A Lucrative Property Development Strategy: A Case Study
Jim J Davidson July 23, 2023
In this blog post, we'll explore a successful property development strategy that resulted in a substantial profit of almost £200,000. The project, undertaken by an ...
Introduction
In this blog post, we'll explore a successful property development strategy that resulted in a substantial profit of almost £200,000. The project involved acquiring a property in need of renovation and identifying an opportunity for additional development within the existing land. This case study demonstrates how de-risking and maximizing development potential can lead to significant returns in the property market.
The Initial Opportunity
The property in question was a house that had been on the market for quite some time. The owners, a couple planning for retirement, were struggling to sell due to the DIY nature of previous renovations, which were not done particularly well. The property was first considered in late 2007 but wasn't purchased until 2008, amid a challenging market environment.
Identifying Development Potential
We saw a unique opportunity beyond a simple renovation. The property had a sizable garden, and local council regulations required that the footprint of the house not exceed one-third of the total garden space. Upon close examination, we noticed that by removing one of the existing garages, there could be potential to build a new house in the garden area.
Navigating the Planning Process
We presented a rough sketch of the potential development to the planning authority. Though there were no pre-application processes at the time, a brief discussion with the planning officer indicated that the proposal had potential support. The process involved applying for outline planning permission, which was achieved remarkably quickly within six weeks. Subsequently, full planning permission was obtained, allowing the construction of a single house on the additional land.
The Land Acquisition
The acquisition of the land was particularly cost-effective, as it was part of the existing garden space. Therefore we simply did a title split and the cost of this and to achieve outline planning permission was £2,500. The land's valuation came back at £70,000, leading to a land profit of £67,500.
The House Build
The construction costs for the new house amounted to £90,000. The completed house was then sold for £235,000, resulting in a build profit of £145,000.
The Renovation
Apart from the development on the additional land, the main house underwent a complete renovation. The property was purchased for £180,000, with buying and selling costs totalling £3,500. The renovation expenses amounted to £20,000. The fully renovated house was eventually sold for £249,000, generating a refurbishment profit of £45,500.
Total Profit Calculation
When combining the land profit of £67,500, the build profit of £145,000, and the refurbishment profit of £45,500, the total profit from this project amounted to an impressive £190,500.
A Rewarding Strategy
This case study showcases a highly successful property development strategy that enabled us to minimize risks and capitalize on the full potential of the property. By identifying the opportunity to develop on the existing land and undertaking a renovation, we achieved an exceptional profit of £190,500. This example highlights the importance of careful planning, creative thinking, and a deep understanding of the local property market for aspiring property developers to achieve substantial returns on their investments.
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