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4th August 2026 | Baya financial

Month: June 2021

Adding value to your property: Planning

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This week we’re exploring some more ideas on how to add value to your property. I’ve chosen to talk about planning as it is something that can be used in many different ways.

Planning gain

This is one way which I think is under used, and can be such a great way to add value quickly. Especially in the current market when investors are looking for opportunities and build costs are so high it can be a great alternative to completing the works yourself – it may be just as profitable. It allows you to sell on the asset quicker than if you were completing the works too, meaning that you can move on to your next project.

Finance has to be thought about carefully in this instance, as there always needs to be a back up option which the lender will base their decision on, but as you aren’t completing the works you don’t need to worry about the refurbishment costs. This means you are borrowing less, and the GDV on various options are less important at this stage. When you are completing the works and borrowing the refurbishment costs the lender will always work back from the GDV, and if the option is funding without planning,  there may not be enough profit in the deal to make it work.

This works well for extensions, change of use, commercial to residential (where it falls outside of PD) and conversions to houses and flats.

The added advantage is that you don’t need so much experience as you are not carrying out the works yourself.

Planning to carry out the works yourself…

There always is the opportunity to carry out the works yourself of course.

With a shortage of homes, a relaxation in permitted development rights and a booming housing market, there are always opportunities in this area of the market!

What to watch out for?

  • Land with property to give you options with additional houses or extensions
  • Blocks of flats – looking for options to add units or extend
  • Development of existing dwellings – this could be to knock it down to make better use of the space, extending or splitting into multiple dwellings
  • Floor plans are key to looking at your opportunities!

What experience do you need?

Lenders are becoming more flexible with what they need, and even with ground up sites we have options if you haven’t done one before. You do need some experience with a project that requires planning but it probably isn’t as much as you think, and you can use your residential properties as experience too.

we have had some examples recently of lenders who are happy with quite a jump up from a small renovation to something much bigger.  It does mean that more due diligence will be carried out on the contractor, and a JCT contract will need to be in place but this does open up potential opportunities.

JV or teaming up with other investors to increase the overall experience of the team is a very good idea too. It shares the risk and the rewards

It’s always worth a conversion to see what’s needed and how it could work.

Adding value to your property: What can you do with leases?

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So I’m back! Still no quieter this week but there we go – I don’t think it will get quieter for a while yet!

This week I am starting a blog series on adding value to your property. In the current market where houses are selling so fast, spotting opportunities and acting on them quickly is key.

There are so many ways you can add value to property so I’ll be covering them off over the next few weeks. This week we’re talking leases.

Splitting leases

This is one of the most common ‘tips’ you get from property mentors and courses – buy freehold flats and create leases to add value! It doesn’t always work like that, as the way lenders value property is based on how it is likely to be sold, and if that is as a block then you won’t get the uplift on a revaluation. There are, however, ways you can do this. You could look at smaller blocks, where they could be split off and sold easily.  Generally you need to consider the size of them, demand, split utilities and access.  The ideal would also be to carry out a refurbishment, or wait a period of time before refinancing them as you need the valuer to disregard the purchase price as a comparable.  You can also look at splitting houses into flats; additional flats into blocks and rearranging space to create more units. These can all create value though the sale or refinance of the properties.

Extending leases

There is a large quantity of flats around the country with short leases which struggle to sell. This is due to most people (buying property to live in) not understanding the lease extension process, as well as a need for a longer capital repayment mortgage. When you are basing your maximum mortgage on your income, and the mortgage is capital repayment, you usually need this over a long period of time (age depending!) to make it affordable. Generally you need 55 years left on the lease at the end of the mortgage so if you have, for example, 68 years currently you could only look at a 13 year term.

The difference with an investment mortgage is that you are able to look at it on an interest only basis. This means that the monthly payment is the same if it’s one or 25 years. You do need to find an alternative way to repay the mortgage and be aware that the full balance will remain at the end of the term, but this does give you options. You could, with the example above, take the mortgage over 13 years and in that time increase the lease length and then refinance. This could increase the value and allow you to take some money out of the property. This is a great opportunity as an investor that home owners just don’t have.

Share of freehold

This is another misconception among many potential home owners. Again, they see a short lease and assume it is expensive to extend it, or they won’t get a mortgage on it. The same principle applies as above with your mortgage term, but it can be much easier to extend your lease. All leaseholders have to agree and all leases need to be extended simultaneously, but it is much cheaper than extending a standard lease.

I hope that gives you a few ideas! Next week I will be back with title splits and planning ideas – if you have any questions in the meantime then let me know! Have a good weekend.

Who’s afraid of a vacant commercial property…?

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Hi everyone. And it’s Friday again and so close to lock down ending (fingers crossed).

If you’ve been reading our blogs over the past few months, you will know that I have got involved in a couple of properties for development.  I’d like to talk about the commercial one for this blog.

I’d known about this property for a while, as the buyers are clients of mine.  The property is a D2 usage large building in Salford.  D2 is leisure, as it was a crown bowling social club.  It was also run down and vacant.  As you can imagine this can cause challenges in getting funding.

The property had a 15 month option from February 2020 in order to get planning for residential.  You’d think that 15 months is enough time to get things sorted, which in normal times it would be.  The property stands on an acre of land, the building itself has a footprint of around 320 sq/m – so there are many options for an exit, it was the purchase that was proving challenging!

I got involved end of last year, just to find funding.  This proved rather difficult.  The commercial market has really taken a hit with lenders during COVID.  For a while it simply wasn’t available, then when it did return it was specific to certain professions and whether they had been trading during lockdown.  This fell into neither camp.

The week before exchange I put my hat in the ring to be a part of this.  Thankfully the investors were happy to do that; it spread their cashflow, which is important at the moment.  If you know and trust the investors you get in bed with, then it’s better to share a number of projects than be responsible for it all.

When a property has a lot of options, although it should be a positive it can prove a negative with lenders as it causes uncertainty.  We could go full on development of 36 or so apartments; a mixture of houses and apartments; renovate the house and split off the land; keep the property commercial and split off the land… and the list goes on.

We now had a deadline to exchange by May 10th, but due to planning having been changed (a housing association wanted to buy it with planning) so we still have no planning.  As most of you will have experienced, COVID has caused such bottle necks in so many areas and this is clearly one of those areas! The application went in for an AIP on 7th May and I looked at it as an auction buy.

I approached Shawbrook to see if they would consider it – at the time we wanted to convert the house into 7 flats under permitted development, but could not get it on PD due to D2 usage not allowing it.  We could also not apply to change the commercial usage as planning was already in.  It was all really frustrating.  We decided just to buy as is and landbank it until planning was through.  I can’t praise Shawbrook, particularly Mark Whitburn and Kieran Route enough, for really getting on with this knowing the completion date of 18th June.  They have agreed 60% ltv on Vacant Market Value, which was the purchase price (£500,000) – very reasonable indeed.

The property is a good buy. There is no way that a piece of land of this size in Salford can lose you money, but having to react quickly at the moment can be a challenge.  Sometimes you really need to go with your gut, as properties are in low supply and you can lose out.  Of course there are risks here, but aren’t there in all walks of life? You could argue that doing nothing is the biggest risk of all.

All is set for completion on 18th.  I know I bleat on about the power team – IT IS THE MOST IMPORTANT THING – we couldn’t achieve this without our amazing solicitor (Phillip Adam) and the safe hands of Shawbrook and Laura Nicholl at Pure Law.  They are worth their weight in gold for the stress they alleviate.  Particularly when the completions side of things is really boiling over at the moment.

What have I learnt from this? 

The educational part of this is the change in lender appetite towards properties like this as we have progressed with it.  There has been a realisation from lenders that there are some properties that are worth funding; there is a still a massive shortage of residential properties and the Government is pushing for smaller builders to step up.  I would ask you to consider these when you are looking at your next investment.  If you don’t have enough experience, then bolt onto someone who does; spreading the risk/cash and progressing up the development ladder as well.

As always, we are happy to run through the figures and see what options are available to you.