Help tackle the housing crisis and make a profit: Architect Garry Thomas advises small-scale developers plotting their next move
How to become a buy-to-let house builder
Before you commit any money, here are 8 simples steps to help you do your due diligence to pinpoint the hidden problems on a site and work out what they would cost to solve.
Who knows it could put you on the right track to be a buy-to-let developer.
- Ask an architect with a track record of getting projects past the local planners for a feasibility study of what you could build on the land, with basic drawings. As a newbie, expect to pay £1500 for a study for one house.
- Planning permission for 10 homes on a simple site starts at about £100,000. For £2000-£3000, a planning consultant will tell you if you’re likely to succeed. Show your initial sketches to a council planning officer to find out what you should amend.
- Find out where power cables are buried (linessearchbeforeudig.co.uk) and check old Ordnance Survey maps (old-maps.co.uk) for past uses of the site – car repair shops are a red flag. ‘Even a little bit of oil can be prohibitive for small schemes,’ says architect Garry Thomas. Do at least a desktop environmental report on contamination and flooding (usually less than £1,000). Many lenders won’t give finance if these risks apply.
- Check the local authority’s website to see whether the site is on a council-adopted road. If it’s on a trunk or private road, access can be difficult. Watch out for ‘“ransom strips’, where you need to cross a small parcel of third-party land: these typically cost up to a third of the increase in land value generated by the project.
- Look up ownership on the Land Registry (£3 per title; eservices.landregistry.gov.uk) and take a view on how easy it would be to buy. With private landowners, it’s often best to negotiate an option to purchase if you get planning consent. If it’s a big company, however, you’re usually better off buying outright or building in a joint venture with them.
- Get a regional conveyancing firm – not a high street solicitor – to do a legal check (£1000-£3000). A covenant stipulating that a Manchester site, auctioned with consent for 24 flats, could only be used as a working men’s club caused it to go unsold last year. But four months of legal legwork to solve this allowed Rob Bence to win it with a low post-auction bid.
- For a basic build costing, a quantity surveyor would charge about £2500 per home. Or ask a builder to quote – the Federation of Master Builders lists members at fab.org.uk and has free standard building contracts.
- Search sold prices on Rightmove and ask local estate agents how much comparable homes have recently sold for. Multiply the price per sqft by the size of your planned scheme, then deduct costs, contingency (5%-10% on the build cost) and your desired profit (typically 20% of cost). What’s left is the maximum you should pay for the land.
If you find the above pointers helpful then why not arrange a free 15-minute call back with architect Garry Thomas would be happy to guide you on your potential development. Arrange your call back here.