Is property development a good business?

[Mariagatzs12]

My parents are thinking of giving me around £200k to start my own property development business. I would create a company and my husband would become the company's employee as a PM.

We were thinking of buying a house for say £150k, invest 25k and then sell it for £200k. I know it depends on the property and the are, but does that sound more or less accurate? My husband's salary would be whatever the profit is up to £25k. Whatever is left would be reinvested and so on and so forth.

According to my maths, it takes about 4-5 years to make enough for doing two properties simultaneously and that's when the good money starts to come in.

Am I being delusional? My mom is on board but I have to present my "business proposal" to my dad who believes it's a good business but he's had businesses of his own so likes everything to be well structured and planned.

The business is not for me, it's for my husband really, I'm just the investor (via my parents).

What does your husband actually say about it all?

• The reasoning behind this
• The skills, knowledge etc he is lacking
• Why?

If his current profession not well enough paid, it's a massive leap to go from that to starting a new business in an unknown field in one of the most volatile/unknown economic situations this country has been in. Why not diversify in the field he already knows? Why not take a better paid job elsewhere?

Are your parents quite happy to gift away 200k on a very likely outcome of the whole lot vanishing within months, never to be seen again?

The London thing I've seen it, which seems nuts but understandable. And we're in the West Country (to which my husband suggests an Airbnb, but you need more than £200k ).

Very tight margins in a somewhat unpredictable market there, I think.

You're talking of paying your husband £25k, but you've only got 25k profit (and indeed, less than that when taking other costs into account) so you've already got a loss-making company, albeit a husband with £25k in his hand (which will then be taxed and subject to NI etc - this is unlikely to be the most tax efficient way of doing it so something to discuss with your accountant, as an aside).

So, in theory, after house 1, you will have around £165k (saying 10k stamp duty, legal fees, estate agent fees) to buy house 2 and so on and so forth.

You're going to be only one bad decision or stroke of bad luck away from disaster for a very long time with very little buffer on those margins.

Well he's not qualified in anything. He's been a jack of all trades his whole life. He hates retail (the only place he could have made a "career") and won't ever go back.
He's benn in the boat industry on/off for around 10 years, he has the hand on experience which I do believe is transferable to home improvement. In all honesty I doubt he'll ever get a better paid job regardless of where we move.

He thinks that as long as nothing is needed/done structurally it should be straightforward and that he can do it.

Because we're not very ambitious to start with (even if we can get £23k for his salary we'd be winners!)

The idea is that he can get some experience and hopefully certify himself as we go.

OP are you taking any of the more realistic feedback on board here? You could likely see the loss of that £200k in a year.

How could we? Unless the house burns down. A property is a property and will always keep some value.

Our safety net (if the market falls while doing it) to rent it. There will always be a market for rentals. Yes, it would cover his salary, but would be a cushion while gets another one.

Sorry if I was sounding defensive. I can admit I'm pretty clueless and although my husband is a lot more clued up he has no business acumen.

All in all we're finding to try a way for him to have a more decent income for the future.

He'd love to own a restaurant/deli/food truck but because my dad has already been in that business wants to do it his way which wouldn't work for this market. We've also explored doggie related businesses but I love dogs more than him, so that was the end of it.

Motherof3Dragons

Flipping a property on the first day of ownership has only happened twice in 30 years.

You can make money in a recession. It all depends on how much you buy a place for

What about using the money to retrain?

Sorry, wrote a lengthier response but lost it. At 40, I think he seems himself too old to retrain in a trade, plus he doubts he'll ever make much more than he currently does.

You won't make an annual net profit of £40k in property development with £200k to invest. I don't think you'll make that kind of return in most businesses, especially not in the first year!

Mariagatzs12

I think you are restricting yourself by saying you are only willing to get a house within 25 miles of where you live.

If your dh wants to do this f/t then he needs to open his radius.

Also even if you only want to take £23k per year then when you look at selling you need to make all the expenses, a decent profit in order to buy the next place, and £23,000
You might get a house that sticks and takes a year to sell.

Thanks Oliver that's why I think you probably need to have two running simultaneously to have revolving money so to speak.

So maybe £300 and do smaller houses / flats?

This thread reads like the introduction to an Episode of Grand Designs. We all know how that show goes.... Id take some serious advice from a financial advisor on how to invest your money rather than trying to buy a fixer upper and flip it with only £50,000 budget.

I would go for it. You can learn all the stuff you need to learn, and your husband is obviously skilled. Mainly I think (from watching friends do it) it takes an instinct for what will sell and how to make good on the cheap. If you think you have that, then do it.
Also, a potential 15k profit for the first year of a business..? I think that's pretty good! Not close to the gazillions some on here are earning but it's not a loss is it?!

TDL works in finance. For passive incomes there many ways of doing it (he always suggests BTLs ) but we want something with a better return than that and that isn't passive, after all.my husband would be actively working there.

*my cousin works in finance.

My dad was a banker & always taught us to diversify & that stocks generally are a better bet & less labour intensive.

Yes, dunnylop that's what my cousin suggests too. But you have to know the stock market very well (or so he says). What we'd be looking at would be a 12% return (give or take).

My dad on the other hand believes in "hard work" and lost money in the stock market in the 80s , so I think buying shares will never float with him.

I renovate houses. First one I bought at auction, knocked a wall down, rewired, replumbed, new kitchen, new bathroom, plastered... made £25k but it tied my capital up for almost a year even though I sold it the second week on the market it took four months to complete. Next place made £10k, next made so little i would have made more if I'd just let it sit for three months and remarketed it.
Buying at the right price and knowing the ceiling for resale is key. People aren't stupid, you aren't adding alot of value just by redecorating and a new kitchen. Rewiring etc isn't visible so it may make a house more saleable but not necessarily more expensive. To add value you need to extend. Or do something structural like knock down a few walls.
The most money I made was £100k on a house just outside London by buying well, simple repaint (it was already a nice house), sticking tenants in who covered the mortgage and cost of stamp duty and then selling after a couple years. It was a rising market.
You basically need to do a hell of alot of research into costs, labour, fees, tax implications, get close to an estate agent, go to some auctions, watch Homes Under the Hammer, and then make sure you both don't give up your day jobs!

Pip My husband is very hesitant about extensions, mostly due to his inexperience as he think most end up costing mini fortunes.

I think there's a market for ready to move houses, people who are either clueless or don't have the cash to do them themselves or want it to be part of the mortgage.

That's the first type of house I bought

to an extent with CGT

Why would you think any profits would be liable to capital gains tax.

Property development is a trade - so corporation tax/income tax/NIC.

As you are in the west country I would suggest you visit the National Self Build and Renovation centre n Swindon.

Why does your husband think he is too old to retrain?. There are large numbers of people in their 40s and older doing apprenticeships.

It's only really viable if you have your own built team and architectural team who you trust implicitly. You need to open wholesale accounts to keep spend costs down and you need at least three properties on the go at any one time to get the most of the build team. This takes lots of project management experience. And it simply doesn't stop. My late husband did this and was an excellent project manager.
If you don't have the contacts, skills or financial commitment I'd say no don't enter this world. It's very stressful.