Development schemes often appear attractive ways of making a lot of money quickly. If you have not undertaken a scheme before, then you should not underestimate the amount of stress, hassle and heartache that you will experience as you progress through the scheme. You will certainly feel like you have earned your profit by the end of it!
Having the right professionals support you is important to ease the path. Here we set out some thoughts on choosing the right people for these roles.
Your architect – How qualified is she/he? A fully-fledged RIBA architect will cost you more than a person who undertakes technical drawing – but their wider skills and knowledge are likely to prove useful.
But better than this, have you considered a multi-disciplinary firm which not only incorporates an architect, but perhaps a planning specialist, a chartered surveyor, a quantity surveyor (“QS”) and structural engineer? Consider the benefits of having a team what works together on a project instead of employing individual specialists. We often see our clients using their architects for all sorts of aspects of a scheme, including QS work, planning applications and contract tendering; Architects are essentially design consultants and having specialists do the other stuff will work better.
Finally – make sure that your architect is up to the job. Whilst their qualifications are the cornerstone, ask them for a C/V – have they undertaken a job like your before? Experience is at least as important as the qualification, if not more so.
Your Solicitor – We regularly see clients using their family lawyers to acquire land and buildings for development schemes. Some even use residential conveyancers. We would say that it is essential that your lawyer has much experience – ideally a specialism – in development schemes if future problems are to be avoided. Do not use a residential conveyancer! We have seen many examples of sites being acquired by a general practitioner, but then a future buyer, or a lenders solicitor identifying issues which should have been addressed on purchase. You will pay more for a specialist, but they will protect you.
Valuers and estate agents. When they are estimating the value of your completed scheme, remember that estate agents expect to have to compete for your business. They know that the agent proving the most optimistic assessment of value is likely to get the job to sell the property on completion. So the consequences of this? Most agents in our experience over value GDVs by 10% or more. So when obtaining your agents opinions, seek detailed comparables for similar property sales in the area, on a £ per sq ft basis. Even then be cautious. Consider paying a RICs valuer for an unbiased opinion. Apart from not meeting your expectations, the wrong opinion will extend your sales period, cost you more in interest, make your scheme less credible with the lender, and perhaps even render your scheme not viable when you thought it was!
Your Builder – It may seem obvious that you want a builder that is not only experienced, trustworthy and credible, but also is not going to go bust part way through your scheme. The consequences of them doing so can be calamitous. How do you check them out? We can help with this. If they are a company we have sophisticated credit checking software that will help. We will also give you pointers and questions to ask them.
There are other professionals that will be involved with your scheme – not least the lenders! Remember – cheapest is often not best value. Paying a little more for your professionals to get the best possible effectively helps to “de-risk” your scheme. Like insurance – you pay a premium, and receive less profit from your scheme – but it makes it more predictable and likely to succeed.
If we are advising you, we will help you to consider your professional support, whether they are appropriate and what the lenders requirements might be. If you are a first-time developer, then it is essential to have a good team around you, and the lender will expect this.