Not every bit of land is a building plot and putting deals together isn't easy!

As many of you know the last few years have been somewhat tricky for me and I have reverted to the roles I am good at ..finding sites and sourcing funding for CLIENTS.

It is a while since I went on a wider sweep of development opportunities and there seem to have been some big changes that have occurred.

Far too many land/property owners have huge over expectations of what their land is worth and also believe that all planning restrictions have been removed by the Government rule changes.

There seem to be a new group of people who seriously believe they can cobble together a report on a property already on the market chuck in some details downloaded from the net as due diligence and then get a developer to pay them a fee!!

Yesterday I spent some time looking at a London project with a site owner and his "advisor". It could be argued that the site is a PD project but they have done some floorplans and elevations and show a reasonable number of units. They have produced a spreadsheet showing costings and profit margin,

The problem was the spreadsheet lacked finance costs, professional fees, a contingency and to my untrained eye seemed seriously light on the ME. By the time I had rejigged the figures the profit margin was slashed so the only area for change was the land value..and I was almost halving their expectations.

The "advisor" pointed me to sold units locally to justify their figures but seemed nonplussed when I pointed out the funding costs still needed to be factored in. We went back over the figures and the Landowner finally started to see where I was coming from. My suggestion was it gets circulated to possible developers and we see what their figures look like and make a choice as to which way to go. (So if you are after a North London flat deal and can show the financial wherewithal to do a deal..emails at the bottom of the article!!)

The "Advisor" then piped up that he wanted a 2% fee for the introduction!!! I asked exactly what he had brought to the table and he seemed quite mystified at my opinions. It turned out he was paying somebody money for a course on "Packaging deals"..I don't know how much he is paying or to whom - but it isn't a good deal for him.

In Bristol I am looking for some opportunities for a smaller developer who wants to step up a level and go from HMO conversions to some house to flat conversions and some new builds and for a bigger player wanting to add to his land bank.

Managing owners expectations is now a major part of the sourcing process. Two people have told me that you can build at ￡100 a foot "no trouble"...many Surveyors are using ￡1500psm as a STARTING point when doing the funding appraisal. On another project we have gone for quotes from contractors and got a MASSIVE difference in the tender results..I suspect the higher figures will have far more provisions factored in to allow for supply costs and material shortages.

Although the old 30/30/30 rule isn't working at the moment it is a good starting point to try and make owners understand that there is a method to calculate land value. The problem with any development deal is you can run all sorts of spreadsheets now but there is a time lag from breaking ground to getting a property sold..and the market can change.

So many people have said "XYZ offered me ￡y but I turned them down because I can get more".. Seriously? You were made an offer at that level and turned it down? In the current market my advice would have been to have taken it.

Of course there are developers who will go in very low secure a site and then once under their ownership look to ratchet up the value..I think Estate Agents, Politicians and Developers are often in the most hated group of people in public polls.

These are not the easiest of times but there are Developers keen to find sites, a housing shortage, and for the right deals there are plenty of funds available if you know which Lender the project will suit) and many landowners will do a deal - PROVIDED THEY CAN SEE WHERE THE FIGURES COME FROM.

"Mr Farmer I appreciate you think that your scrubby paddock is worth ￡1m an acre but to get it to that value somebody will have to pay for the raft of reports that the planners will need, the ever rising costs of the planning application, the legal fees need factoring in. If you want to cover those costs we can introduce you to specialists to get it done.

Oh you don't want to pay the fees and costs .. oh and you don't want to do an Option or Subject to planning deal? Your land is worth agricultural value plus a bit of hope value..and that wont be close to ￡1m.

"If we do an option/subject to planning deal we can see what the land value is based on the GDV..it still probably won't be ￡1m"

For a good deal one needs a willing seller a willing buyer and a good broker to bring the two together but anybody thinks they can sign up to an on line course and be making a fortune from it is in for a nasty shock.

If you are in the hunt for development sites and opportunities or you need help with raising finance for commercial development/bridging deals ping me an email [email protected]