Podcast Summary
Considering Construction Projects: Experience and Risk Tolerance: Seek professional advice and consider experience and risk tolerance before embarking on a construction project.
When embarking on a property development project, particularly one involving construction, it's essential to consider your level of experience and risk tolerance. Mike, a listener of Ask Rob and Rob, found himself in this situation with planning permission for six flats but lacking experience in the construction sector. He asked for advice on insurance recommendations and delegating responsibilities. While Rob couldn't provide specific answers without knowing more details, they encouraged Mike to consider his risk appetite and future plans before making a decision. This discussion underscores the importance of careful planning and seeking professional advice when expanding your property portfolio. For those with limited experience in construction, it might be wiser to partner with experienced professionals to minimize potential risks and ensure a successful project outcome. Additionally, the episode highlights the ease of getting involved in Ask Rob and Rob. Listeners can call a phone number or submit questions online, making it simple to ask industry experts for guidance on various property-related matters. In summary, gaining knowledge and seeking advice from experienced professionals can help mitigate risks and lead to successful property development projects.
Considering a larger property development plan?: When deciding on a property development project, consider if it's a one-off opportunity or the start of a larger plan. Hiring a contractor for a larger plan can ease the process, but securing multiple quotes is important. For one-off projects, it might be more profitable to skip the development process.
Before starting a property development project, it's essential to consider whether it's a one-off opportunity or the beginning of a larger plan. If it's the latter, hiring a contractor to manage the project can make it easier, even if it means a smaller margin. Obtaining quotes from multiple contractors is recommended to ensure the best price and quality. However, if the project is a one-off and the goal is to make a profit by selling the property, it might be more beneficial to skip the development process and let someone else handle it. Ultimately, the decision depends on individual goals and resources. Securing planning permission is a significant achievement, and it already adds value to the property. Good luck with your project!
Leasehold property value decline starts around 60 years: A longer leasehold term helps maintain property value and offers more flexibility for owners
The value of a property with a shorter leasehold term can experience a more significant decline in value compared to one with a longer term. However, this decline isn't a sudden cliff edge at 80 years, but rather a gradual one that starts having a material impact around the 60-year mark. Most lenders won't finance properties below this threshold, limiting the property owner's ability to sell or refinance. Although the decline in price is present even before the 80-year mark, the curve is much gentler up until that point. So, having a longer leasehold term can help maintain the property value and provide more flexibility for the owner.
Impact of lease term length on property value: Longer lease terms add more value to properties, but shorter terms require considering lease extension costs.
The length of a lease term significantly impacts the value of a property. While a longer lease term adds value to the property, a shorter lease term requires the consideration of the cost of extending the lease. For instance, a property with a 110-year lease term may be worth slightly more than an identical property with a 90-year lease term. However, the difference becomes more substantial when comparing a 90-year lease term to a 70-year lease term. It is essential to factor in the cost of a lease extension when considering properties with shorter lease terms. Broadbee's golden rule is to target properties with a 125-year lease term to avoid the concern of lease extension costs at the end of the mortgage term. However, if a property with a shorter lease term catches your eye, be sure to factor in the cost of a lease extension versus similar properties with longer lease terms.
