I believe you all have had all the introduction you need to who I am
from my website www.GeorgeGannon.com. so for my first post. I thought I
would GIVE something to you and explain why I said NO to a deal with a
potential profit of £105,000.00 this week.
Why say no to deal that has a potential £105,000.00 profit in it?
Well its all about knowledge and becoming a professional property investor / developer opposed to an amateur.
£105,000.00 a year sounds great right? But if you look at the principals of the deal I had, you could see that £105,000.00 is only 25% profit margin on Gross Development Value (GDV) – the end re-sale value.
Now 25% profit margin might be great for the novice, after all if you cannot sell the project after you might be able to get a 75% LTV mortgage on each unit you create.
Well let’s say What if!!
What if the comparable end re-sale figures you based your valuation on devalue, as you have a distressed seller on your street that sets a new precident for asking price on the street so your now competing against or even have lower sold comparable figures!
What if you miss a major cost out on your build costs or an unforeseen problem arises that the contingency does not cover. A major falling out with contractor etc, any factors of which resulting in build costs going up!
So 25% a good £105,000.00 looks good on the face of it but if re-sale figures go down and build cost rise you could be in a precarious situation. Leaving that very attractive £105,000.00 diminishing very quickly.
Why take the risk on a deal with 25% profit margins when there are developments with 40% profit margins out there, especially in the current property climate.
Now this property mentoring Tip No. 1 that I want to share with you all.
Only ever proceed with a project that has 40% profit margin’s. That way you have plenty of fat in the deal against any unforeseen issues that may arise.
Change your mindset change your results!
If you want to know more on increasing your profits whilst also reducing your time in doing so feel fee to contact me for an informal chat on how I can help you at: gg@georgegannon.com
Thanks for reading -
George Gannon, Property Mentor – ‘ignorance isn’t bliss – its ignorance’
http://georgegannon.com/mentoring/
Why say no to deal that has a potential £105,000.00 profit in it?
Well its all about knowledge and becoming a professional property investor / developer opposed to an amateur.
£105,000.00 a year sounds great right? But if you look at the principals of the deal I had, you could see that £105,000.00 is only 25% profit margin on Gross Development Value (GDV) – the end re-sale value.
Now 25% profit margin might be great for the novice, after all if you cannot sell the project after you might be able to get a 75% LTV mortgage on each unit you create.
Well let’s say What if!!
What if the comparable end re-sale figures you based your valuation on devalue, as you have a distressed seller on your street that sets a new precident for asking price on the street so your now competing against or even have lower sold comparable figures!
What if you miss a major cost out on your build costs or an unforeseen problem arises that the contingency does not cover. A major falling out with contractor etc, any factors of which resulting in build costs going up!
So 25% a good £105,000.00 looks good on the face of it but if re-sale figures go down and build cost rise you could be in a precarious situation. Leaving that very attractive £105,000.00 diminishing very quickly.
Why take the risk on a deal with 25% profit margins when there are developments with 40% profit margins out there, especially in the current property climate.
Now this property mentoring Tip No. 1 that I want to share with you all.
Only ever proceed with a project that has 40% profit margin’s. That way you have plenty of fat in the deal against any unforeseen issues that may arise.
Change your mindset change your results!
If you want to know more on increasing your profits whilst also reducing your time in doing so feel fee to contact me for an informal chat on how I can help you at: gg@georgegannon.com
Thanks for reading -
George Gannon, Property Mentor – ‘ignorance isn’t bliss – its ignorance’
http://georgegannon.com/mentoring/
No comments:
Post a Comment