How much could you gain from Planning Gain? £300,000 maybe?
Regular readers will already be familiar with my multi-faceted approach to property. In addition to run-of-the-mill buy-to-let investing, I generate life changing and regular income through site finding, new build developing, land trading, renovating and – more recently – by helping others to replicate my methods.
I’ve already described how I used my knowledge of the planning system to obtain permission to build my own home. If you remember, my wife and I had set our hearts on a one acre, semi-rural, ‘greenfield’ site. An independent planning consultant had told the owner of the land that he stood very little chance of achieving planning consent for any sort of development. As a result, I was able to purchase the site extremely cheaply.
Within a few months, armed with detailed planning permission to erect a 7,500 sq ft house, I could have sold the land to a developer and walked away with a quick profit of around £140,000.
Incredible isn’t it? The value of the land had increased by 140 GRAND, simply because it now benefited from planning permission for a spectacular luxury home.
If you’ve read my recent post A Tricky Question of Looking Beyond the Obvious you’ll know that, on that occasion, I decided not to sell the land and instead embarked on my first self build project. However, I’m constantly on the lookout for ‘planning gain’ opportunities and over the years have made many hundreds of thousands of pounds simply by trading in land. One of the best examples relates to a site I spotted whilst out shopping with my wife. That everyday shopping trip turned into a £300,000 windfall.
The site was a former garage premises very close to Bolton town centre which was up for sale with a local agent. It was on the market for £220,000 but was to be sold with a covenant preventing the site being used as a garage in the future. You see, the company selling the land had constructed a new garage close by and didn’t want their old site to be used by a competitor.
The garage had been on the market for some time (which is hardly surprising considering the restrictions of the covenant). Whilst the site was very ‘tight’ and positioned on a bend in the road, I could see its potential for residential use, provided I could obtain consent. As soon as my wife had finished dragging me round the shops, I made enquiries with the local planning office as to their views.
Luckily, they were fairly receptive to my idea, provided I could come up with a suitable way of servicing the homes by a refuse truck. Encouraged by their response, I quickly contacted the agent. I put in an offer at full asking price but stipulated that my offer was subject to me obtaining consent for residential development. To my delight, the agent emailed me the very next day with some fantastic news. The vendor had accepted my offer.
I instructed my solicitor to draw up a contract whereby I’d buy the site, on condition that I was granted detailed planning consent within 12 months, with an allowance of an additional 6 months if my application was refused. This give me time to lodge an appeal against the decision. As soon as we’d exchanged contracts, I got together with my architect and prepared a detailed planning application for a high density, mixed use scheme of 21 apartments, a retail unit and associated parking. Without much fuss or debate, the local planning committee granted permission for the scheme. The whole process took around six months.
I’d already calculated that, with planning, the site would be worth over half a million pounds. Had it not been for a river running along one of the boundaries which would require additional groundworks, the site would have been worth even more.
It didn’t take long for me to find a buyer. Six weeks after going on sale, a Liverpool developer bought the site for £535,000. My profit margin after architect, legal and planning costs? £300,000! I probably made more money from the deal than the Liverpool company who had to put in all the time, effort and risk of developing the scheme and selling the units.
I’ve completed many similar planning gain deals over the years, although I’m happy to admit, not many of them have been as straightforward or as profitable as the example above. That said, planning gain can be extremely lucrative and, provided you know what you’re doing, can deliver truly life changing rewards. Over the coming weeks I’ll be writing more about the techniques I use, including:
- How I source potential development sites.
- How I limit my risks by gaining legal control of a site before paying the landowner a penny and before obtaining planning consent.
- How I calculate the value of a site before and after planning
- How I decide on the most appropriate – and profitable – scheme for a site
- How I increase my chances of obtaining the necessary consents
- How I go about obtaining planning permission
- How I go about overturning consent refusals
- How I market my development sites and obtain the very best selling price
So if you like the idea of taking home a six figure, quick(ish) turnaround profit, watch this space!
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Hi Lyndon, I’ve just been reading your recent post titled “How much could you gain from planning gain?” I have come across it before but never really considered it as a major income stream. Untill reading your post! That was an amazing result. I pass numerous derelict gargae sites on a daily basis, in fact I can think of two straight away in my local area that could make good commercial sites. You have certainly inspired me to talk to the planners about the sites. What type of questions do you ask the planners? If you can give me some pointers I can speak to them this week. It would be good to get further information from you on the points you listed above – if the sites have potential then I feel it would be beneficial for us to talk on a more business level.
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Lyndon Forshaw Reply:
September 14th, 2009 at 3:35 pm
HI Chris,
Our residential site finding report will be released soon and contains detailed instructions on how to source deals and opportunities and make significant sums from them. You will be the first to receive it as a subscriber of my news letter. As for the sites you mention. I would first check their zoning on the local plan/UDP for your area – you will find them online. This will give you an idea of what development would be suitable in principal for the sites. You could then run your ideas by the local planning officer if they are in accordance with the UDP/local plan.
Cheers, Lyndon
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Lyndon, Very motivating stuff! I am considering running a land/property business alongside a day job (abiet a flexible day job). I’ve done a couple of projects before (self build and renovations) land trading is the area that would fit with my current commitments and offers the greastest returns, I’d be interested to know how you would advise somebody to start up a business in this area? Many Thanks, Nick
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Lyndon Forshaw Reply:
September 22nd, 2009 at 10:54 am
Hi Nick,
Glad you like the info. We are in throws of writing several products to aid those interested in doing similar deals to those discussed on the blog. As a subscriber to the news letter you will be the first to hear of about them. I will be in touch shortly
Cheers, Lyndon
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Hi Lyndon, yes interesting stuff indeed. Note to Nick – I think Lyndon mentions elsewhere that just because the planners give you the nod informally doesn’t mean you won’t get problems when the process formalises. That has certainly been my experience. All seems tickety-boo, then the notifications to neighbours get posted and a few object (as they always do), councillors get twitchy about their popularity rating and their vulnerability to the electorate, and before you know it you have a real battle on your hands. Last time I had to stand up in the council chamber and quote them chapter and verse from their own Local Plan, and give specific examples of precedents in my local area, to get my last app thru. If I had been less articulate and less persistent they would have refused the app. and I’d have had to go to appeal. I think some councils love losing at appeal. They can claim that they ‘fought it all the way’ to the electorate, but still get to make up their quota for housing stock imposed on them by central Gov.
Rich
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Lyndon Forshaw Reply:
October 3rd, 2009 at 2:21 pm
Hi Rich,
Agreed. No matter how straight forward an application would first appear, you can’t take success as a given. However, as long as your application in line with policy (or you can argue that it is successfully if the case is subjective), then even if some annoying counsellor has a ‘bee in his bonnet’ about it you should rightly be able to appeal and win. The cost and the hassle of going to appeal can be a real pain though. Some of my most lucrative planning gain deals have been where I have bought the site unconditionally quite cheaply and then obtained a lucrative consent. For example a site zoned for employment but managed to obtain residential consent. Higher risk but much higher reward. In these instances it certainly helps to get counsellors on side where you can.
Cheers
Lyndon
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