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.

Thanks It's under I've more or less concluded the same thing that you need more than one.

Maybe yes he could retrain, but I think at that age you need a passion and I don't think he has any in that way.

What about your husband setting up as a handyman? He probably has all the skills required and could make your target annual salary easily once established. Minimum investment required but it would still earn you the income you are aiming for and the career flexibility

I think a handyman business us probably oversaturated over here. He thought of a valeting one too but when we looked into it he always gets stressed about finding customers. I get its

Campervan conversions? Know of someone who has done really well from it.

@Mariagatzs12 surely the property development business is completely oversaturated? Nationally. With people who know what they're doing. Being a handyman would at least be within your husband's skill set

Having done up 2 grotty flats, only one of which was sold on (though that wasn’t the original intention) - can only say that the doing-up (largely cosmetic, but inc. things like new boiler and wiring, nothing structural) cost quite a lot more than we’d expected.

Have you factored in all the other costs apart from the actual work? Solicitors’/estate agents’ fees/stamp duty/CGT if applicable?

In a rising market I think it may well pay, esp. if you’re prepared to do some or most of the sheer graft yourselves (assuming you know how to do it) but I wouldn’t necessarily bank on it.

Classic mistakes I’ve seen on TV are over-speccing (and overspending) for the type of property/target market, and doing daft things like having only a walk in shower, no bath, in a 3 bed family home where buyers are likely to have young children. Not to mention doing up to your own personal taste, not to what is likely to appeal generally.

If you’ve been watching Homes under the Hammer you may have noticed that any profit is often quoted gross, without taking all the additional costs into account.

I do this for a living, but with taxes etc i need to be making 80-100 k profit each time for it to be worth it, as well as having a solid team of good but mates rates trades behind me.

Anything cosmetic, flooring, carpets, decorating, installing bathrooms/kitchens he can do it himself.

We also know there will be times when he'd have nothing to do (waiting for completion) so then he can do his valeting/handyman type thing.

Over a year, we've seen that usually non ex council houses in very good cosmetic order get sold within one week.

It happened more times that we can count that the house was sold before we could even view it.

It just seems a lot of faff for not much guaranteed reward as your margins are too tight.

How about him becoming a driving instructor, or you both doing it as a family business.

We also know there will be times when he'd have nothing to do (waiting for completion) so then he can do his valeting/handyman type thing

That’s when you start looking for your next place.

How about retraining as plumber and fitting luxury bathrooms in other people's houses. The super yacht experience would come in here. Alternatively, we have just found a kitchen fitter who uses a qualified electrician but does the rest of the stuff himself. He uses DIY Kitchens (highly praised on Mumsnet). He helped us design it but we paid for the kitchen and materials upfront (less outlay for him). He's ordered the skip to chuck the old kitchen, we ordered the appliances (checkrd with him first). He's known to be a perfectionist in his work, and does bathrooms too.

Unless you are employing a team of builders electricians, plasterers then buying multiple properties at the same time is just having your money laid out with not a lot happening on one property whilst your dh works on the other.
Maybe buy a small place then when it is finished and up for sale then buy the next.

There is money in property but you do have to know what you are doing.

I probably have nearly 60 years of experience because my family did this sort of thing. You could say it is in my blood.

I have zero qualifications and hated studying because nothing ever went in but tell me an area/town/village and within a week I can tell you what houses are worth in every street, what they have been sold for and what state of disrepair or how beautifully renovated they were.
I have an almost photographic memory when it comes to google street view

I can look round a place and know virtually to the penny how much needs spending on it, how much I will get for it and what the right price is.

There is money in it but you have to know what you are doing and trying to replace a wage when you are starting out and have a minimum budget and are restricting yourself to a certain area (unless the area is London) is going to be virtually impossible.

"I think a handyman business us probably oversaturated over here. He thought of a valeting one too but when we looked into it he always gets stressed about finding customers."

Property development would be MUCH more stressful than valeting! It sounds like your husband doesn't have the temperament for it. You would have a huge amount of capital tied up, spending more on trades and fixtures, and you seem to think the market will be kind to you and give you back what you've spent. This won't happen. How would your husband cope with this kind of stress? Doing renovations on your own home are stressful. If you're doing it with the hope of making a profit, using someone else's money, the stress factor will be so much higher.

I know nothing about property development but I know you and your husband don't have the skills, knowledge or temperament to make this work. (You say that your own experience includes designing a lovely games room. In no way is this property development!) Your poor parents would see their £200k diminish very quickly. It's incredibly generous of them to offer you this money and you should be thinking of a realistic plan. Not a pipe dream. Your husband should use it to retrain or, at a pinch, do some unpaid interning in a field he's interested in.

I’ve been investing in property for 18 years alongside my own career in an unrelated field. I wouldn’t call myself a property developer though - it’s a passive income stream to support my increasingly precarious pension.

Honestly, I commend your optimism but I think you’re mad to risk £200k on a project in a dying market. The transactional costs are huge, the margins are small, and the risks are high. Your numbers are chickenfeed and the returns if any are going to be minuscule. I have a client who buys £1m houses and turns them into £1.5m houses but she reckons her net profit is less than £40k per house, each of which takes a year’s work (although admittedly not full time). As she once confided, she’d be better off financially cleaning those houses, not building them.

If your husband wants more flexibility in his work life and more time at home, starting up your own business is emphatically not the way to achieve that. Any business of your own is going to demand all your time and headspace for months or even years on end.

Can you use the money to set up in a trade? Your DH’s boat building experience must be a huge head start in, for example, joinery. A lot of the best joinery companies in Britain are based in the West Country - Atkey and Artichoke of the top of my head, although the latter is owned by a nasty UKIP supporter - and they would definitely be worth approaching about apprenticeship. At 40 he has another 25 years ahead of him, which is plenty of time to be successful. Britain’s housing stock is ageing and all those miles of Victorian sashes are going to need repairing and replacing in great numbers, but where are the apprentices who are learning how to do that?

Sorry I should also have added: if you have a big lump sum from your parents, use most of it to pay down or off your mortgage so both you and your DH can have a better work-life balance by making one salary sufficient.

Personally I don’t think there is anything wrong with your plan apart from your dh giving up his job and your restriction on areas.

I would start out with a much cheaper property whilst still working and bringing in a wage.
Then you don’t have to make huge profits because you aren’t covering a f/t salary.

Do a few until he is making a profit and covering his wage.
Then give up the day job.

humsnet paying off my mortgage has always been out of the question. They'd like us to have yes a better family/work balance but ultimately a better quality of life.

Their money, their rules.

I'm not convinced that it's worth it these days or unless you have big budgets.

How much do you make out of it @Oliversmumsarmy?

Residential property gains isn't what it used to be. Have you calculated the Capital gains tax on selling? Commercial property is more profitable factoring in tax allowances. If you look at your figures and do the deductions including the time spent you might see how realistic that figure looks.

"What happens if the market falls during the time you are renovating and wipes out any profit ? We'd still have my income coming in"
You seem extremely blasé about losing your parents' money. And your husband could end up working for months without earning a penny.

"For us it is about making enough to cover his salary"
You're looking at this all wrong. The business isn't an employer which will pay your husband a salary, NI contributions, pension contributions, etc. You need to generate enough money to cover these after all your property developing expenses have been paid, and after you've paid business expenses such as tax and professional fees. I can't see how you will do this.

You need to start with auditing your husband's skills. Not just joinery, etc, but his qualifications, interpersonal skills and personality. What kind of job would fit with this? (If he can't cope with stress then running any kind of business is out.) If his background wouldn't be enough to get a £200k loan from a bank for this business, you are wasting your parents' money. I don't get any sense that you understand how lucky you are. I hope I'm wrong about this.

stopshoutingd

Nothing for the past 4 years (Dp has been very ill)

Just getting back into it and have done a lot of research. Think I should be able to make £40k and cover all living expenses as Dp isn’t working and it will be our only income. For the first year.

I am starting though with a much bigger budget and won’t be sticking to just the UK as I am setting up a business abroad as well.
I was going to do this anyway but because of dps situation it has become more pressing

Thanks for answering @Oliversmumsarmy & sorry to hear about your partners illness.

I know the op was against the idea of a food van but I know some people who have had quite a lot of success with this & it seems less risky.

As my dad has had a few food.ventures, he thinks food trucks are not a great investment

OP you're an adult and you need to live your own life. If you want to start a food truck business go and borrow the money yourself.

Not sure what type of house you live in. You might not need to move .
But given where you live is a lovely area would actually putting the money your parents are willing to give you together with the proceeds from your own place with or without a mortgage be enough to buy a house that is large enough to section off a bit into a B&B
In the countryside (if you have some land) you could also put in a couple of self catering Yurts/caravans/chalets
Or buy something in a town/city where you aren’t relying just on seasonal guests