Conversion to 17 residential units (including adding additional storey to building) Total project cost: £2,018,861 GDV: £2,815,000
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We’d heard talks on doing developments and doing conversions ✅ We’d attended courses on doing developments and doing conversions ✅
WE WERE FIRED UP! INSPIRED! READY TO GO BIG!
We’d heard that “Doing a development is not much harder than a refurb… just bigger numbers”
We were ready to stop “wasting” our time on the little refurb projects we’d done up until that point and to do something PROPER with our property investing time. We were ready to make our MILLIONS in the shortest possible timeframe!!
We were excited!
We excitedly showed this deal to our strategy mentor Deri and he…… put A RIGHT DOWNER ON IT!! The conversation went something like this…
Q: “Do you have the power team to be able to deliver on this kind of project?” A: “We are looking for them right now.”
Q: “Do you know what power team you actually need to have to be able to deliver on these projects and who actually does what?” A: “Yes we are confident we do.”
Q: “Are you sure 100% on your development figures?” A: “We’ve done our deal analyser!”
Q: “Do you understand what you are RISKING here?” A: “There’s so much profit in it that even if things go wrong we should be ok”
Q: “You’ve got a great small refurb / portfolio business that is working. Something that you can sensibly scale. Why are you trying to do something else?” A: BECAUSE THERE’S SO MUCH MONEY TO BE MADE (we wailed!)
No-one else in the property world was giving us this REALITY CHECK. Moving into developments had started to seem straightforward from what we’d heard, and we’d got drawn into it.
We didn’t abandon the project straight away. But after some careful reflection decided we were out of our depth… and we walked away.
This all happened over 3 years ago. I look back at the answers we gave now and we were SO WRONG… We didn’t have the power team in place (we didn’t even really know who we actually needed!); our deal analyser (whilst looking comprehensive) had SO many holes in it; what we were putting at risk was our whole portfolio to date (huge risk); and we were trying to do something new / bigger because it seemed more exciting (it was a shiny penny!).
And looking back on it now it was the BEST THING that we EVER DIDN’T DO…
We were being impatient, we wanted to jump into the deep end… to prove ourselves I guess. But why?! We’d built up a nice little portfolio by this point and we’d have been putting it all on the line to try and pull a deal like this off. We didn’t have the team. In retrospect I now know we had no idea what team even meant! It really doesn’t just mean ‘builder’!!
You wouldn’t expect to be able to take on a billion pound class action court case without a law degree and experience practicing in court on smaller cases. You wouldn’t expect to be able to fly a jumbo jet without first learning how to fly a small plane, and then a medium sized plane, and then a large plane
So this is me passing on the ‘be careful’ warning that we were so lucky to have received. If you are considering moving into conversions or developments and you haven’t built up the proper experience and team along the way (doing gradually larger projects) then please think carefully before you plunge in.
And don’t forget, smaller deals done in a systemised way can get you the same results in the long run, for MUCH less risk.
This property business is a marathon not a sprint.
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