The Property Speculator

13 Steps to Getting a Property Sold

If you are planning on developing a property, the very final stage is the sale at the end. No developer wants a long wait to sell the property, no capital or rent is coming in and meanwhile mortgage repayments have to be covered. The longer it stays on the market, the more the developer will financially lose out.

So, to ensure that you have the very best chance of getting the completed property sold, here is a checklist to run through so that you know you are less likely to miss out.

© Copyright Carl Ayling and licensed for reuse under this Creative Commons Licence

Establish your position. You have to realistic about selling the property; if the market is currently flat in the area you are selling in you might well have to reduce the price at some point in the marketing process. If you are not in a particular hurry to sell, you might feel that reducing the asking price is not an option you want to consider. Don’t rule it out though.
Consider the purchaser’s aspect when pricing the property. Clearly it will depend on what the property is valued at but remember that houses are usually priced strategically just below the Stamp Duty Land Tax thresholds. This is not coincidence. If a property is priced just below the threshold and a competing one is just above it, the difference between them might only be a few thousand pounds but the cheaper one is likely to be on the market for a shorter length of time.
Consider your market. Much is made on TV property programmes of selling to ‘young professionals’; however there are occasionally people outside this category who buy properties. Of course, I recommend buying a development property with a particular customer in mind but you should certainly be selling it knowing who should be buying it. Students for example (or rather their parents), will be considering different things than a young family or a retired couple. Far better to cater for an existing local need than trying in vain to sell a property that’s being marketed to the wrong people. Speak to Estate Agents (several), they should be able to tell you where the local needs lie.
Ensure that the work that needs to be done, is actually done. If you’ve just had work done on the property then there shouldn’t be any excuse for leaking gutters, damp or mildew on walls or dodgy hinges on doors (for example). Not every developer will be carrying out a complete ‘gutting’ of the property, so if the turn-round is a rapid one to get it back on the market, make sure nothing is overlooked. If someone is having a viewing and looking round the property, if they find one obvious fault they might start to look for others.
Always have an idea of what the property is worth. Property valuation is not rocket science; it’s easy to get to know a particular area’s property market. After a few weeks you will probably be able to gauge neighbouring property prices to within around 5% of what a professional valuer would put it at. This will definitely help when it does finally get to the stage of accepting an offer, you will be able to distinguish between a silly offer and a realistic one. Having a look on a couple of property websites will help to get an idea of what neighbouring properties sold for (www.nethouseprices.com or www.rightmove.co.uk).
Choose the right estate agent. Some are good, some are bad but it’s highly likely you will be stuck with them for at least 6 months if the property does not sell. Word of mouth is a good way to get an idea of true reputation, and don’t be taken in by their sales pitch, remain sceptical! If you choose to put the property on the market with a single agent, there’s no reason why you should have to pay more than 1% (plus VAT) of the sale price. If you go with dual agents, it’s very likely you will be charged 2% (plus VAT).
Once the property is on the market, make sure it’s kept tidy inside and out whenever possible. Potential purchasers will do ‘drive-byes’, where they drive past a property to have a quick, discreet look and get a feel for the area without committing to a viewing. If there’s rubbish or builders waste left outside the property, it can be really off-putting for them.
If the estate agent has promised you that the property is displayed in their window and being aggressively marketed, periodically check that they’re telling the truth. Speaking from experience, an agent had stressed that the particulars of a house was in their window for all passers-by to see; but upon arriving at the shop, my wife and I found that not only was it not in the window it wasn’t displayed inside the shop either. They were poor agents and this was the final straw in making the decision to sack them.
Be picky about the property details produced by the agent. Their job is to get your property sold as quickly and efficiently as possible. If you feel that the details are not satisfactory, don’t be afraid of telling them. You will ultimately be paying for this service so they should always be acting in your best interests.
Pester the agent for feedback on viewings. Agents are not always the most communicative of people so they might need prompting occasionally. You might be fobbed off with a vague comment the agent picked up from the viewee, but after a few weeks of pestering them for accurate feedback, they’ll make sure they have proper answers for you. Some aspects of the property might be unavoidable, such as parking. However some things might be easily solved such as borrowing some furniture to ‘pad-out’ an empty property.
Consider exactly what you might be prepared to put in the property for the purchasers. For example you could throw in all the fitted carpets if the purchasers pay full asking price; they don’t know that you managed to get a load of inexpensive carpet from a friend. Same for curtains, you (as developer and vendor) might feel that putting up some (decent quality) curtains is of such little consideration as to be next-to worthless to the purchaser. This is not the case, buying and fitting good quality curtains and rails can run into thousands of pounds in some cases. If you can source them cheaply, you might well swing the deal in your favour.
When an offer does come along, you should have a figure in your mind that marks the border between what would be acceptable and what wouldn’t. This value has to be realistic though. In the current climate, buyers are looking for bargains and if you won’t consider dropping the price at all then it might be a while before the property sells. It’s a difficult market and sellers have to do what they can to keep their businesses running. Obviously a reduction in selling price over what you might have expected will reduce your profit margin, therefore consider this very carefully.
Do anything possible to increase the exposure of the property. Sarah Beeny’s website Tepilo is very good, and free. You won’t lose anything by making use of it! If you look around, websites and blogs can be free too these days (for example www.wordpress.com), give the property its own site! You have nothing to lose and it should not affect the arrangement you have with your estate agent.

Jul 3rd, 2011

Developing an Arts & Crafts Property

‘Arts and Crafts’ refers to a particular style of design that was principally founded by Artist & Writer William Morris. It was at the height of its influence between 1860 and 1910. Although the ‘movement’ (as it is known) is most often associated with architectural design, it also referred to a wider range of items such as furniture and decor.

William Morris was a Socialist, he felt that industrialisation was slowly killing off all creativity in design and believed that the usual style of Victorian design was void of any ‘soul’. He thought that design should be functional rather than overly decorative and favoured the work of Artisans and Craftsmen rather than mass produced items. The Arts and Crafts properties that exist today are very clearly more carefully and skilfully built than the vast majority of Victorian properties. The architectural features were produced to a very high standard and in the case of large houses, were sometimes completely unique. Unfortunately for a Socialist, he didn’t foresee that individually produced items proved to be very expensive. For all but the wealthy, the Arts and Crafts movement was a step backwards in terms of economy.

Arts and Crafts properties are characterised by a certain look that can show slight influences of Medieval and other styles such as Georgian and even maybe a bit of American Colonial. Arts and Crafts didn’t so much evolve from a particular style; it was a rebellion against industrialisation. The style we know today as Arts and Crafts has simply come from a movement that was not contrived in any way. It was a result, rather than a plan.

© Copyright Mike Searle and licensed for reuse under this Creative Commons Licence

External

Features that immediately identify an arts and crafts property are low roofline, small paned windows and exposed structural components such as beams with wooden pegs. Externally, windows and doorways very often had stone mullions.

Internal

William Morris was famously quoted to say “Have nothing in your house that you do not know to be useful, or believe to be beautiful”. This was a significant departure from the Victorian and Georgian ideas of filling the house with all manner of dust-gathering knick-knacks. It also represents a genuine ‘look’ that is more in line with the present day idea of trying to keep domestic clutter to a minimum.

The colours of the inside of the houses were lighter colours than the majority of Victorian properties; I would speculate that it was because Arts and Craft houses tend to be in rural areas rather than urban and the residents didn’t have to be as concerned with air pollution. Cornicing was still there, and painted white to give a pleasant contrast with the wall colours. This relationship between walls and cornicing was simple and not as ornate as Georgian design.

One of the most obvious and dominating features in an Arts & Crafts property is the fireplace. Of course because architectural items such as this were hand-made, they were often intricately carved and also very large. Floors were dark wood (sometimes parquet downstairs), as oak was used in abundance.

Arts and Crafts style furniture is based around a classical look rather than any particular common features. Brown leather (preferably aged) is an easy way to add instant authenticity for chairs and sofas. Again, oak is used for furniture throughout the house. Oak doesn’t shrink and distort anywhere near as much as soft-woods (like pine) when it’s drying out. It should definitely look handmade, rather than mass-produced. If you don’t want to spend all that money on handmade oak furniture, staining or dark-tinged wax is available for lighter woods (such as pine or beech) and works better than you might think.

For curtains, plain but elegant is good. No Victorian or Regency-style frills or netting. Curtain poles are also plain and should be simple wood or solid brass.

Lighting was (in common with the rest of the property) kept simple but was handmade. There is no shortage of Arts & Crafts style wall light sconces available online to compliment the look; in fact to really get into the spirit of Arts & Crafts movement you could handmade some yourself.

Rugs and carpets during this era were still quite ‘fussy’ and covered with swirls and loops. This design contrasted with the dark wooden floor though so it did not seem too intrusive. Wallpaper was popular at this time, although not quite as popular as in the main period of the Victorian era. It was a similar design to the rugs and carpets.

Jun 6th, 2011

Update on the UK Planning System

In the UK budget on the 26^th March 2011; The Chancellor, George Osborne announced plans to alter the UK planning system in order to encourage growth in the property sector, and subsequently the economy as a whole.

Apparently, in its current form:

“The planning system has held back investment and created distortions in the way that businesses compete, deterring development and growth”.

This overhaul (in my opinion) is good news. It doesn’t just relate to the commercial sector, but to the residential too. The intended actions are:

Introduce a new presumption in favour of sustainable development, so that the default answer to development is ‘yes’;

Plans on how this will be incorporated into the planning process are due to be announced in May 2011.

Localise choice about the use of previously developed land, removing nationally imposed targets while retaining existing controls on greenbelt land;

This will allow Local Authorities to use their discretion in applying planning laws.

Pilot a land auction model, starting with public sector land;

The details of this have not yet been released, but it is likely to have 2 parts:

Local Authorities will be able to buy land from owners and grant planning permission in relation to it.
Sell the land onwards to developers, keeping any uplift in land value.

Introduce a number of measures to streamline the planning applications and related consents regimes removing bureaucracy from the system and speeding it up. This will include a 12 month guarantee for the processing of all planning applications, including any appeals;

This is likely to take a few months to take shape. The Government is planning to allow certain types of minor commercial developments to fall under Permitted Development.

The plans to streamline the planning process will be unveiled in autumn 2011.

Ensure a fast-track planning process for major infrastructure applications through the Major Infrastructure Planning system;

Clearly this is unlikely to impact the private developer, unless they’re planning to grow in project size rather quickly.

Consult on proposals to make it easier to convert commercial premises to residential

This is probably the most eagerly anticipated change to the existing planning laws. The Government is intending to allow certain changes of property use from ‘Business’ use, ‘General Industrial’ use and ‘Storage/Distribution’ use to Residential use. This will effectively allow developers to convert some commercial premises into houses and flats.

I imagine though, that strict conditions will be imposed such as (for example) proof that the property has been empty for a certain period of time.

I believe that these proposals represent the largest changes to planning and property laws for many years. If the government makes the plans work, it will provide a much-needed boost to the property sector. No doubt many developers will be in a comfortable position to immediately exploit these new additions, but hopefully it will benefit the smaller-scale speculators too.

Mar 28th, 2011

Increasing the Value of a Property

To be a successful property developer and/or investor, you must learn to see your business or property through other people’s eyes. That is to say that if you intend to have a tenant occupy the property for example, you must think about how a prospective tenant will see your property when they view it. It is far too easy to make the assumption that your property (the ‘product’ of your business) is the perfect one for them because they have identical taste to you. Likewise, if a prospective purchaser arrives to view the property they are unlikely to be particularly impressed by a hot-tub installation or a state of the art media system as in almost all cases, a new property owner enjoys the process of changing the property to suit his or her own taste.

Have you ever noticed how builders change properties when they purchase them? This is yet another ‘pair of eyes’ that you should learn to view a property through. Builders know better than almost anyone how to add value to a property and fully maximise all features and benefits. This is one of the very reasons why they are probably about the most successful group of people at developing property. The other reason they are so successful is because they know how to carry out the development in the most cost-effective way possible. All materials and labour will be sourced shrewdly. Extensions, loft conversions and conservatories will be added to the property wherever possible. Rooms will be knocked through to make open-plan areas, en-suites and downstairs loos will be added and cellars (where present) will be used, all for the purpose of fully increasing the value of the property. They are very successful at it too. Be aware though, that in the majority of cases, planning permission must be sought to ensure legal compliance.

The way in which the extensions and loft conversions etc increase the property value is simply by increasing the internal property area. That’s it; the most certain way of increasing the value of a property is to increase the internal dimensions. There are some other ways to increase the value but they are not as reliable as ‘square footage’. They will be discussed later.

Property valuation is described by property professionals as ‘an art, not a science’. This means that there are no difficult calculations to carry out and no secret information that only estate agents are privy to. The majority of property valuations are based upon ‘comparables’. Comparables (in the context of property valuation) are similar transactions completed recently, that provide a guide to the likely sale price of a particular property. So to use a very basic example, if a 2 bedroom flat sold 3 months ago for £220,000; and another 2 bedroom flat sold 4 months before that for £215,000, then it would be fair to say that any similar 2 bedroom flat is likely to sell for a similar amount now. This is the technique that estate agents and valuers use, and it’s also the technique that anyone who knows the property market in a particular area uses. It really does not take long to get the feel for an area and whether properties are over or underpriced.

Property features such as garages, swimming pools, a quality kitchen and bathroom will also add value. However, there is a danger that you might not recover the initial cost of these things in the eventual sale price of the house. A double garage can cost around £10,000 to have built, but it is not guaranteed that it will make £10,000 worth of difference in the value.

So what happens if you have a property that cannot be extended or substantially altered such as a terraced house or a flat? There are still many ways that the value can be increased, it’s just a little trickier. This is because it depends so much on the property itself and the prospective owner or tenant you are hoping to ‘sell’ to. If the property is Grade II listed for example, period features must be kept and probably even emphasised. A high quality finish to the kitchen and bathroom is probably the most reliable way of adding value in this case. Materials such as slate and oak are instantly noticeable and will give that impression of quality.

In more modern and unlisted properties, the alteration of various internal walls to allow more natural light into the property will help a great deal as this will give the impression of extra space. This can also be done by adding velux type windows where possible or a ‘Sky Tunnel’. In these types of properties, it’s easier to alter things to maximise the feeling of space because you aren’t limited by the traditional layout and features of listed properties.

The modern practice of adding en-suite bathrooms wherever possible should be discussed here. A master bedroom (in a property with multiple bedrooms) with an en-suite is a clever move. If the property has more than 3 bedrooms, an en-suite to the 1^st and 2^nd bedrooms is a good move too. However, an en-suite to every single bedroom is too much. Once the bedrooms begin to get smaller, en-suites simply rob the room of valuable space. If you are hoping to sell or let the property to a family with young children, an en-suite will be useless in a baby or infant’s room. A single bedroomed property is not really suitable for an en-suite either. One bathroom/toilet is plenty.

Jan 25th, 2011

Using a Property Purchase Option

Quite often, a property developer feels that it is a better idea to build a property from the ground up rather than renovating an existing one. There are advantages to this approach, as there are definitely economies of scale involved when buying a suitable building plot. It usually works out far cheaper (per individual unit) to build several properties on a slightly larger plot, than one on a small plot.

With this in mind, one of the most important (if not THE most important factor at this point) is the establishment of planning permission for the build you intend to carry out. Once you have this, the capital value of the site can increase many, many times over.

This causes a problem if you intend to be particularly prudent with your finances. Do you:

Buy the land without planning permission and run the risk of not getting consent, and owning a useless plot that cannot be built upon? Or
Purchase a plot that already has planning permission in place at up to 10 times the price it was prior to the grant of planning consent?

Most novice developers follow option 2 and purchase the plot with either outline or full planning permission already in place. This offers the least amount of risk but is also the most expensive choice by quite some margin.

Professional property developers are not in the habit of spending money unnecessarily, they will seek the establishment of a Purchase Option on the land prior to buying it. This is a contract between the two parties (Vendor & Purchaser) that is ‘open-ended’. This means that one party can choose to exercise their right to buy something (at a price agreed prior to contract finalisation) or they can allow it to expire and take no further action.

The way a Purchase Option works is thus:

1. A property developer believes a particular plot of land is suitable for development, but presently has no planning permission in place. The plot is not currently for sale, so he traces the owner of the land through the HM Land Registry.

2. He consults the local Planning Authority as to the viability of obtaining planning consent on the plot. This is done informally and may only amount to a phone call, although a planning officer might visit the site to discuss the developer’s plans with him. If the planning officer believes that there are no obvious problems at this point, the developer is likely to be invited to submit a planning application.

3. The owner of the land is then approached by the developer and asked if he would sell the land to the developer subject to the satisfactory grant of appropriate planning consent. If the landowner agrees to this, a purchase price is agreed to (this is normally considerably below the full value of the site with consent in place, as the developer is still taking some degree of risk).

4. The developer usually pays the landowner a fee for the facility of agreeing to this contract, this is known as the Option Fee. It could be around a thousand pounds or so, depending on the size and scale of the project. This fee is the landowner’s, regardless of the outcome of any planning decision.

5. The Purchase Option contract is drawn up by a property Solicitor. It states:

a. The names of the two parties

b. An indication of the area of land (maybe accompanied by a plan)

c. The Option fee

d. The agreed purchase price of the plot

e. The term of the contract (this could be for 6 months, for example)

f. The precise conditions of the planning consent required by the Developer

6. The full version of the option contract is then signed by both parties. Now, at any time for the remaining term of the option contract, the purchaser (developer) can buy the plot from the vendor at the agreed price, provided the planning consent is satisfactory and any associated conditions are acceptable to the purchaser. The developer then has the plot he wanted, with suitable planning permission in place, at a price that was significantly less than it could have been.

7. If the planning permission is not granted on the terms the developer hoped for and it is unlikely that it will be granted, the developer can simply allow the term of the option contract to expire. This becomes worthless upon expiry and the developer is not financially committed to the land at all. The prospective vendor however, gets to keep the option fee regardless.

Option contracts are now fairly common, a lease option and a double lease-option are available but work in different ways to the purchase option. It is simply a contract that one party can choose to exercise or not, but the other party is legally bound to adhere to.

Purchase options can be fairly complicated, reflecting the nature of English & Welsh property law. Because of this, it is not really possible to download a contract template that will serve all situations. I highly recommend a Property Solicitor is consulted and asked to draw up the draft and final copies of the contract.

Jan 18th, 2011

Why a packaged-up property investment does not work

When I was studying to become a Surveyor and learning about property investment and valuation in particular, I remember seeing a large development of flats being constructed and a banner caught my eye. It read ‘12% yield, guaranteed’. I thought about this for quite some time because the subject of yields was very fresh in my mind.

The term ‘yield’ within the field of investment means the sum of money that your investment returns to you on a regular basis. It is in effect your payment for letting someone use the asset it is based upon. If this were a bond or a company share, then the yield would be the payment for lending/giving a corporation or government your money (the purchase price). In the case of property investment, it is the return (in the form of a rent payment) for allowing a tenant the use of your property.

The equation to calculate the yield figure is simply the return over 1 year, as a percentage of the capital value. So for example, if the annual return for a particular investment was £5,000; and the capital value was £100,000 then the yield would be 5%. As the yield figure is based upon two figures (annual return and capital value); if one changes, then it will alter the yield figure. So using the example above, if a property is returning £5,000 per year (this is written into the tenancy agreement and subsequently cannot be changed easily) and the capital value rises to £120,000, the yield would become 4.2% (£5,000 is approx 4.2% of £120,000). Likewise if the capital value dropped to £80,000, the yield would become 6.25%.

Most investments, (property included) provide a yield of between 4% and 8% (very approximately). Residential property tends be lower yield because the capital value is higher and investors look upon it as long-term and low risk. A realistic yield for residential property might be around 4%-5%.

At the other end of the scale, retail property tends to be highest yielding because the investor will be anxious to recoup the initial purchase price in as short a time as possible because these properties represent a higher risk to him (retail property is extremely sensitive to economic influences). So the rent will be set fairly high, but the capital value will be quite low. A realistic yield figure for retail property might be around 8%.

With this information in mind, why would a banner advertise that a return of 12% is guaranteed on a residential development?

Many developments are planned from the outset to rely heavily on buy-to-let investors. Obviously the development I saw was one of them. The developer will be keen to sell as many units as possible to achieve his planned return. An investment company might partner up with the developer and seek to sell individual units to private property investors. The appeal of this arrangement is that the investment company will manage the property, including finding a tenant. At the end of each month they collect the rent and pay you your share. Sounds good doesn’t it? Investors get to receive a return on their outlay and don’t have to do anything for it. However, it really isn’t that simple.

To be completely honest, I really do not know how any company can provide an investor with a 12% yield. Let alone guarantee it. However with the benefit of experience, I can make a couple of assumptions:

1. That the contract between the private investor and the management company contains some very onerous smallprint that in effect makes the initial promise of a guaranteed return worthless.

2. That the property’s capital value is manipulated to reflect a much lower figure. This has the effect of increasing the yield rate.

The market in residential property ensures that if a particular development is overpriced, customers will simply go elsewhere.

To guarantee a yield figure to an investor seems to me, madness or just lies. The tenant is highly unlikely to pay such an inflated figure for so long that to offer any promise of such a high return is simply not possible. The management/investment company would have to heavily subsidise this return, and that is not a very smart business model at all is it? There isn’t a landlord or investment company in existence that can guarantee a tenant in occupation (even in the case of social housing, governments, policies and budgets are always subject to change). Risk, to a greater or lesser degree is part of investment. It is the element of risk that provides you with your return.

The point I wish to make, is that the concepts of being a ‘remote’ investor, and expecting the venture to pay for itself are not really compatible with each other. Guaranteed yields aside, off the top of my head there are at least 3 reasons why these packaged up investments are unlikely to make you much money:

The initial purchase price is highly unlikely to be negotiated down beyond a certain percentage (most ‘sales suite’ staff have the authority to agree a certain price reduction, but this will not be volunteered!). Remember, as a purchaser you will be expected to pay a fairly high price because it’s your cash that makes the whole thing worthwhile and profitable for all parties before you, and it’s likely that there’s quite a few! This situation immediately rules out your opportunity to make a profit on the capital value. Remember, you are helping to provide the developer’s profit!
If you wish to sell the property at any point in the future, any increase in value will be absolutely dependent on the development as a whole. There is a general rule that all properties are different in some way, whether that is location, size, layout or appearance. That said, these large developments of flats do look very homogenous. So the value of your investment will remain exactly in line with the values of all the other individual units, regardless of what you do to it.
As the properties tend to be new-build, you are extremely limited in what you can do to add value to the property. You will be limited by the layout of the building as a whole, planning laws and no doubt, the covenants within the property deeds.

These 3 aspects form the very basis of how investors and developers make money from property. The fundamental process being:

Buy the property at a discount, carry out work that increases value, and sell at a price that provides a decent profit.

So there you have it, these packaged up property investments might look very tempting. However, scratch the surface and you will see that they manage to one-by-one, eliminate all your opportunities to make a profit.

I believe I can say without fear of being contradicted, that anyone who really makes money from property has done it through being heavily involved in the whole process. It is only possible to delegate the work once you have people working for you.

Oct 15th, 2010

Why unfashionable post-war properties should not be overlooked.

Much of being a successful property speculator is establishing a target market and tailoring the investment or development property to appeal to it. Unlike other walks of life, fashion in property tends to come and go quite slowly. Period properties remain very popular and no doubt will remain so for the foreseeable future. Meanwhile, many properties built in the post-war years were not particularly attractively styled (although generally they were actually built to a fairly high standard). This lack of popularity often means that in comparison to period properties, these houses are undervalued.

These unfashionable houses tend to be overlooked by many potential developers and investors, as they believe they are uninspiring and will not be occupied or sold easily. This need not be the case. The appearance of many post-war properties has been changed substantially to incredible effect.

Consider the following photos:

“The owners of this house wanted to add more space and improve its exterior. After an Erincastle Design Consultation, the front garden was improved, the front door and windows were restored to their original design and an extra floor was added to accommodate a new luxury Master en suite. The overall effect is obviously a breathtaking improvement, increasing the desirability and market value of the house.”

Pictures and text used under permission of Erincastle Exterior Design; www.erincastle.co.uk

This amazing transformation was created by exterior design consultants Erincastle. It’s not difficult to see that this programme of transformation would certainly add value to any investment or development project and therefore an opportunity to increase profit. Many residential developers believe that the only way to change the appearance of a property is to repaint the exterior and tidy up the garden. It is possible to achieve so much more.

The idea that a house considered by many to be ugly, can be transformed into one with character means that for now, there are more opportunities available than many thought. The more work carried out on a development property, the greater the opportunity to make a profit. Taking the time to make substantial, tasteful changes to the exterior is certainly an area that is likely to pay dividends upon valuation for resale or letting. However, the alterations carried out should not be too expensive. The cost of the works should still be substantially less than the expected increase in the property value.

Obviously if the property is within a row of semi-detached or terraced houses, a dramatic change to the exterior is likely to look rather odd and create too much of a contrast. Therefore when choosing a development property, your intended work should be taken into consideration. The building’s original layout, profile and shape will influence the finished item. A great deal of the property’s appearance can be changed; such as adding extensions, demolishing parts and altering roof lines.

Popular ways of changing the appearance of a modern property is by adding additional external finishes to the walls, such as replica wooden cladding to create the ‘New England’ look. If windows are to be changed, this also provides an opportunity to change the property theme, such as sash windows to give a Victorian or Georgian look. One of the most substantial changes that can be made is a roof alteration. This is probably the most expensive of all cosmetic works but can achieve the most substantial change of look. If much of these things need changing as part of the intended development work, then the additional cost involved in changing the property ‘look’ might not amount to a great deal more.

It should be pointed out that under the Town & Country Planning Act 1990, changing the external appearance of a property does correspond to the legal definition of ‘development’. Depending upon the amount of work you intend to carry out, planning consent will almost certainly be required.

For new-build projects, you might feel that options are limited in finding designs that don’t look too contrived. Erincastle also have experience in creating designs that genuinely look like listed buildings:

“TOWER HOUSE ” A NEW BUILD BESPOKE HOUSE DESIGNED BY STEVEN JAMES TYLER, COPYRIGHT ERINCASTLE 2006.

“HILL HOUSE ” – A NEW BUILD BESPOKE HOUSE DESIGNED FOR AN UNUSUAL HILLSIDE PLOT BY STEVEN JAMES TYLER, COPYRIGHT ERINCASTLE 2007

Note: If the property you intend to carry out these works to is listed, or in a conservation area; it is highly unlikely that you will be granted permission to change the look of the property. Houses that fall into these categories might not necessarily be full of charm, but unfortunately they cannot be changed without the express permission of the local planning authority.

For further information on Erincastle designs, visit their website: www.erincastle.co.uk

Sep 6th, 2010

What Makes Property Such an Excellent Investment?

Property is certainly not the only form of investment, and it has its shortcomings. It’s (obviously) very expensive to purchase, there are high costs involved whenever it’s sold, let or purchased and also in the day-to-day running of it (decorating and maintenance).

However, what are the advantages?

1. You can borrow from banks and building societies to fund the purchase of property. Indeed in most cases if the intention is to build a portfolio, it makes more sense to borrow rather than purchasing the property outright. You can’t do this to buy company shares or bonds.

2. Property is a ‘tangible’ investment. It is a physical entity in itself and therefore will always exist. The property can be in a state where it is falling to pieces, but the land it sits upon still represents some value. Investments that only exist ‘on paper’ might plummet in value and be almost worthless in a very short space of time if the company invested in runs into trouble.

3. Many people feel that property ownership gives them ‘kudos’. A few hundred years ago, it was only landowners who would be allowed to vote in elections. Property ownership apparently gives people a feeling of being affluent. This is certainly the case for many businesses. Investment of other types doesn’t really provide this.

4. Leverage. This is where an investor or developer only puts in a fairly small percentage of the purchase price as equity (their own money). The remainder of the purchase price is provided in the form of a mortgage. If a property is said to be ‘highly leveraged’, it means that the investor has borrowed a high proportion of the purchase price and only contributed a small proportion of his/her own money. Where else but in property would you be able to purchase several hundred thousand pounds of investment and only have to put down around 25% of the price out of your own money? This has the huge benefit of allowing investors to purchase several assets instead of only one.

However, be aware that this is how many property speculators got their fingers burnt over the last 2-3 years and no doubt contributed to the current economic climate. Tread carefully!

5. Above all, direct property investment (that is, the actual ownership of a legal interest in a physical property) provides a way of increasing the value of your investment. This can be done through various means such as increasing the size or obtaining planning permission to divide a site up into several plots.

You can go as deep as you want into the analysis of investment ‘behaviour’ and why property follows particular trends (this is often quite different to other investments). Many investment professionals acknowledge that property gives a varied investment portfolio a particular ‘stability’. This is due to a particular aspect of property that some see as a shortcoming, others see as a benefit; liquidity. This has a major influence on the behaviour of property values.

If an investment is regarded is ‘highly liquid’, it means that it is easily and quickly sold on when the owner feels he/she should (for whatever reason). Property transactions tend to take a few weeks at best, several months at worst. If an investor needs capital quickly, he or she is unlikely to get it from the proceeds of a property sale because it simply takes too long. Therefore, if a ‘liquid’ portfolio of investments is important, property might not be the best way forward.

The benefit of this lack of liquidity is that property provides a certain stability of investment. The investor knows that it is pointless to attempt to sell the asset whenever the economy fluctuates (which an investor in company shares or bonds will probably be tempted to do). The property investor is more inclined to ‘ride out’ the (smaller) economic peaks and troughs. Demand is also likely to be subject to a more gradual increase or decrease, as transactional data is not produced at the same rate as smaller investments, thus the rate of change is slower.

That said, it is debatable whether property investment (as a separate activity to property development) brings any higher returns than a comparable investment in a blue-chip company. Indeed, many investment managers would agree that ‘paper’ investments have slightly outperformed property in the mid to long-term. As mentioned above, the increase in property value comes when development in some form is added.

Jul 24th, 2010

added value