Beyond the bricks: a rounded approach to modern property investment
There is an old adage in the investment world that property is the ultimate safe haven because, quite simply, "they aren't making any new land."
While this sentiment remains technically true, relying on it as a guaranteed path to profit could prove a dangerous oversimplification in today's market.
To succeed, investors must look past the surface appeal of bricks and mortar. We must engage with the practical realities of construction, the competencies of those building our assets, and the confusing landscape of "Standards."
It is critical to recognise that Building Regulations represent the legal minimum requirement, much like the current baseline assessments for energy performance. To build a resilient portfolio, you need to understand the complex system in which that property exists.
How has the property market landscape changed over the last 30 years?
Three decades ago, the attitude in major cities was one of unbridled optimism. The market trajectory appeared permanently upward, creating a culture where investors felt comfortable "sitting" on vacant properties. The logic was simple: even without protective maintenance, the asset would appreciate enough to cover the neglect.
That era is over. Today, a passive approach is a liability. The risks have evolved, not just from the traditional threat of squatters, but from a radically changed regulatory and financial environment. Council tax on empty homes, skyrocketing insurance premiums for vacant premises, and the massively increased costs of refurbishment have altered the mathematics.
Investors can no longer view a building in isolation; they must view it in total, analysing how its usage type interacts with its location and the underlying land value.
Why does the old "Rule of Thirds" no longer apply to development?
Historically, builders operated on a reliable equation known as the "One-third rule." In a viable development, one-third of the budget went to purchasing the land, one-third to construction costs, and the final third represented profit.
Due to the explosion in land values, this equation is now redundant. But what drives these values? It is not just market demand; it is largely influenced by central government, through the Town and Country Planning Act. This legislation sets the overarching policy but empowers Local Authorities to make decisions based on their specific regional needs, balancing history, education, business, and infrastructure. Understanding these local nuances is key to decision-making.
During my time serving on an expert scrutiny panel for infrastructure at Wakefield MDC, I was often surprised by the absence of developers in the public gallery. Witnessing policy in practice provides the answers to the questions your proposal needs to address. If you don't understand the policy, you cannot navigate the market.
What legal risks and liabilities do developers face?
While there is specific legislation regarding land use, investors often overlook the significant risks posed by Tort Law, specifically concerning the actions (and consequences) of a developer.
I have acted as an Expert Witness in numerous cases involving the tort of nuisance and riparian (water) rights. Property development is not a contained activity; a simple oversight on your site can cause severe damage or financial loss to a neighbour. Crucially, "neighbours" in legal terms can be located some distance away, particularly regarding water flow. Regulatory authorities, such as those managing rivers and drainage, hold significant power to enforce these liabilities.
Why is a comprehensive Flood Risk Assessment essential?
The worth of a plot of land is intrinsically linked to what can, cannot, and should not be done with it. A primary factor in this due diligence is water management. It is not enough to check if a property is near a river; you must take a broad view of the four distinct types of water:
Marine: coastal and tidal risks.
Fluvial/Estuarine: rivers and estuaries.
Dam: potential failure or overflow of man-made structures.
Surface Rainwater: flash flooding from heavy precipitation.
You must ask: does the land flood? If so, from which source? Also, is the property located within a "managed" or "licensed" flood zone? This is a critical distinction. For example, in Doncaster, the Doncaster Drainage Board is legally obligated by its byelaws to make certain areas available for flooding. They are regulated to sacrifice specific land to protect other areas.
Why is expert advice crucial for property investment?
I have undertaken expert work in cases where Conveyancers failed to scrutinise the details of a property’s situation. The result? Purchasers inadvertently buying properties in active flood zones, facing massive, unforeseen liabilities.
Success lies in the small print. It requires checking for restrictive covenants that might block your planned conversion or extension. It requires understanding that "minimum standards" are a starting point, not a goal.
Making the best use of your capital means striving to go beyond the basics. By investing in competent, comprehensive advice, the kind provided by 'By Julian', you secure not just a property, but a reasonable return and a better future. Land is precious; your advice should be too.
About the author:
Julian Carter is the founder of By Julian, a consultancy providing services in civil engineering, structural engineering, emergency engineering, education and training, information technology and expert witness.
