Property development in Guildford - a game of snakes and ladders

Property development in Guildford ~ a game of snakes and ladders

A local developer came to see me recently to seek my thoughts on purchasing a property to refurbish and then sell. While the Guildford property market is currently in healthy condition with prices continuing to rise he was looking for a property that he could refurbish and extend in order to raise the value significantly. This would enable him to remortgage using the new valuation so that he could take out all, or most, of his initial investment, to invest in further projects.

Having made it clear that he would obviously have to consider both the planning and financial implications of his proposal first, by seeking professional advice, I then went on to relate two examples of refurbishment projects to him, to illustrate how projects can proceed in practice.

The first was a delightful Victorian property on the edge of town so within reasonable travelling distance of both Guildford and Woking. The house was situated on a large plot surrounded by fields and woods. It offered huge potential for an investor wanting a restoration project to work on. 

The owners had recently extended the property to provide 3 reception rooms downstairs plus a substantial kitchen area and 4 bedrooms with 2 ensuite bathrooms upstairs. There are also a number of outbuildings that could be put into practical use subject to the usual planning conditions. However the work had not been completed due to the owner's circumstances changing. For example, the kitchen was not fitted and the house had not been redecorated.

Having been purchased in 2010 for £690,000 and had a lot of the work completed the house was then placed on the market for sale at the price of £1.5 million, in 2014. Since then the asking price has dropped to £1,100,000 yet still the property remains unsold. If the property is sold it should go for a price more than it was purchased for in 2010 and should cover the cost of the development works but it is unlikely that the owner will realise a profit.

By contrast one developer purchased a run down property in one of my favoured investment areas, Bellfields, spotting the potential instantly. The property was a 3 bed semi detached house in need of modernisation and updating. It was purchased for £250,000, in August 2012.

Before modernisation and extension works

After modernisation and extension works

Single story extensions were built to the side and rear to provide a family room plus a large kitchen/diner area and a new utility room. Then a bedroom with ensuite was built into the roof to provide a fourth bedroom. The house was fitted with a new bathroom and kitchen and redecorated both in and out to completely refurbish the property. 

Prices in the GU1 postcode have risen by 16.4% during the last three years, so the house should have sold for just £291,500 but it was in fact sold for £475,000, to realise a capital gain of 90% over this time period.

If the house were purchased and then rented out to a family as a single let the investor would have gained a 4.9% gross yield or more, if let out to sharers now that the house could accommodate tenants in 5 bedrooms, when using one of the reception rooms downstairs.

My passion lies firmly within the residential property market, so whether you are searching for a reasonable gross yield or capital gain, please talk to us at any point if you want to chat about investment opportunities in the Guildford area.

Please call 01483 320 207 or email richard@guildfordpropertyblog.co.uk for a chat about where to invest in the local area.