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Purchase of building land

Discussion in 'Building' started by low drains drifter, 20 Jan 2012.

  1. low drains drifter

    low drains drifter

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    Can anyone advise me as to whether there is a building industry guideline as to what a builder would pay for plot/s of land. eg Something as expressed as a % of the selling price of the finished property? So, if a house on a plot of land would sell for £250,000 what would a builder expect to pay for the land?
     
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  3. freddiemercurystwin

    freddiemercurystwin

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    This has been asked before on the forum. The value of the land is what the purchaser is prepared to pay for it.

    Typically around 30% though.
     
  4. low drains drifter

    low drains drifter

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    thank you for reply
     
  5. amwc

    amwc

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    The house on the land would cost approx £1000 per square meter of living space so if the house is 150000 to build you dont want to be paying more than 100000 for the land.
     
  6. low drains drifter

    low drains drifter

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    Thank you for reponse, amwc.

    The £150,000 you talk about? What sort of margin would a builder be looking for here?

    Also, if a commercial builder were buying the land to develop and sell on what price would he expect to pay for the land @ £100,000?
     
  7. RedHerring2

    RedHerring2

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    I understand having Planning Permission already granted makes a vast difference to the price of the land, perhaps as much as tenfold, depending on the type of PP and the location of the land, which of course, influences the price of the finished building.

    e, land without PP £10,000
    land with outline permission say £60,000
    land with detailed permission say £100,000
     
  8. ^woody^

    ^woody^

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    Any prospective buyer will do a residual valuation of the development which will essentially determine all the build costs, and the potential sale value, and that gives a figure which he can afford to pay for the land.

    So the land will be worth different amounts to different developers as they have different costs
     
  9. low drains drifter

    low drains drifter

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    If I take amwc's price to build the house at £150,000 what would it cost the builder, £130,000?
     
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  11. amwc

    amwc

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    It all depends on spec of finish £1000 per square metre is a good guide but if you have expensive tastes it will go up conciderably if you do everything on a budget then you can do it for £800. Most trades in the building trade work on about 10-15% profit.
     
  12. ^woody^

    ^woody^

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    The £ per square metre calculation don't work for a single new build as the cost of getting services to and from the site can make a massive difference

    The build cost has to be all inclusive ... including even loan interest
     
  13. jeds

    jeds

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    Residual valuation of small development land in my area is typically between 15% and 20% of gross development value. So for a 250K GDV I would expect to pay around 37k to 50k for the land. But that would depend on ground conditions, availablity of services and access. It could be a lot less. And that's with planning - you'd pay nowhere near without. There's not much difference between full planning and outline planning. Your area may be different.
     
  14. low drains drifter

    low drains drifter

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    Jeds, are you a builder and expect to make a profit from the example you have outlined?
     
  15. jeds

    jeds

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    I'm a chartered surveyor and have ten or a dozen builders and property developers as regular clients plus quite a few one-offs in between - you know, gardens etc. All my clients obviously hope to make a profit. They wouldn't do it otherwise. The builders are usually happy to make a bit less because the work pays wages for 4 or 5 months. I'm working on a couple of projects at the moment for developers where the profit is not going to be brilliant. But they're not concerned about it because they don't intend selling anyway - they will rent. It keeps things ticking along and things might look better in a couple of years.
     
  16. low drains drifter

    low drains drifter

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    Jed, apologies I'm not explaining myself very well. I was trying to work out if you were a private individual and building a house for your own purpose or, as I can see, you are "in the trade" and building houses (or your clients) as part of a business.

    Perhaps I should widen things a bit more by saying that I'm trying to put a business package together part of which is to try and determine what a builder would pay for a plot of land with permission to build 10 houses that would sell for £250,000 each. I've learnt a lot by people's answers on this site and I gather that 20-30% of the sale value is a realist estimate of what a commercial builder would pay. Is this % figure not going to decrease drastically with a multiple plot purchase?
     
  17. jeds

    jeds

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    There are several methods but the basic model for a multiple plot site is 'residual to land value'. Simply put that's the gross development value (10 houses at £250k each = £2.5 million) minus the development costs. If the costs are fully calculated for build, infrastructure, fees, services, interest, profit, etc. then the residual figure is what you can pay for the land. The difficulty is predicting costs below grround level, future costs associated with national policies and variability of gross value. Developers usually want a good old contingency for these.

    I once had a conversation with an acquaintance in a pub about a piece of land he was selling. It had been in the family for quite a few years and they had never been able to get any planning on it. He'd been offered something like 10k for it which he thought was a good deal. I did a quick calc on a beermat and told him he should be looking for more like £70k. That was 8 or 9 years ago and the next time I saw him still makes me laugh now. He sidled up, looked both ways over his shoulders and pressed something into my hand. Thanks for that he says. Got a result - fifty grand!. With a little jubilant rub of the hands he offered to buy me a drink. And in my hand was - a tenner. True story.
     
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