Converting a property into flats is becoming increasingly popular across the UK, particularly in areas like North London, where flats are in high demand.
There are plenty of reasons to convert your property into flats, including how the units can maximise rental income in the short term as well as the potential profits on sale in the long term.
We’ve put together this guide to help you understand the things you need to do and consider before converting your property into flats. If you think you’d like to convert your property, why not get in touch with us and speak to one of our chartered surveyors in Cornwall?
Do You Need Planning Permission to Convert a Property into Flats?
The short answer – yes. You absolutely need planning permission before you convert your property into multiple units. You’ll also need listed building consent if your property or house is a listed building.
Before you start planning your conversion, make sure you contact your local council. If you don’t, you may have to undo any changes you’ve already made.
Will Converting my Property to Flats Affect my Mortgage?
Before you make any move to convert your property into flats, you need to consult with your lender and get their consent.
To continue without their consent could be a breach of the terms of your mortgage, which could then potentially give your lender the right to take possession of the property.
Do You Need a Separate Mortgage?
Should you make the decision to convert your property, it’s likely that you’ll need to remortgage onto a new product (or products if you’re looking to convert it to two or more flats).
You’ll also need to have the property split legally with separate leases for each flat; otherwise, you won’t be able to get multiple mortgages.
How To Convert Your Property into Flats
Converting a property into flats is no small task, but it doesn’t need to be a complicated one. With the right guidance and planning, you can make the transition as simple as possible.
Here are the things you need to consider before you begin your conversion.
The Cost of Converting a Property into Flats
Converting your property into a flat isn’t a project that should be taken lightly, and you will need to budget accordingly. There are also a number of things that will affect the cost of your conversion, including:
- The size of the property
- How many flats you’re converting
- The builders and materials you choose to use
If the property you’re looking to convert is structurally sound and you can use the existing kitchen and bathroom in the house, then you’ll be looking at a cost of £15-25K on average.
This cost will cover the basic modifications to the property, such as:
- Putting up stud walls
- Installing bathrooms
- Installing central heating units
You’ll also need to think about budgeting for extra costs, which, at a minimum, will be:
- Planning consent
- Building regulation approval
- Fitting new utility meters (gas, water, electricity)
- Installing new kitchen/bathroom
- Finance for development
- Separate boilers/heating systems
- Separate water system
- Installing a second entrance
Selling or Renting
Before you get started on the conversion, you need to plan ahead and know what you’re planning to do with the flats once they’re complete.
Selling the flats may seem like the obvious choice if you’re looking for immediate input of equity. However, what some people don’t know is that you could be receiving up to 20% return on investment every year by renting.
Before you make the choice between renting and selling, do some research into what the current market is doing. If people aren’t buying, then you may not have a choice but to rent the flats out.
Even if you do want to sell, this isn’t necessarily a bad thing. By renting the flats out, you can provide a steady cash flow until the market changes and you have the option to sell.
By changing your property to flats, you may also be affecting your tax liability, so make sure you research and plan accordingly.
If you convert the flats and then sell them, it will impact the amount of tax you owe. While every case will be different, generally speaking, tax authorities will factor in what you spent purchasing the property and making the conversion.
You’ll also need to understand how your trading profit will be taxed and whether you’re liable for capital gains tax. We’d recommend getting professional advice from a tax advisor or chartered accountant.
Once you get all the research and planning out of the way, it’s time to get work started. This is the point where it’s important to bring in the professionals such as structural engineers and chartered surveyors to give their input.
Converting your property to flats may not be a quick project, but when done properly can be a great way to turn a profit. However, before you start any work, you need to remember that not all properties will be the right fit for converting into flats. It’s always worth speaking to a professional to make sure.
If you’re considering starting a new construction project, why not get in touch with us and speak to a member of our team today to see which of our services would be suitable for you?