reasons ( I don't really want to get into) the owner is desperate for it to remain within the family. My initial response was no ****ing way I'm happy where I am, but it's growing on me. The land is in an area that we will never be able to live in, so it really is a once in a life time opportunity. There is money to be made there , A lot of developers are sniffing around and he has had offers from them . You're right I do need expert advise and will clearly seek that, I was just throwing it out there to see what people who've built themselves think

 

 

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[OldNick]

It's my Mrs family & yes for various emotional reasons ( I don't really want to get into) the owner is desperate for it to remain within the family. My initial response was no ****ing way I'm happy where I am, but it's growing on me. The land is in an area that we will never be able to live in, so it really is a once in a life time opportunity. There is money to be made there , A lot of developers are sniffing around and he has had offers from them . You're right I do need expert advise and will clearly seek that, I was just throwing it out there to see what people who've built themselves think

 

 

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Have you factored in the uncertainty of Brexit lol.......afterall property may get a bit dodgy. I have noticed that January has been very slow in my business and so we may be heading for choppy waters

[benjii]

Have you factored in the uncertainty of Brexit lol.......afterall property may get a bit dodgy. I have noticed that January has been very slow in my business and so we may be heading for choppy waters

 

Yeah, but you do run a Christmas hamper business.

[Whitey Grandad]

Have you factored in the uncertainty of Brexit lol.......afterall property may get a bit dodgy. I have noticed that January has been very slow in my business and so we may be heading for choppy waters

 

Yes, it's been like that for a couple of businesses round here. There have been seasonal droops before but not normally at this time of year.

[OldNick]

Yeah, but you do run a Christmas hamper business.

No I sell Liverpool cup final giftware

[benjii]

No I sell Liverpool cup final giftware

 

[Clapham Saint]

Thanks for the advise, I really wanted to gauge some opinions before spending money on expert advise. Everybody I speak to says go for it , but they're not neutrals they're friends who maybe won't tell me the harsh truth.

 

Basically we don't need to pay for the land until the end of the year ( I couldn't afford it if we need to pay now). It's owned by a family member and he wants it kept in the family if at all possible. Nobody else in the family is interested and are all behind us. However he needs the money at end of the year for his dream move , so really can't throw his generosity back in his face by not paying on-time. It was his idea to build & sell one to pay him. Leaving us with half the land with planning permission and enough money left to build one to live in.

 

Does anybody know the Capital gains tax implications. Can I offset the price of the whole land against capital gains. If I had to pay 600k for the whole land and get 800k for the first house, is it the 200k profit that's subject to capital gains. That's what I'm working on. If I can only offset 300k (half the land price) and have to pay CGT on 500k it's getting tighter and tighter.

 

Thanks in advance

 

 

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Re the capital gains tax...

 

Your costs when calculating the CGT are the cost of what you are currently selling.

 

If you buy the land for (say) £300k and it costs another £300k to build the first house then when the first house is sold your profit is £800ksales price - £300k build cost - £150k cost of the land on which the first house was built = £350k.

 

Now if you sold the house in December 2017 you wouldn't actually have to pay this tax for some time. It would be taxable in the tax year running from 6 April 2017 to 5 April 2018. You would need to complete a tax return and pay the tax by 31 January 2019.

 

Hope that is of some help.

[Lord Duckhunter]

Re the capital gains tax...

 

Your costs when calculating the CGT are the cost of what you are currently selling.

 

If you buy the land for (say) £300k and it costs another £300k to build the first house then when the first house is sold your profit is £800ksales price - £300k build cost - £150k cost of the land on which the first house was built = £350k.

 

Now if you sold the house in December 2017 you wouldn't actually have to pay this tax for some time. It would be taxable in the tax year running from 6 April 2017 to 5 April 2018. You would need to complete a tax return and pay the tax by 31 January 2019.

 

Hope that is of some help.

 

Thanks for this, it's really helpful.

[Special K]

Another consideration is getting the scheme built to CML approval, which generally involves an insurance policy from a Warranty Provider (NHBC, Premier, etc) which may be used by lenders when considering lending to someone who wants to take a mortgage out to buy the house you sell. TBH, i'm not sure what the rules are on small developments, but i know on larger developments that a Warranty is required and their inspectors will require site visits to witness the work taking place. This will be in addition to the local building control. Again, i'm not sure how it affects individual developments, but like anything, there is a cost involved and when getting a Builder, it may be worth trying to get someone with registration to the NHBC or similar. Worth getting it checked out.

[tttdcs]

If you would like some help .... tttdcs@me.com

[Lord Duckhunter]

If you would like some help .... tttdcs@me.com

 

Thanks for the offer, very kind of you . I may take you up on that & email you but at the moment the project is very much in doubt . The finances are pretty much sorted but the major stumbling block is the timescales . Dec is just not realistic when we haven't got planning yet. I have a meeting with a builder next week who is interested in a joint project, but it'll leave me with a pretty hefty mortgage at the end of it. Although it'll only be for 10 years ( as I'm in my 50's) I'm not sure I want to swap my OK lifestyle for a lot less desposable income, even if it means living with fantastic sea views.

[hutch]

If you're looking at some form of mortgage finance, and if the land or the project forms any part of the security for that finance, then the land will need to be registered to you unencumbered to get finance. And it sounds as if you need to also subdivide a large portion of land into 2 or more smaller pieces. That will also take time before you start.

 

That will involve either a) your relative will need to legally subdivide it first and then sell you two separate pieces, or b) you will need to buy one large piece, then subdivide and register it as 2 separate pieces. All before you get started, although you could do it in parallel with your planning application.

 

If you're doing it all cash, then you could do it in parallel with building but you would be taking a risk, and all this presumes that you are plannng to sell the new properties freehold. Leasehold I think you could have more than one property on the same piece of land, but the preliminary legals and financing arrangements would be much more complex and it would probably take longer to sell at the end unless you heavily discounted the price.

Edited 4 February, 2017 by hutch