Timing of House Sale vs Ordering Timber Frame

[mike2016]

So, I've just purchased a house that comes with a nice side garden to build on...and started the 19 year mortgage to pay for it all....! I want to build a house on that garden, so plan to do up the current house and sell it. I was planning to rent it back from the new owners for 6 months, immediately start the new build and move in when ready but timing the financing with a timber framed kit would be difficult. The problem as I see it is the lead time for the timber frame, windows and the builder. While I could afford the deposits, until I pay off the old mortgage I can't draw down any funds to pay the balance as things arrive onsite. 

 

Options: 

 

1. I could have everything lined up for the date I expect the sale to close, place deposits for everything, book builder, but end up having no way of funding the build should the buyer or bank delay or worse, pull out. 
2. Alternatively and more realistically, I wait until the sale closes, pay off the existing mortgage and THEN book everything but it would be 3-6+ months before anything happens on site.
3. I could convert my mortgage into a buy to let and also get a self build mortgage but based on figures I saw this morning that would only provide about half of what I'd need to finish the new house. It would drag the build out over a few years at best, stretch me and finances but I'd end up with two houses when I eventually finish. And that's if the sums work! 

 

It looks unlikely I'll be able to stay in the current house to see the build through. I'll have to manage access to services with the new owners and all the noise & mess without falling out with them. I have a friend around the corner and a sister living nearby so I'll have a roof over my head at least, rather than a caravan, and can keep an eye on things that way. 

 

There are other construction options which don't have such a high initial cost but I'd prefer a factory built house and get as near to Passive as I can. 

 

I suppose I've 19 years to think about it but would like to move in sooner than that! 

 

 

 

[ProDave]

What I learned was you can plan everything in the finest detail, then be completely derailed by circumstances outside your control like the old house not selling, or not selling for enough.

 

It's always going to be a tricky one. Selling a house where you are carving the garden up and building a new house is bound to be tricky. Not everyone wants to live next to a building site, particularly one that might take a while.

 

It would be a lot simpler if you could find a way to finance all the ground works, i.e. foundations and all service connections and the basic levelling / landscaping of the plot before you have to sell the house. That way at least you can repair any disturbance to the garden that goes with the old house, the buyers will know their garden does not need to be dug up, and they will clearly see at least the foot print of the new house.

 

As a guide it cost me about £10K for the foundations for my house and another £5K for service connections.

 

It's no bad thing to have the foundations in before ordering the timber frame, at least it can be built to "as measured" dimensions and you know it will fit.

[mike2016]

Thanks - I have to realign the driveway anyway to maximize the plot size and dig a trench to access the fibre broadband which sweeps through the front garden. I could get this done in advance for sure. Sewage and storm drainage is at the back of the site and easily accessed from my site during building works later.

 

The service maps place Water (Blue line on map) & Electricity (Red Line on Map) on the road. Is it possible to hook those up in advance? I wouldn't have thought so. I hope the Fire Hydrant can be moved? 

 

I'm guessing you mean to finish any work that needs to take place directly on the property I'm selling (No. 66 below ) and manage the later trench out on the road during build with a steel cover while services are being hooked up? Does that sound plausible? 

 

Thanks as always!

[Temp]

Might be better to partition off the plot and look for any buyer for the house. If they are happy to rent it back to you then all good. If not find somewhere else to rent.

[ProDave]

Yes I was meaning get all works in or under No 66 complete before you sell it.

 

I don't see the Fire Hydrant as an issue. My Sister's house has a fire hydrant set into the pavement right in front of the dropped kerb to her driveway.  I assume you are creating a parking space in front of No 66 so any adjustment the the hydrant cover could be done then.

 

Water can be connected to the site just to a stand pipe, then routed into the house later.

 

Likewise electricity can be connected. You can either get a "building supply" and have a meter and consumer unit in a temporary box on the site boundary, then have the supply moved into the house when ready. Or you can do as some of us have and make the meter box on the boundary a permanent fixture to avoid moving it later.

 

At least if you get all the connections done before you sell then the buyer knows there is a bit less disruption to expect.

 

It should be pretty obvious where the new house is going in that situation with or without footings to show it.

[AliG]

You're going to lose a lot on the house sale limiting your market to people who don't want to live next to a building site, probably 5% and wanting to rent it back will make it even more limiting. Meanwhile put a nice house up next to it and you could increase its value.

 

You said that you plan to do up the current house then sell it. Could you use the cash for that to get you started on the new place. Is the house liveable in its current state whilst you build? Could this with a self build mortgage get you most of the way there. It depends what the budgeter for doing up the current house is.

 

Of course higher interest costs could eat up the benefit of getting a higher selling price. Again a lot depends on how much you can get done using your own finance, if you could finance the ground works and the house is a fast timber frame build then you are only looking to borrow money for maybe 6 months.

 

Ultimately there will probably have to be some compromise and you might not be able to maximise the financial outcome. Not building a house quite to passive house standards may be another compromise.

 

[mike2016]

Thanks,

I'm only planning to put in the minimum possible into the current house, paint & floors etc 1-2K at most. Nothing like what would be required to start the build. I need time to build up my savings again after the recent purchase and with a full mortgage over my head can't easily access any more finance to build,move and sell in that ideal order. Part build may be possible but if I can cordon off the site and finish any works that impact the current house, that's as much as I could hope to do. 3 Bed semi-detached houses are in demand here in Dublin so someone should hopefully purchase it despite the pending build unless mortgage limits or other market changes come about. 

I think compromise is the reality here as I think about things. 

 

 

[TerryE]

As @AliG said, you have to be brutally realistic about selling a house next to an adjacent building site. This is going to hit both the saleability and the value of No 66.  Find a local estate agent or two that will give you honest advice (if that's possible), and get their opinion about the value of the property and the impact of an adjacent building site..

 

You also need to think of the risk that someone could buy No 66 and then attempt to derail your adjacent development: that way the new buyers will get a two-for-one: a reduced price for No 66, but no building works next door.

 

At a minimum I suggest that you get full PP and discharge as many conditions as you can -- certainly to clear all preconditions for build above FFL and that way you de-risk this for both you and the the new buyer of 66:  its' a lot more difficult for a neighbour to derail a development once you have got the foundations / slab down, and also the new buyers will have a better idea of what they are going to have to live with next door.  Less risk = less price impact.

 

The other thing that you need to factor in is that your mortgage company is an "interested party" in your title, so you aren't going to be able to split it without their permission.  They will want to be convinced that their agreeing to the split isn't going to increase the risk on their loan -- especially if the mortgage is worth more than say 80% of their valuation of the reduced No 66 with an adjective building plot.

 

We fully own our farmhouse at the centre of our village and it had a large plot that we could split and we had quite a bit of savings to get us started.  We cleared planning approvals, then split our title, and took  out a new mortgage on the farmhouse in its new title to finance our new build.  At the early stage we had pre-planning advice (which proved very worthwhile by the way), and I remember the planner's jaw dropping when we mentioned that we hoped to move in in 9 months.  It's now over 3½ years later, and we are just about to move in.

 

So this is all going to take you time, and you need to have an honest expectation of how long it is going to take.  For example you'll be very lucky to get full planning permission and clear preconditions within 18 months, IMO.  And you have to agree an update to your mortgage and sell your existing house before you can begin in earnest.  

 

So I suggest that you make the best use of that ~18 moths by building up your knowledge preparing and also trying to improve your existing property cost-effectively to maximise its current value and saleability, which is going to help with agreeing any mortgage changes.  Hard advice, I know, and to be honest my wife and I wouldn't accepted it if some gave it to us 3½ years ago.    All I can suggest if that you read some of the blogs and related threads here.  Our experience is mid spectrum, and about the only people who can build in short timescales have a shit load of money to throw at the project, and you don't seem to be in that category.

[ProDave]

Another big advantage of at least getting the foundations in, is that in the eyes of the planners, you have "started" so the planning permission is locked in, usually without any time constraints on when you can finish.

 

I could drive you around our local town and show you at least 4 houses built to slab level than work has stopped. They have been like that for 2 years. No doubt the developers have decided now is not the time to build them but were facing PP about to expire, so they "started" the development to lock in the planning.