I Am A Property Developer – Ask Me Anything!

Reply to the comment left by "Ian House" at "28/02/2014 - 16:34":

By the way, thank you in advance (I pressed Post comment too quickly 🙂 )!!

All the best, Ian

hi Tony. We are working with a builder on a refurb project and he has asked for a Schedule of Works which I think makes sense to ensure that we are all on the same page. Would you have an example of one you have used previously ? Thanks, John

Hello Tony We would like to ask you a question
We have a four bedroom terraced house in a good rentable location that we have rented out to four/five students over the last 10 years. The students market has become very competitive so we are planning to convert the property into four self contained one bedroom flats and rent each flat at £450 to professionals.
Any ideas on the approximately cost of conversion like this, any tips, the best way to finance (we plan to remortgage the unencumbered property ) and do you feel we are making the best decision? (HMO is not the route we would like to take due to the work and red tape involved)Your comments will be really appreciated.
Thank you

Reply to the comment left by "fay clarke" at "15/09/2014 - 11:25":

Hello Fay. This is complicated, as it depends quite how distinct these rentable units are going to be, and how posh they really need to be. In my view young professional tenants are not much different from students: they tend to like big houses and prefer a higher standard of décor and an ensuite, but otherwise employed people can be happy to live in houseshares into their early thirties: it's independent, affordable good-quality housing, while they save a deposit, change jobs, find partners and so on.

If you intend to create entirely self-contained one-bedroom flats out of this large house, then you will be creating four separate leasehold properties within a freehold envelope, each of which will need a separate mortgage. This is by far the most expensive option from a construction point of view: building regulations will require you to insert new-build-quality fire- and sound-proofing materials between the flats so they are completely protected from each other. You will also need four separate electrical and heating systems and ensure you meet local minimum space standards for each flat, if your council has a policy on this. You will also need planning permission, sufficient parking, bike storage - the list just goes on and on. You will end up however with four separate flats which could be sold on and would attract a higher rent. However, each unit would be taxed separately for council tax, which gets expensive for the tenant.

A less intensive approach would be to create an HMO of bedsits, which are separate lockable units with some shared facilities. For example, each might have an ensuite bathroom, but the kitchen is shared - this is closer to a student houseshare - or you could have separate kitchenettes in each unit, with shared bathrooms and a communal lounge/TV room. I've never done separate kitchenettes, and I'm not sure how this would be treated as regards building regulations: each represents a separate fire hazard, so the authorities will probably have higher expectations on this.

In my view the best approach would be to create lockable units with separate ensuite bathrooms and fast internet and TV points, but retain a shared kitchen and communal room, with common utilities and heating and electrical systems. Ensuite rooms always secure a higher rent, and professional working people really appreciate it, whilst still being prepared to share a kitchen. You intervene much less in the fabric of the building, the conversion cost is far cheaper, and it will be a lot easier to sell the property as a normal family home, or rent it to a family, if you ever decide to do that.

I can't give you a price for making each room more self-contained - so much depends on the layout of the house. I also can't advise on output values as I don't know your area. In Reading, where I operate, a one-bed flat will rent for around £750-800; £450 is the going rate for a superior-quality room in a houseshare,

As regards mortgages, may I suggest you post a separate query on Property118, as there are other people better qualified than me to advise on HMO mortgages. However, in my view you don't need to remortgage. Assuming you have a BTL mortgage and the terms and conditions don't explicitly ban separate lockable rooms, then just convert the bedrooms by adding ensuite bathrooms and better internet connections, and carry on as you are. All you are doing is upgrading the rooms and making them better suited for professional sharers rather than tenants.

You may need to upgrade the kitchen and other areas to suit professional tenants: have a look at the properties on http://www.spareroom.co.uk to check out your competition at the higher end.

Hello Tony
Thank you very much for your constructive answer. You have give me more options to consider...

As a landlord, do you use third-party property inventory adjudicator services so the process would be as easy as tick tick check?
And if yes, do you change inventory companies or you stick with the same one over and over again?
One last last question do you benefit of any discounts as a loyal client?

Thank you
Cheers!

Hello Charline
We complete our own inventories for our properties...sorry I cannot be more helpful..

Hello Tony

We have just found a buyer for a building plot with planning permission to build one house in our back garden. We will remain in our current house for a few years at least so have carefully vetted the buyer as we want good neighbours ( they are building to live in the new house themselves ). The building plot is accessed via a shared driveway along the side of our house ( shared just between our existing house and the building plot ) so we have been advised to retain ownership of the drive in order to protect our asset ( the house we live in ). We want to make sure we are covered in the sales contract for any other issues that may crop up eg. we want to put a sensible timescale on the build so we don't have an overgrown building plot behind our house for too long. We have also been advised to make sure the new owner of the plot does not connect to our services such as sewage pipes as this could cause problems in the future. With your experience can you think of any more potential issues we should cover in the sales contract?

Thanks
Rusty

Reply to the comment left by "Rusty Dog" at "30/10/2014 - 12:14":

Hello Rusty,

Firstly I hope you are able to work out amicable arrangements with your new neighbours, as it can be miserable for both parties if things go wrong: if, for example, you are too prescriptive - you have, after all, presumably received a very large tax-free payment in exchange for your land, and you must expect some disruption during the construction of the new house - or if the new owner is cavalier with his or her machinery and hours of operation, or fails to monitor the behaviour of their subcontractors as regards noise and disposal of refuse in particular.

The issues I would consider addressing in the sales contract are:

1. How are you going to enforce a maximum construction timeframe? Are you going to impose financial penalties on the new owner if her builder goes bust or walks off the job in mid-winter, and she struggles to find someone prepared to take on someone else's unfinished work? In my experience if you try and impose a deadline on a builder or a buyer, they just adjust their price to compensate for the possible penalty and added risk. I think the main thing you can do is check the buyer has sufficient funds to finish the job, with a contingency reserve.

2. I wouldn't bother trying to specify hours of operation down the shared driveway: this will be stated anyway in the conditions of the planning permission.

3. Since it sounds as if the new owner will be running large vehicles, including full skip lorries and flat-loaders with bricks etc down the drive, and digging it up to install services, this may affect the structure of your property. If the vehicles and excavation works are going to be within 3 metres of your building, consider requiring the new owner to issue a Party Wall Notice to you, and pay for an inspection of your property to confirm its condition, in case you see any signs of damage or settlement and have to make a claim.

4. How close are the routes for your sewerage, gas, electricity and water to your driveway? If the new owner's utility works are likely to be within a metre of yours, you could specify that you must be copied in on all correspondence with the utility installers and notified when any works begin. Rusty pipes can burst if the ground surrounding them is disturbed.

5. Require the new owner to reinstate the surface of the shared driveway when the works are complete, and any damage to trees and fencing. After that, it sounds like all road maintenance will be your responsibility.

6. I presume you will be putting restrictions on use of the house, to prevent future owners from running, say, a taxi or vehicle hire business from home, with all the associated traffic. Your access permission over the drive, after construction is complete, should only permit domestic cars and vans, and delivery vans.

7. I assume you are providing space at the head of the drive for the new owners to put their rubbish bins on "bin day": local government refuse vehicles won't go down such a drive.

Thanks Tony - that's really helpful - a good few things I hadn't thought of.