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Ask George – Episode 2… How do you cost your first project?

QUESTION:
How do you estimate refurb costs for the first time?

ANSWER:
Be super careful with build costs!

Always get the builder to use the detailed specification from the architect’s working drawings to provide you a quote. This is the only way you will get a true price.

Until they see these they won’t know whether you’re going for small, pencil-necked skirting or four-inch, expensive skirting. They don’t know whether you’re going for ensuites in all the rooms.

There may be an extension on the back, and the builder’s thinking “I’ll build it out of timber, it’ll be cheaper” but the conservation officer says it has to be built out of brick. Again, the price could double there. So you have to be really careful.

“This is a catch 22. If it is speculative you will not have any plans yet! We cover this in our courses where we help people with build costs and common mistakes.”

You also need to explore the services to make sure everything has been covered, i.e. the drainage and roof. Your quote could easily go from £50,000 to £100,000 and leave you with no profit in the deal.

Definitely engage with someone with experience when you’re doing this for the first time.

Hope that helps.

For details of our courses ==> click here

George Gannon
Property Leverage


Two steps to banish fear from your property journey

Do you know what ALL my students and mentees have in common?

Every single one of them (and there are many) have told me this.

Is this something that affects you too?

FEAR is the common denominator!

Fear of risk. Fear of messing up. Fear of tackling the unknown… on your own!

When you are new to something… you don’t know what you don’t know!

Not a great place to be if you are going to source expensive assets. If you are going to risk family money or take on debts to finance your decisions.

Fear is a major roadblock when embarking on your property journey. It affects everyone!

The only way you can overcome this genuine obstacle is to:

1. Invest in your education and yourself

This is what Billionaire investor Warren Buffett says.

“What is the very best investment you can make? It is one that you can’t beat, you can’t tax and not even inflation can take away from you. There’s one investment that supersedes all others: Invest in yourself.”

Warren Buffett

2. Work with an experienced mentor/partner

You can either work things out yourself as you go along. You may make expensive mistakes. You may take more time than is necessary. Or you can work with someone who has more experience and ‘earned their stripes’.

There is massive benefit in having your ‘hand held’ during your first project. You will save time and avoid mistakes. You will also have piece of mind knowing you are being guided by an experienced mentor.

Would you like to know more about our events, mastermind training and mentorships? Check out our courses ==> here

If you prefer to move forward with your property career with the right help… please call us on 0161 920 7131

To your success

George Gannon

Property Leverage

Ask George – Episode 1… What do you look for when sourcing property?

QUESTION:
George, what’s your criteria when sourcing new property to develop?

ANSWER:
The holy grail is to do developments, remortgage all your money out, and do the next one. It used to be possible to do that, but it’s getting a lot harder. You could be looking all year to find the right property like that. That’s why people get frustrated and go in for ones with smaller profit margins.

When you do find a commercial building it will dictate to you what you can do with it, so you have to keep an open mind. Say we find a care home and want to do it as flats, retain it and get monthly cash flow. But the planners want houses, not apartments, because the area’s saturated with flats and we won’t be able to sell them.

“You have to do what the market wants, not what will make the most money.”

George

Ultimately, we’re looking for a certain profit margin. People down South may tell you that 20% is a deal. But up North it isn’t. It’s all area-dependent. The challenge we’ve got is when you come to remortgage. If we’re retaining it, the banks will typically only lend 70% loan-to-value. We want 30% profit on gross development value (GDV), which is the end resale value.

I always start with the exit first, understand what the market wants, don’t get greedy, do what will achieve a successful exit; not what’s going to make you the most money on paper.

Always do a Feasibility Study to figure out the best and most viable way to make it work.

“Look at what the market wants and deliver the product to suit”

Hope that helps!

George Gannon
Property Leverage

Case Study – My First Commercial To Residential Project

I thought I would share this with you.

It’s a case study of my first deal. Hopefully you will find great value as I explain what I got right and what I got wrong.

I did my first large deal when I was 21. It was a run-down, boarded-up pub, which I converted into four apartments. I got a bridge on it, bought it, did the work and got development funding.

I was completely out of my depth!

At the time, I didn’t have the experience – I was a full-time university student, doing a bit of painting and decorating on the side, with zero money. If you had to write a list with every reason a bank would say “NO” to you then this was it! But, for whatever reason, I knew in my gut that I could make it happen.

Case Study 1 – Croft House

The Property:

A run down, boarded up former public house, with three ad hoc extensions at the rear on different levels. The soil from the extensions was just dumped in the garden so retaining walls and new opening would be required.

The flat roofs were shot, and the pitched roof required work. It had dry rot infestation along with wet rot. Meaning the floors and walls were compromised in places. The masonry on the front had filed and was blistering off. It needed everything doing to it.

Purchase:

After hearing “No” a lot from banks, due to my lack of experience and lack of any other assets or funds, I was getting pretty frustrated, so I contacted Alan, a guy I used to work for on the Isle of Man. He said, “Go on then, George, do me a business plan, I’ll lend you 100% funding to buy it and develop it”.

That was definitely a life-changing moment for me.

Strategy:

To convert it into 4 flats.

Works include:

●     Full Planning & Building Control Permission

●     Pitched roof to repair & new flat roofs

●     A new extension, then floor and ceiling to raise to marry up the three rear extensions

●     A retaining wall to allow new door openings, bins stores and steps to the garden

●     Fencing walls, levelling and graveling of the garden

●     Replacing a giant wooden 3m long wooden lintel with dry rot

●     Rendering the front and rear of the building

●     Stripping out and clearing out of all junk left there

●     Cutting back all timbers and materials affected by the dry rot, treating and replacing

●     New services mains coming into the building Gas, Electric, Water

●     New draining internally and externally including manholes

●     Taking walls down, putting walls up, boarding, plastering, painting

●     New wiring, plumbing, bathroom suites for four apartments

●     New joinery and kitchens

●     Carpeting and decorating throughout.

I did all the work, with the help of my friend Graham – starting with drawing my own plans and building control submission, stripping-out and knocking doorways through (which was really fun), a little bit of bricking up, plastering (which is so hard), joining and taping and dry-lining walls. The plumbing was very mentally challenging to get it all working correctly. I didn’t do the wiring. I can run a few wires through, but I definitely held back on that, because you only get one chance with electrics. When you’re doing all these hours and you’re really tired, that’s the last thing you want to be getting wrong.

It was an amazing learning curve, but I strongly recommend you don’t do what I did. It’s a lot of hassle and a lot of hard work. I’d recommend sitting back and trusting the experts to do it now.

The Numbers:

Purchase price (incl. all costs): £90,000

Investor loan: £163,000

Refurb cost: £85,000

End value post refurb: £247,000

Loan repayment, legals & 10% interest: £175,000

Profit: £72,000

Remortgage & Sale:

I remortgaged and split the title into four leasehold units and one freehold. I drew the plans for the title split myself as well to save even more money. I retained the leasehold personally and the freehold in a Limited Company. Times have changed now and I would recommend Limited Companies for all.

The plan was to sell the bottom two and keep the top two, but a sale fell through on the bottom one, so I ended up keeping three.

So there you have it. My first deal warts and all! It wasn’t the smoothest ride I’ve ever been on but it made a profit and is still cash flowing today!

Hopefully it will inspire you to take the next step on your property journey!

George Gannon
Property Leverage