Adding value to your property: Planning

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.