Converting a terraced house into flats

Discussion in 'Property Refurbishment / Development' started by steverogers84, Jul 11, 2017.

  1. steverogers84

    steverogers84 New Member

    Hello everyone,

    I joined this forum because I need some advice. My brother and I are looking to buy a terraced house in Cardiff and splitting it into flats to sell on and make good profits hopefully. We can both get over 200k mortgage between us so buying the property is the easy part we do have savings aside for the work we do not know however where to start.
    We have heard that there is a lot of regulations and legal stuff to do. If anyone in here has done this before could you kindly write a list of what I need to do and where to start from planning permissions, architects etc

    Thank you guys

  2. totallyproperty

    totallyproperty Administrator Staff Member

    Hi Steven,

    welcome the forum!

    My first piece of advice would be to check how likely it is you will get planning successfully through. You don't want to end up having bought a property to split into flat, and then planning is refused.

    Are there any other properties within the same street or immediate area that have done the same thing? Or are there a mixture of houses and flats within the street?

    Would there be ample parking for tenants of 2 flats if you were to split the property?

    Is there a good demand for flats in that particular area?

    I would talk to 3 local estate agents about the price you could achieve for flats in that area to check your pricing and i believe you can have a pre-planning conversation with the local council to gage how likely it might be that planning is accepted (they should also advise you on key things to consider).

    Who are the typical tenants in the area? Families? Professionals? Students etc?

    With planning, the council will be considering things like keeping the look of the property the same as surrounding houses, sound-proofing, the effect on parking, etc.

    Do you have a particular property in mind yet or are you still looking?

    Keep us updated! :)
  3. diyhelp

    diyhelp Active Member

    Sounds like a very interesting project!

    I can only reiterate what has been mentioned above:-

    Make yourself aware of the current regulations
    Test the water about planning permission
    Speak with as many estate agents as possible in the area to get a feel for the local market
    Have a target buyer in mind (business person, family, etc)
    As a back up plan see what rental yields can be achieved in the area
    Give yourself some headroom on the financial side for unexpected expenditure

    There will be more which I will add when it comes to mind. Other than that, good luck!
  4. Nicholas Wallwork

    Nicholas Wallwork Editor-in-Chief Staff Member Premium Member

    Again all good advice so far.... one thing to add - the first thing to do to test the planning is seek out a local planning consultant who knows the attitudes of the local council and who can advise on the likelihood of getting the planning.

    Have you also considered turning it into an HMO? (House in Multiple Occupancy) This might give a better end rental and thus make it worth more (as the income potential could be higher). The cost of converting to an HMO is likely to be significantly less than a flat scheme as well...

    Worth looking into...

    Good luck and let us know your next move!
  5. Longterminvestor

    Longterminvestor Administrator

    What is the ball part figure rental yield increase between traditional rental flats and an HMO?
  6. Jessica Harrison

    Jessica Harrison New Member

    Hi Steven

    One other point from a funding perspective, if you are taking out a mortgage or loan on your own home to release funds to buy the property you plan to develop then you can stop reading here as the rest will not be relevant. If however as you mention, you can get a mortgage of £200k and that is against the property you plan to buy and convert then you may need to consider what type of mortgage that is and has it taken the value of the property into consideration rather than just you and your brother's income situation? If it is a residential mortgage (ie: owner occupied) it is unlikely a lender will lend knowing you do not plan to actually live there but instead to perform major development works to convert it. You may also find most buy to let lenders or commercial mortgage lenders will only lend based on the end use for the property (ie: if you buy a property that is already ready to let) if you are planning the type of conversion work you mention, it is unlikely a 'mortgage' lender will fund the purchase and if the property is being sold at auction it is highly unlikely they will wait 6 to 12 weeks for a mortgage to be completed. Assuming you have also allowed a deposit for the purchase of the property with the balance being made up by the mortgage, you would be more likely to either require a bridging loan for the purchase, fund the development yourselves as you say (you could roll the interest up on the bridge so no formal term repayments are needed along the way) and then once you have done the work, then apply for a buy to let mortgage to enable you to rent the property out (you will therefore need to check out potential rental income in the area as most lenders require a minimum of 125% rental income. If you have no allowed for a deposit for the purchase then you would be better placed to use the money you have available for the work, for the deposit, take a development loan for the conversion work and then repay it with a buy to let mortgage once work is completed.
  7. realdeals

    realdeals Active Member

    Are you still going ahead with the project steverogers84?

    It would be interesting to see how you get on with the project and the finance required.
  8. michael1978

    michael1978 Member

    Sounds very interesting and i think you can make a good profit. As long as you don't cut corners on anything and use quality materials it shouls sell no problem.
  9. I was just reading about bridging loans which can be useful to refurbish properties and then refinance on the enhanced value - maybe something to look at?
  10. diyhelp

    diyhelp Active Member

    I thought it might be interesting to again bring up the subject of bridging loans which many people are scared of. Often seen as an expensive short-term funding option, they can be used to fund redevelopment of property and then allow refinancing on the enhanced value. In many cases the uplift in value can be significantly greater than the cost of the bridging loan. Certainly something to think about.
  11. Karen R

    Karen R New Member

    You will be unlikely to be able to use the mortgage to purchase, if that is your intention. A standard resi mortgage lender will usually assume/insist that the purchaser immediately occupies the property, it would be a development loan that would be required to perform this type of significant structural conversion work. You could purchase the property with a short term bridging loan and then fund the work yourselves or you could use your savings towards the purchase to reduce the bridging loan you need to purchase and then borrow the money for the conversion. You should be able to borrow without the need for any term repayments by rolling up the interest and then if sale is the exit you simply redeem the loans once the properties sell retaining any profit. Good luck with it in any case. You may also consider refinancing onto buy to let mortgages and letting the properties instead.
  12. Longterminvestor

    Longterminvestor Administrator

    I presume the investors also need to consider the new income offset rules for mortgages which penalise higher rate tax payers?

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