Starting the process with no capital

[Daniel Mahood]

Hi all,

Im a newbie to this forum (See welcome thread) and I am looking to gain some knowledge and research in order to begin to realise my ambition of developing property. Firstly, a little background of myself..

I am a 29 year old graduate of Building Surveying currently working in England for a Niche developer who specialise in the conversion of buildings into luxury properties. I work in the production department gaining experience on most aspects of property development.

My ambition however for many years has been to begin property development for myself, taking redundant or out of date properties and bringing them back into circulation. (nothing new there). I would like this to grow eventually into small scale new build developments. (say 2-4 homes or whatever is viable)

Working for myself is a real importance to my ambition as getting stuck in and dirty is just as crucial to my job satisfaction as programming works, labour and balancing the all important accounts.

What I hope to gain from this forum is methods of starting up.

I have no capital nor do I have a mortgage of which to borrow against. Are there methods of start-up that include outside investment or bank assistance? No time like the present to begin the research. (I am aware I will need a solid business plan prior to borrowing, but that's for another thread)

Thanks,

Dan

 

[KGeeson]

Hi Dan, welcome to the forum!

It sounds like a Joint Venture agreement could be the way forward for you. As you have development experience (and probably access to reliable building teams etc) then you can bring something to the table for a JV partner who is simply wanting a good return on his funds and wants to remain 'hands off'. Experience and track record will go a long way to securing investment alongside a credible business plan, but getting a couple of reasonable sized projects under your belt will help you gain larger investment.

I'm guessing you must already have quite good contacts in terms of sourcing strong potential properties?

I'm sure you'll get lots of helpful advice and guidance from the more experienced developers on the forum

 

[Daniel Mahood]

Thank you for the reply.

Are JV's popular when it comes to investment?

I have great contacts with regards to trades, advisers and accountant. With regards to sourcing properties, I would need to find a contact in an estate agency who I can trust in my local area in Northern Ireland.

Are there property specific business plan templates available on line of which to loosely base a new one on?

 

[Nicholas Wallwork]

Welcome again Dan!

I'm not aware of any templates online maybe someone else is? The key to the business plan is the product... What is going to be your niche? Sounds like new build... So you need to do a spreadsheet in the first instance to include:
- cost of land
- transaction and acquisition costs
- development costs
- resale costs & comparables in the area you're looking etc
- any end exit or completion fees (planning, building control, Section 106 payments etc)

You basically need to show where the profit is and how much you can make on a deal.

I tend to over estimate the costs and under estimate the sale price or rental income (whichever is important for that deal). Leave a solid over run buffer as well.

Then once you know given a certain level of investment what your return can be (this can be annualised if the project is not exactly a year). If the return is good (normally has to be over 10% for a JV partner to be interested) then you now have your "JV" product you can go out and offer...

So figure out what your offering is, do a spreadsheet to show where the financial benefits are and what the return will be and the start talking to everyone you know about the first deal you're trying to source!

Lots more advice to give but that's a quick response to get you going in the right direction...

 

[Michelle Barringer]

I would suggest that if you find a local property meet - such as PIN as there you will find lots of people with knowledge in your area and you may also find a partner who has funds but not time / experience to work with. Then once you have identified a project with strong returns you can start too use your next work to help you. - good luck

 

[totallyproperty]

I think you can find free, example templates online yes. There are some websites that might charge a small fee if it's a professionally written contract example. But if you do use a template as a basis, ensure you get it checked by a lawyer before proceeding with anything to ensure you are both well protected.

I agree that a local property meet could also be a good idea to build local contacts. Linkedin is also good, as is this forum itself of course!

 

[Daniel Mahood]

Thank you all for the really good advice.

Local property meets will certainly go on to the "to do list" once I return home.

Reading between the lines here with what has already been said, I feel I would benefit from a mentor (whether that be the JV sense or as an experienced outsider)

As a beginner I would definitely target properties that require modernisation or light to moderate repair building experience up to new build eliminating planning costs and with any luck Building Control too (served my uni placement with local BC which should help).

So on the list so far is;

1. Sound and relative business plan
2. Local property meets
3. Meet experienced people and try to gain a mentor

 

[Michelle Barringer]

Did you know that Nick Wallwork (the owner of this site and an experienced investor) offers mentoring sessions and he is excellent

 

[nmb]

A joint-venture would seem to be the most obvious route for you at this moment in time. I would make a list of your skills and contacts in the property industry because you will likely be surprised at what you have to offer when you see it down on paper. As Nick quite rightly suggested, it makes sense to overestimate costs and underestimate sale value/rental income which leaves you margin for improvement in the longer term.

 

[Daniel Mahood]

Did you know that Nick Wallwork (the owner of this site and an experienced investor) offers mentoring sessions and he is excellent

I had a look at that actually, looks fantastic and something to bear in mind in the near future I think

A joint-venture would seem to be the most obvious route for you at this moment in time. I would make a list of your skills and contacts in the property industry because you will likely be surprised at what you have to offer when you see it down on paper. As Nick quite rightly suggested, it makes sense to overestimate costs and underestimate sale value/rental income which leaves you margin for improvement in the longer term.

Good advice thanks. Having looked at a few business plan templates for property I have noticed that it is based on a particular property rather than a long term plan. I can understand this for JV's however if I was to approach a bank for instance for help funding a start-up business would they require 2 business plans?

I should hopefully have enough to begin some research and draft out the beginnings of a plan.

I have previously read what I think is a decent book by Ian Samuels called Property Tycoon (must get that back from my friend actually) which in very basic language explains the process and factors to do with becoming an developer/investor. Can anyone recommend any other literature I can get hold of seeing as I spend a night or 2 a week in a hotel with my current job.

 

[Judith Beilby]

Hi Daniel,

I wish you the best of luck in your property journey.

I think that relationships are the best tools we have, as Michelle said earlier going to your local property networking meetings are vital. Go with a specific intention of finding people who are doing what you want to do.
Would it be possible to shadow their build? Is there any service you could offer to assist them in return?
The other good way of building a pot of investment funds is to source properties for other investors, this will have the added benefit of raising your profile with local agents and getting you quickly familiar with reviewing the figures for profitable sites.
If you meet developers at the networking meetings ask what they are looking for, keep their details and find deals specific to them. If you are seen to be creating good deals and show a talent for adding value then there may be opportunities to work together.
I have just sourced my own private investor for an office conversion deal and he was a recommendation from the agent who sold me the building, tell everyone what you do and why, you never know who might have some money sitting in a account they could potentially invest with you.

 

[Nicholas Wallwork]

I had a look at that actually, looks fantastic and something to bear in mind in the near future I think



Good advice thanks. Having looked at a few business plan templates for property I have noticed that it is based on a particular property rather than a long term plan. I can understand this for JV's however if I was to approach a bank for instance for help funding a start-up business would they require 2 business plans?

Banks really only look at the property in question and whether their security is good enough. Your business model will only start to matter when you buy a few more and use the same bank and they start to consider their exposure to you increasing...

So a business plan is a great idea it's really only for your benefit right now and the plan for the deal is far more important to the bank to start with.

Re books: Amazon has lots of good titles and we'll shortly be adding our recommendations on Amazon on here so watch this space!

 

[Daniel Mahood]

Thank you all for the valuable input. I have got some work to do now i'd say.