Key Stage 1 of Successful Property Development: LAND - Identification and Initiation

Key Stage 1 of Successful Property Development: LAND - Identification and Initiation.?

The first stage of any property investment and project is to identify suitable land for the building scheme. Land is a precious, finite commodity and is essentially the raw material for a property development firm. Its value and its potential vary tremendously, however, and not necessarily in ways that newcomers to the construction world would be aware of.

Our first piece of advice to all but the most seasoned of property investors is to be cautious and to take the time to learn the ropes before leaping at what seem like golden opportunities.

You need to learn how to identify not just a good deal, but the right deal for you.

How to find deals

Off-market deals

The most effective way to find good deals is definitely off-market. It is, however, in most instances the more time-consuming route. For that reason alone, it’s worth conducting off-market searches alongside keeping a watchful eye for on-market deals.

Patience, perseverance, and a systematic approach are all vital. The reason, of course, that off-market land opportunities are so often the best deals is the reduced level of competition for the purchase. On-market deals are public knowledge. You’re up against every property development investor in the area. You’re in more control of the process, the negotiation and the price. Finding these opportunities is an acquired skill. Despite decades in the construction industry, when we scaled up into property development, we recognised that we needed to invest in first-class training. We trained with Paul Higgs, a highly experienced land finder and an excellent trainer. There was a lot to learn and we didn’t know what we didn’t know.

Firstly, you’ll need to learn the process of identifying sites with potential. Next comes the process of identifying the landowners and how best to approach them. Will they be interested in selling that land or being involved in a profit share? It’s seldom the case that your initial enquiry will lead directly to a deal. Instead, one has to go through the process of doing the land dance, negotiating until you reach a figure and/or an arrangement that is favourable for you and equally appealing to the landowner.

Once that arrangement is agreed upon, you’ll need to sign an option before you can carry out the work needed to properly optimise a site. Until that option is signed, it’s foolhardy to spend too much time and money on a project that may never go anywhere. Signing and controlling an option is a work of art in itself and, speaking from experience, it really is an area that requires expert training in order to get it right.

Land agents

Land deals don’t land in your lap – unless you’re well known as someone who takes action in the market. Having experience in the industry and a history that speaks for your credibility is, unsurprisingly, extremely helpful. Land agents aren’t keen to invest their time in people who lack the experience to see things through. A number of our successful deals have come through land agents and that’s no accident. We kept knocking on the door, reminding them of our existence and experience. Importantly, when the calls come to alert us to a potential land opportunity, we’re clear and open in our communications. It’s every bit as valuable – for you and for the agent – to explain why a deal doesn’t work for you, as it is to be fully prepared for the process of deal negotiation.

Of course, it takes time to build up awareness and establish your reputation as a serious and knowledgeable prospect. Until then, leveraging the experience and industry visibility of more established property developers can help you make your mark and get started on a project that suits your business model.

There are no real magic bullets to finding land opportunities. It's hard work that requires persistence, tact, and very often the instinct to think a little creatively. But actually, there are unidentified, unrealised opportunities in most areas. More than once, you’re going to find out about a deal that was right under your nose and which is now being realised by someone else.

We run a number of different strategies at the same time to source our opportunities and, in truth, you never know which strategy will yield the best deal next.

High-level costing

You can’t know whether the deal you’re being offered is sensible unless you understand the costs of a building. It’s the number one issue for fledgling property investors and exactly why teaming up with an experienced property expert will save you from making costly mistakes.

During key stage 1, we’re working only with high-level costings for proceeding with a build. But those costs matter. Can you ballpark the cost in pounds per square foot to build? Can you estimate pounds per square foot for green areas without ending up in the red? What are the average costs for installing utilities in a particular site’s location??

The accurate calculations come later, but without a comprehensive knowledge of high-level costings – and the many pitfalls and tribulations of the planning process – can you really be confident of a good price for any given parcel of land or the probable profitability for a scheme?

These are not by any means the only considerations you’ll want to take into account during key stage 1. Do you have the human resources to deliver a scheme in that particular area at that particular time? What is the attitude of the local planning authority to the kinds of schemes you’re considering? What are the risks for derailment?

Don’t leap in. Take your time. Bring in – and absorb – expertise. And look beneath the surface.

Which is one of the vital elements of Key Stage 2: LAND - Strategy and Feasibility