Episode Information Property Ladder: Edgware & Croydon

Date Published:

11/06/2008

Andy and Leanne have now been waiting 17 long weeks for their neighbour’s insurers to sort out the dodgy garage on their development.

For all of that time the market’s been falling, so rather than sell, Andy’s decided to move in, and they’ve hatched a new plan to make money against the property for future projects. They’ve bought a tired old three bed bungalow in nearby Kenley for a pricey £490,000. They’re planning a £60,000 modernisation, on which they’re only expecting to break even - so what’s the big secret? The bungalow comes with a large studio tacked on the side. In its place Andy and Leanne want to build a four bedroom detached property.

While they’re waiting for their planning application to go through, they get cracking on the bungalow. The plan is to give it the same super stylish revamp as development number one. Progress is good and within just six weeks they’re onto plastering and second fix electrics. It’s all going according to plan.

But just a fortnight later, that could all be about to change. They’ve bought another plot. This one cost £245,000 and comes with planning permission for a four bedroom bungalow. They want to spend £150,000 on the build and sell for £550,000, making £155,000 gross profit. But this is far from a sure thing.

What’s more, back at the first development, where Andy’s still living, it’s clear that this new venture will soak up every last penny he and Leanne can lay their hands on. The garage finally comes down so that they can maximise the value of the house – and they up their total borrowing to £800,000, deferring the interest on their commercial loan for a year, to keep the monthly payments down to three grand. They’re stretching themselves very, very thin.

Meanwhile, the bungalow has had the full Andy and Leanne treatment. Once again, the styling is razor sharp and ultra modern. They were hoping to break even on this project and sell for £550,000, but even with the bungalow priced at £495,000 they’re not getting any viewings. So they decide to change their plans and rent it for a while.

But the question remains, what to do with their latest purchase, the plot of land? Prices have now fallen so far, there’s no profit in the development. Sarah thinks Andy and Leanne were right to take a long term view with their bungalow, but that now’s the right time to get rid of their plot of land. It’s a cautionary tale to all developers who have got a bit too enthusiastic with their ambitions. Be prepared to take a loss now to reduce your exposure in an uncertain market.