Property development second property step advice needed

Discussion in 'UK Property' started by bmann, Jun 3, 2017.

  1. bmann

    bmann New Member

    Hi, I'm in the midlands. Birmingham and Leicester area.
    Just completed my second project with 50k pre tax profit.

    Now I want to move onto my third project in the coming weeks and months. I'm pretty skilled at DIY Building.

    Anyway what would you recommend now that I have some experience. Something one step higher? something that would return a big profit

  2. Nicholas Wallwork

    Nicholas Wallwork Editor-in-Chief Staff Member Premium Member

    Hi @bmann!

    Well done on your first couple of successful projects firstly... great to see you on your journey!

    What we're the first two projects and how long did they take?

    If you want to scale up you'll need to bring on a team of tradesmen to finish it quicker and thus recycle your capital quicker. This will be higher returns. One man can only work so fast and you'll find as you grow the business you'll need to spend an increasing amount of time sourcing and selling the sites you're developing.

    I'd step up in size slowly and stick to what you know. There are lots of opportunities in property and it's easy to get distracted. If you've got a model that works then grow that. It doesn't mean you can't diversify a bit later on alongside what you do as you gain experience... you'll know when it feels right!

    Keep us posted and keen to hear more!

    Sent from my iPhone using Property Forum
  3. bmann

    bmann New Member

    First was a terraced house. Renovated and rented out.
    Second is another house. Major renovations, new driveway( By prof) cut 6 trees in the garden, new grass, new plaster (By professionals), new flooring and few other things. I just did the medium complexity DIY's.

    Anyway I'm thinking of buying another residential and adding a bedroom or 2.
    However instead I want to step up.
    Was wondering if somebody stepped up from renovations to say something like buy a plot of land and build. or Buy a property and convert into flats and saw it as better returns?

    or what would one recommend as a challenge?
  4. totallyproperty

    totallyproperty Administrator Staff Member

    Hello and welcome to the forum :)

    Are you looking at flipping properties or retaining them for rental income?

    If it's the first, I would suggest a couple of ideas to scale up your income... you are obviously happy to manage other tradesmen, so could you work on 2 projects at the same time? Keep the projects the same size as those you've already done (as you've had great success with this strategy so far), but double your income over the same time frame? If you don't have enough cash to do this, now that you have a proven track record could you offer an investment / JV opportunity to friends and family? For example, offering an investor a 10% return on their cash investment would still give you a good profit on a second project.

    If you want to add value to maximise returns, the priority there is research. All houses have a ceiling value which you must bear in mind. If you were considering converting a 2 bed to a 3 bed on a particular street, use Rightmove to look at SOLD houseprices within the last 4 months for equivalent houses within the immediate area, to check what prices are actually being achieved. This gives you a realistic idea of whether it would make financial sense to add additional bedrooms (and how many).

    If looking at going into a loft, or converting a house into flats, look at what else has been done already down the same street (which will give a strong indication about whether planning permission might be granted). Then again, compare 'sold' house prices for the developed property/properties against your development costs. Don't forget to take into account any potential delays that planning can cause, and make sure you have an exit strategy. Eg. if you struggle to sell... would rental income be enough to cover any finance / mortgage costs you are committed to?

    If you're looking at rental income, have you considered an HMO? @Tracey Woods HMO is our resident HMO expert here on the forum and i'm sure will add in some helpful pointers here. But for example, the layout of some 3 bed houses work well for conversting to a 5 bed HMO which gives you a far stronger monthly rental income. The location of an HMO is vital to it's success though, and they can be more hassle to manage (you might want to use a Management Service to help you tenant the property).

    Do keep up updated on your journey and how you get on! :)
  5. Mark Lodge

    Mark Lodge New Member Forum Partner

    It sounds like you are having a great time developing out these properties! However, I would say the next thing to learn is using other tradespeople in order to maximise your time effectively looking for more properties!
    If you are thinking about moving up a step, then I would also recommend looking at potential HMO investment opportunities. Location is key (you need to generally be in towns with large populations ((100K plus ideally but not always, due diligence will play a huge role in determining your strategy)) and lots of working tenants or students, great access to amenities and transport routes.
    I would recommend taking a course on this as there are quite a lot of moving parts to consider. The returns really do go up a level though so it is a fantastic strategy for retaining property for cash flow - plus you could sell to an investor capitalised on its income and therefore considerably higher than its bricks and mortar value!
  6. Tracey Woods HMO

    Tracey Woods HMO Director of Landlord Smart Forum Partner

    Hi to you as a new member, well done on your progress to date, sounds like you have laid some strong foundations to then consider moving up. I would be more than happy to have a chat about my experiences in HMOs and help where I can. I believe any strategy has to be relative to the market at the time and what works today may not work in a couple of years. Property, as you are aware is forever changing..... :)
  7. Joe Aston

    Joe Aston New Member Forum Partner

    @bmann this all sounds very exciting, congratulations on completing your first 2 projects!

    Please let me know if you would like any advice or assistance in sourcing funding for future projects at all.

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