Landlord to Developer: Have you considered commercial-to-residential conversions?

The property industry has seen some change over this past year. Covid-19 has restricted our movements and, for many of us, hampered the plans we had in store for any investments. We have all been left dealing with some sort of dilemma during the pandemic: “should I invest in Property A or Property B?” or “would going short term be any wiser than long term?” These questions may have crept into your mind. But, if you have been keeping up with recent news, you will have come across the new development rights brought in as of August last year.

Commercial-to-residential conversions could truly be the answer to our concerns of investment and the predicament currently plaguing our high streets. Visiting this topic back in April, many observations were made. Retail units have been disappearing from the high street for some time, with residential living proving to be a useful avenue for many developers to go down.

If the recent collapse of Debenhams is anything to go off, no store is safe. Their department stores will leave a huge gap in our towns and cities which will need to be filled. Although many investors cannot afford to convert these large spaces, smaller ones can be achievable. Investors can even aim for the new market of 18-35-year-olds who are now flocking to towns.

For investors to benefit from these new opportunities, though, they will need to get ‘hands-on’ as a developer. Becoming a developer can give investors the power to identify what needs to be done as well as appointing the team and obtaining finance for the project. From being involved just as a landlord to becoming a landlord-developer, capital can be gained at a faster rate.

If an investor chooses to go down the road of buy-to-let, they will start to see profit coming in at a later date. If they cut out the middleman of the developer in a conversion, by doing the job themselves, they can get straight to work with the vision they have in mind. This is where the advantages of commercial-to-residential really come to fruition. Since the structure of the property is already in place, the ‘development’ will be a lot easier than building a new property from scratch. Just hitting targets, making sure everything is in place will be sufficient.

The skills that a developer needs are also similar to what a landlord would need. Most of the work will be delegated to the team who would see the conversion through. From fitting the electrics to ensuring the property is up to date with the latest fire safety regulations, they will take care of many aspects. What is mainly needed from the developer is knowledge in property development as well as leadership and business skills to make sure operations run smoothly.

Finally, developers need to keep in mind the finances for a commercial-to-residential conversion. Landlords tend to fund their buy-to-let deposits themselves, whereas developers secure most of their deposits from private investors. For those who may not have the necessary funds upfront, becoming a landlord-developer can be a good alternative opposing buy-to-let.

With the government looking to reach their 300,000 new homes a year target, landlords can make full use of the new opportunities available to them. At the same time, they can start to build up their portfolios, capital and development knowledge, then move onto bigger and better projects. They can even start to bring life to the high street. More people living in towns should create more demand for services such as restaurants, retail and entertainment than ever before.

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