A small scale residential development project. BUSINESS PROPOSAL FOR PRIVATE FINANCE FUNDING OF A SMALL SCALE RESIDENTIAL PROPERTY DEVELOPMENT IN HUNSLET, LEEDS, WEST YORKSHIRE.
Investor Returns and Security
The directors are using a total of £100,000.00 of their own capital which provides security for any potential investor. Further details of how the other forms of security work can be provided please speak to Kevin on 07739804975. Kevin can discuss David Bradley Homes’s previous experience and go into the details of the legal process in regard to security.
Rate of Return Per Year
Restriction, personal guarantee or security on existing portfolio
According to the Joseph Rowntree Foundation (JRF, 2014) Britain is heading for a property shortage of more than a million homes by 2022 unless the current rate of housebuilding is dramatically increased,. By 2025 the housing shortfall in Yorkshire and Humberside is projected to be 151,000 homes (BBC, 2011). More broadly new builds nationally continue to not reach projected targets (Department for Communities and Local Government, 2012). David Bradley Homes (DBH) will specialise in small scale residential property development which can help alleviate that shortfall in the Yorkshire region. We will focus on developing properties within the £130-200K price range and anticipate attracting more affluent working class local people. Our aim is to provide quality homes at a competitive price. Industry competition comes in the form of companies such as Bellway and Barrat Homes, we will look in greater detail at these competitors within this business plan.
To develop good quality homes implementing a personal touch within the Yorkshire region through the use of a team of experts.
- To acquire a minimum 20% gross profit margin from total value of end product
- Develop a reliable and trustworthy team of experts
- Expand at a sustainable rate up to 30% gross profit margin per project
- Provide realistic and sustainable returns for investors
Keys to Success
1.Contractors meeting deadlines
2.Forecasting costs effectively
3.Projecting time frames correctly
4.Timing of finance
5.Management of finance
6.Estimating end value correctly
7.Management of people
8.Clear job roles and management structure
9.Use of experts
10.Buy a plot of land with planning to minimise risk
DBH is a limited company owned by David Bradley. David Bradley Consultancy will be the shell company used as the vehicle for this project and future projects also. Kevin Pratt, Natasha Whiddon and David Bradley are currently directors.
DBH have purchased a plot of land for 40K which has outline planning accepted for three two bed terraced houses (see appendix 1). There is a possibility to tailor these plans to achieve a more profitable end value and we are currently exploring this option in detail.
Start Up Summary
See a summary of expected start up costs dependant on stage of the project. See appendix 2 for a detailed breakdown of these figures.
Buy the Land
£40,000.00 + £7,500.00 (coal and gas checks)
The company will have marketing boards on site these will direct potential buyers to our web site where information will be available regarding design specification and information relating to the house. When buyers view the website we will take their details and follow this up by inviting potential buyers to open days.
One of the residential developments will become a feature show home and will enable potential buyers to view the high standard of specification and quality finishes. According to research conducted by the little house company, 80% of men feel that a home purchase is ultimately a woman’s decision. One of the key findings of the research show that women value the importance of emotional features such as the wow factor. As a small company who can afford the attention to detail, we believe these findings must be a key consideration, in our house design and the staging of the property.
Central to our service will be ensuring customer satisfaction. In part, we will achieve this by demanding excellent workmanship and securing appropriate insurance relating to all work. Fulfilling customer needs and aspirations will form the cornerstone of our reputation and will ensure our residential developments are recognised for quality and good value.
1.Software to enable account management
2.Brand and product awareness through use of website
3.Digital photo use to monitor progress of work day to day
4.Project management software
5.Software for supply chain
In the future DBH will aim to increase the scale of residential developments and associated market presence. Future projects will be tailored towards what will work financially. Our aim will be to reduce cost of labour and materials through building good relationships with our supply chain. Further to this; building our reputation in order to attract future land projects at a good price in order to improve profit margins. Portfolio building and letting management will continue to be a key activity for DBH. Experience and good systems in this area will create an additional sales feature for investors who want a less active role in the ongoing management of their property.
Market Analysis Summary
DBH will aim to sell its residential property to those individuals who can afford 100-125K mortgage this will be those individuals or couples who earn 25-30K (collectively or individually respectively). Within our target market the most important group to focus on will be the single professionals or couples.
Target Market Considerations
Market-demand based on our conversation with local agents will be couples or singles under 35 years of age, whom may have children in local schools, will be second or first time buyers and in full time employment. This profile matches our market analysis summary and is supported by national data. For example, the English Housing Survey (2010) found that the majority (62%) of recent first time buyers (FTBs) were aged 25 to 34. Recent FTBs were more likely to be in full time work (91%). About 80% of recent FTBs households had 2 or 3 bedrooms (English Housing Survey, 2010).
Direct competition would come from local builders whom have bought plots of land for 1-5 dwellings within a x mile radius. More general competition comes from companies such as Barratt Homes, Caddick developments, Bellway Homes and many more building companies that are operating within the market. David Bradley Homes will afford the time and attention to provide a more unique and individual approach to our buyers and their needs. Companies such as Barratt Homes offer larger plots in which their homes are developed providing a new home and new neighbourhood. We will aim to focus on our USP which will be the personal touch provided to an area which has existing housing ranging in style and build type. This will differentiate ourselves from the formatted approach which Companies such as Barratt Homes adopt.
Our aim will be to market and sell the properties whilst off plan through the use of illustrative computer generated images (CGIs). DBH will advertise via Rightmove, a virtual estate agent as soon as site work commences. This will allow potential new home owners to view the CGIs including potential kitchen and bathroom designs. Buying off plan will allow new homeowners to customise internal fixtures and fittings. Help to buy schemes will be promoted within our sales literature which will appeal to first time buyers.
In this scenario we can buy their house at trade price and then resell at full market value. Upon exchange of titles the legal process would begin until completion of the sale. Depending on each individual case this may help potential buyers to raise a deposit.
3-Rent to Own
With many aspirational home buyers struggling to raise a deposit to purchase their first home. The new buyer pays a deposit, typically 10% the asking price and then rents the property while they save to be able to afford it. Directors have extensive experience of using this exit strategy on properties in our portfolio. An asking price linked to inflation would mean it has additional profit to a traditional sale.
4-Buy to let
In this scenario what we would do is buy the properties ourselves and return money to investors using this process. The properties would then be let out and held in our portfolio.
Strategy and Implementation
The SWOT analysis provides an opportunity to examine the internal/external strengths and weaknesses DBH must address. It also allows us to examine the opportunities presented to DBH as well as potential threats. DBH has a valuable inventory of strengths that will help it succeed. These strengths include: Industry experience, market knowledge, business information, and most importantly dedication and will to succeed. Strengths are valuable, but it is also important to realise any weaknesses DBH must address. DBH strengths will help it capitalise on emerging opportunities. These opportunities include, but are not limited to, niche market specialism, growth sectors, and the recession. The main threat that DBH should be aware of is a prolonged global recession.
Industry Experience- We have 18 years experience in the property industry as landlords. Experience of securing and managing over 250 tenancies. We have project managed over 20 full refurbishments and completed many more partial refurbishments. As agents we have extensive experience of working with buyers and sellers and have become proficient in negotiation and the micro management of the sale process. See appendix 6 for photos of two high specification refurbishments previously completed.
Market Knowledge- Our residential property interests are concentrated within the West Yorkshire region. As such we have extensive local market knowledge of housing market activity and economic growth forecasts.
Expanding Business- After building a stable residential property business while self employed since 2004 the business has subsequently expanded to a limited company in 2009.
Dedication and will to succeed- The company has developed an aspirational team dedicated to developing an incredibly successful business. This combined with an action oriented mentality will support sustainable growth of our company.
Growing business- As we diversify our operations we will be are moving into new territory and new challenges will arise.
Large and established competitors- Market presence of established developers such as Barratt Homes.
Tough lending criteria- Few financial products available for SMEs (Small to medium enterprises).
Brand- Currently unrecognised as a residential developer by the public.
Improved Lending- The UK and international financial market are growing in confidence. This positive climate will provide potential lending opportunities for the business moving forward.
Housing Needs- Projected new build targets have not been achieved and there remains a housing shortfall.
The recession- There are skilled tradesman available and prepared to work at a competitive rate.
The supply of new homes- Minimal building throughout the recession resulted in many businesses within this market been forced into liquidation.
Brand Development- Building on early projects we will develop customer awareness products and a reputation which serves as a platform for brand development and recognition.
Changing Market- Property values decrease due to a downturn in the economy and market activity stagnates.
Changes in government- Current housing policy and the planning system may change and be
Stability of Suppliers- Suppliers not able to deliver products and services due to over
commitment or liquidation.
Unqualified and inexperienced professionals tendering for work
The company will have three directors who will draw on their different skill sets to maximise success of our projects. The key to our success will be recognising when we need to leverage other peoples skills of other professionals to create an effective team of individuals.
We can work independently, this will include taking responsibility for overall project management tasked with day to day KPI management of the team. Weekly meeting will take place to review progress and address any issues requiring attention.
Our financial plan is based on conservative estimates and assumptions (see appendix 2 and Start Up Summary).
Researching End Value of the New Build Properties
Calculating the correct end value is critical to ensure profit margins can be achieved. The process of estimating end value is a lengthy one which required speaking with local agents, the local neighbourhood, evaluating the properties on the market and researching previously sold property prices.
Appendix 3 provides a report on the market, produced by a Your Move agent (Joe) representing the Beeston branch of Leeds. Joe felt that depending on the quality of the finish we could expect to realistically achieve 100-125K per 2 bed terraced property.
The local area has some unique features including been located within five minutes of major motorway networks and ten minutes from Leeds City Centre. The accessibility of the area makes it a cost effective option for people wanting to be close to Leeds Centre at an affordable price.
New Build Properties for Sale in Local Area
There are no new build properties for sale within a quarter or a half mile radius. However, there are properties of a similar nature within a mile radius (see appendix 4). The current market does point to our end value estimation being very achievable.
Thank you for taking the time to read our business plan. If you would like to talk further about investor returns or security please contact Kevin on 07739804975. We welcome your questions and value your feedback