Preparation is key
The Covid-19 virus is expected to hit its peak in 14 weeks from now. After 30 weeks we should be almost back to business as usual.
Thanks to the government’s drastic measures most industries should survive the epidemic with a strong chance to pick up where they left off if they continue to act now. This is the same for the property and construction industry.
It was Benjamin Franklin who stated that “By failing to prepare, you are preparing to fail”. This is no different to the scenario we now find ourselves in. We have 30 weeks to prepare for business as usual. So how can we make the best possible preparations?
Taking advantage
Our previous blog (Is Covid-19 prime time for property investors?) looked at the opportunities that are likely to present themselves to the savvy property investor. However, to take advantage of these opportunities we must prepare to do so.
Let’s take for example an investor developing House to HMO conversions. They will be looking to purchase the property when prices drop during the epidemic and to develop this cheaper than usual when there is competition for builders.
When prices recover, they will have instant equity in the value of the property. They are also looking to add value and cashflow by converting the property to a HMO which will require planning permission.
Tip: a savvy investor may look to purchase the property on an option agreement, or subject to planning approval. In theory this can defer the payment until the economy recovers but secure the lower price.
Planning Permission
What they must factor in is the time that this takes. A planning application has a statutory decision deadline of 8 weeks. Often this is extended to 9 weeks before a decision is issued. You also require drawings to be produced to accompany a planning application. Let’s say this takes 4 weeks. In order to do this your Architect will require a survey, which may take 2 weeks. Before this, you will need to get a quote from an Architect following a consultation. This may take another week.
This gives a total of 16 weeks meaning that you can’t even get your approval before the country is passed the peak of the virus.
Building Regulations
Once you have Planning Approval you will likely need Building Regulations drawings. This could be another 6-8 weeks for an Architect with input from others (such as a structural engineer). This is then submitted to the Building Inspector to comment which may take up to 2 weeks.
Following this let’s assume that you ask 3 builders to tender for the project and they are allowed 4 weeks to return their price. The cheapest then has a lead time of 4 weeks to begin on site.
This brings your total time-frame to 36 weeks. This is 6 weeks after things are theoretically back to normal but you have increased your profit margin by taking action whilst others have had some ‘down time’.
Failure to Act
The contrary to this is those who do not plan. They are the ones who will shut up shop, consolidate what they have and wait for a recovery before they look to continue. All this achieves is a loss of 36 weeks! During this time, you will likely still have bills to pay, wages for staff etc.
By waiting to apply you will have a further 36 weeks without income from this property. This is 36 weeks where the government will no longer be offsetting your losses. Can you afford this?
People will ask, “what if the recession continues”? If this happens then your permission remains valid for 3 years so you retain the property with permission. As prices recover you then have the option to sell the property on with permission if you require additional capital to offset the loss of income. This will obtain a higher valuation than it would without permission. Or you can develop the HMO as planned and benefit from a great cashflow.
How we can help
Most of these opportunities require a degree of Architectural input. Whether this be in the preparation of design drawings, or construction drawings. We offer a free consultation to discuss options for your development.
After this we can assist with any stage of the development, from initial design through to construction drawings and on-site supervision.
Our Network
We have spent a lot of time developing our connections. As such we can suggest contractors as well as consultants who can assist in your development. These are always credible individuals that we would be happy to work with ourselves. This takes a degree of uncertainty away from your project, as well as saving you the time to find these people. This means that you can focus on growing your business through these uncertain times.
Contact us
If you are planning a project and would like a free, no obligation consultation then please feel free to get in touch.