Kaiser74 wrote: » Is there a profit out there in constructing for example a 5 bed on sites or converting period houses to apartments? I don't believe there is a boom out there however there must be a profit to be had?
antoinolachtnai wrote: » They are charging you 7.2 million for the money. If this is 40 houses worth 500k each, you'll need to make 180k on each site to pay the financier before you take your own profit on your equity (which admittedly is very little). That is difficult. Things would need to be very buoyant and you would need world-class management to build and sell 40 houses on a new site in 3 years. It is certainly possible, but it will be difficult and expensive. Why build at all? Service the sites, flip the property as fast as you can. There are ways to do it even less capital intensively. Presumably the finance company want a mortgage on the land as collateral?
Kaiser74 wrote: » We'll assume they hold the deeds until property sold. I was thinking of splitting the 3 years into 6 month projects ie build 4 property's on individual sites then sell all in a 6 months timeline. Profit of 20% on sales. Once sold reinvest that money and repeat for next 6 months. Over the 3 years accumulated profits should be enough to service the origanal loan and interest payments plus a profit. Obviously if 6 property's need to be sold per 6 months then so be it. Also interested in other capital saving measures you mentioned
antoinolachtnai wrote: » what price point had you in mind?
Kaiser74 wrote: » Site with pp for I large house.
CONM wrote: » Honestly not too sure to take you seriously or not, if you are serious do you really think it's a good idea to get involved in something at this level with such limited knowledge and experience? But anyway, the bulk of a developers margin is generally in obtaining a good planning permission. And obviously any margin is completely based on the market price, a developer can't just decide to add 20% to their costs and expect to get it. Its completely down to what the market can bare!
Kaiser74 wrote: » Thanks for your reply. Obviously no drawdown on funds until profit established and costed professionally beforehand. I agree the market will determine the profit ultimately but believe the model I've sugested is manageable. Refusing €20m is a hard thing to do ...
CONM wrote: » Okay, well how I would do it personally is by basing it on current market sales and working your way backwards... Taking away VAT, build costs, professional fees, site cost, etc... That will leave you with your margin for the particular site, given the market in recent years there has been an enormous variation in developers margin/return on capital invested.
Kaiser74 wrote: » Profit of 20% on sales.
Kaiser74 wrote: » Thanks for your reply. Obviously no drawdown on funds until profit established and costed professionally beforehand. I agree the market will determine the profit ultimately but believe the model I've sugested is manageable. Refusing €20m is a hard thing to do ...
J.pilkington wrote: » You are talking rubbish, no company / institution will offer you funds to drawdown (let alone €20m !) without a solid detailed business plan signed off by professionals in the industry. The type of questions you are asking are the type you would expect to see in an ordinary level junior cert business studies paper!
Kaiser74 wrote: » As I already stated no drawdown without prior agreement. This is obviously based on professional oppinion.
Victor wrote: » You have no idea where property prices will be in three years. I know a guy who bought apartments on Clanbrassil Street circa 1995 for €35,000, by 2000 they were worth €100,000 and they are probably now worth €300,000. Look at how that affects your margin. If you go to the beach and going swimming, and if you can't keep your feet on the bottom and head over water, then you are out of your depth. You are currently halfway to Holyhead and worn out from treading water. Your enthusiasm is to be commended for what it is, but not you swimming abilities. You need to listen, not demand. Property is not like running a shop. If I'm Aldi and I want to open a new shop, I will know exactly how much it will cost to run the shop, how much to buy and distribute the goods, to build the building (where a standard Aldi building is used, otherwise I'll be hiring someone to work that price out for me. I will know what my market size is, what percentage of the market I will take, who my local competitors are. I will know what my contribution to head office costs will need to be. I will essentially know everything. The last criteria is site cost. If the site costs X and that leaves me with a profit margin of Y. If Y is acceptably large, the project will go ahead. If too small, it won't. If it is too large, I will be checking my figures and asking myself what assumptions are wrong and if I should be building two stores. I know all these things because I have done it many times before. The thing with property development is that no two projects are the same. Even building two identical buildings next door to each other can have different costs, sales prices and turnaround times. You are 3-4 years late in buying land. That takes a huge chunk out of your margin. You have not indicated that you understand what costs you will incur and how you will minimise those costs. You have not indicated that you understand what price you will receive and how you will maximise those. If you are paying 12% interest, the only people making money will be the liquidators.
Kaiser74 wrote: » Thanks victor. Not demanding anything. Obviously if enough profit it goes ahead if not it won't. I too have a background in construction with a family construction company. I did not assume that all projects were the same in fact they are not. The points relevant here is wether the land cost will cripple profit and wether the sale prices are agreeable. All costs understood and will be costed prior to submitting same.
Kaiser74 wrote: » Indications are that property prices will rise. However this is obviously no gaurantee. The hope would be that it will remain buoyant for 3 years min.
