It may take you two weeks to find a good plot. On the other hand it may take you ten years! Plots vary in demand as you move away from London and, to a lesser extent, other large cities.
The hardest places, probably in the world, to build a plot are the Polar Regions – rural Surrey and East Sussex!
If on the other hand you live in Carmarthenshire, no problem, there at loads of plots with the best ones fetching £50K and the worst ones worth no more than farm land.
So, here are a few points to get us started:
- Almost all land is owned
- Most prospective building land is owned by large companies
- Most land cannot be built on due to planning policies
- The best building land has usually been developed already
That’s why good building plots are hard to find. Don’t lose hope though; there are many solutions to this!
What kind of land maximises profit?
It’s really quite simple.
You have to consider land as a percentage of final sales value. Any other view will lose you money! Generally, look for the following:
- A location that is desirable to yourself and potential buyers
- A location where sales prices can be improved by a really good design and building scheme
- A plot that will support a large dwelling
Remember, sales value is determined by….
- The look and the quality of your project
- The size of the building
The price of a plot will be determined by…
- The seller’s view on the ultimate sales value of a development
- How close to realising this sales value the plot is
The seller, in a case where planning is already approved, will generally take a view of your costs, and will price the land to allow you a builder’s profit of 20%.
The only ways to make more money are …
- You find land where the potential is not yet realised, i.e. there is no planning in place
- You conceive of a scheme, by good design, that exceeds the potential the seller sees and that other interested parties see
- You have legal or other holds on land that others do not have (like first right to purchase)
You can reduce this thinking even further…
Key Tip: You can maximise your profit by ensuring that the cost of your land is 25% or less of the finished project’s sales value. Do this by seeing potential that others have not seen, or realising potential others cannot access
Approaches to finding land
There are two basic ways of getting building land:
- The direct, buy a plot with permission approach
- The indirect, find an opportunity approach
Direct plot buying
Your sources for direct buying are as follows:
- Estate agents
- Auction houses
- Private sales through your personal network
You can supplement these with online searches that trawl information from several sources such as those above and present them to you as a list.
Building land, particularly for single plots, is usually in high demand. You have a possible advantage over developers in as much as you don’t need to make as much profit as they do. You can therefore win a bidding contest just by offering a little over the odds.
Premium plots in locations like the Home Counties e.g. Berks and Surrey can be marketed at up to £1 million for ½ acre and can be bid 30% above that level. Conversely, plots in less desirable areas can be as little as £10,000 and can stay on the market for years.
Generally, you don’t need to move all that quickly as plots will be marketed for a couple of weeks to gauge demand before an offer is accepted. There will typically be several offers out there that you have to compete against.
If you find that a plot is snatched away from you unexpectedly, there may be one of several reasons:
- The agent feels another buyer is more credible (in terms of demonstrating intent to buy quickly)
- The seller has some kind of preference for a particular buyer. Builders often do deals with sellers that include tax-efficient barter type arrangements. The seller may, for example, benefit from a free extension to another property
- The estate agent has pushed the property to a friend of theirs or a family member
Here are our tips for securing a plot in a buying contest:
- Make sure you have cash, in principle, ready to go.
- Get a letter from your bank confirming you are able to finance the deposit from cash.
- Be dogmatic when asked, “How quickly can you complete”. Sell your scheme. Other buyers will do the same.
- Be prepared to pay a little more.
- Be wary of estate agents who suggest they have other offers but are vague.
- Try to talk by email as this makes for a more honest conversation than on the phone.
- Stay close to the agent. Keep selling yourself to them.
Indirect plot buying
Indirect options usually require a great deal of energy and sometimes risk. They usually provide a better outcome, however, if you do well in terms of cost or quality or both.
The way to find a hidden building plot is to understand a little of planning process and strategy and then work the system. Armed with this knowledge, you will see things others cannot see.
Finding the hidden gems
There are three ways you will come across hidden gems:
- Someone will tell you of an opportunity. That’s why you should tell everyone you know that you are looking for building land.
- You will drive around until you see a gap between houses or an oversized garden.
- You will consult local maps or aerial photos and see something that looks interesting, like a larger than average garden.
Key Tip: Don’t confine your search to greenfield sites. Look for properties you can demolish. Sometimes properties that look too good to demolish can offer interesting and profitable opportunities
Key Tip: Tell your friends, family and everyone you meet that you are on the lookout for a good building plot. Tips on land coming up for sale can come from the least likely people simply because they mentioned you to someone who was in the know.
If you know the area you would prefer to live in, securing small scale maps that show plots and buildings can be very useful in terms of locating infill opportunities. Once you find a piece of land that has the right potential, do the following:
Find out the owner’s details through the land registry. You can do this online for £4.
- Write to them and politely set out your proposal
- If they don’t respond, go knock on the door
- Try and meet face-to-face if you can
Try not to be too pushy. Explain that it’s a win-win opportunity.
You have one thing working in your favour in terms of securing the deal. You are prepared to pay the application fees and for architect’s drawings. You are prepared to risk £1,000.
You know, of course, that the proposal will probably succeed. The seller may not be as well-informed as you and therefore may not be willing to take this £1,000 risk personally.
If this is the case, get a contract together that secures the plot for you at a pre-agreed price subject to planning approval. It’s as easy as that!
In all cases, familiarity with local development plans is a must as you are generally confined to plots within defined boundaries (unless you want to play a long game, as boundaries get adjusted every decade or so).
As a general summary, plots are costed according to how much risk they carry. Greenbelt land costs around £4,000 per acre, land with planning approval can be £100,000 or more per acre.
Many speculators and developers own large banks of greenbelt land. Their hope is that it will one day become building land.
Redevelopment land usually has a good chance of getting approval for a reasonable scheme. Its pricing will be indicative of this. Many people are pretty savvy to the opportunities that can be present in brownfield sites.
Sometimes, however, the opportunity can only be seen by you. That’s the hidden gem!
Key Tip: A hidden gem is only visible to you. You suddenly see something that has been overlooked. Play it carefully and you can get a great bargain.
And that’s it in a nutshell. Do your homework, start looking and you will eventually find something of great interest!