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  • Refurbish/Develop

    House to 5 Flats - Financing Strategy/Options

    Hi All,

    Whilst i have been browsing this forum for some time now, this is my first post so please do go easy on me.

    I'd like to get your opinion(s) on a project i am about to embark on which will see me demolishing my 4 bed end terrace house and building a Block of 5 Flats in it's place.


    • I owe c. £230k on the property
    • There's c. £320k + in equity
    • c. £125k in savings
    • Recently received planning permission for 5 flats (mix of 1, 2 and 3 bed)
    • I have 3 siblings, all currently renting (individually) struggling to get on to the property ladder
    • No "bank of mum and dad" to help
    • I'm from a family of builders (grounds works to roofers)
    • This is my main and only property
    • I plan to rent one flat out (rent a room scheme??)
    • I plan to live in one flat
    • Allow siblings to occupy the other 3 flats (each paying a small monthly rental to cover cost) to allow them to save up for their deposits over 18-24 months, post completion

    I think that should be enough to paint a picture.


    Initially, I had it in my head that i'd remortgage and use some of the equity to help fund the project but then quickly realised that most residential lenders wouldn't be up for me demolishing their share of the property.

    What other options might I want to start looking at?

    How can i get the post build value considered?

    Is bridging an option and how will i structure this? Pros / Cons

    Self Build Mortgages how can I make this work, being that I already own the property? Pros / Cons

    What rates am i likely to get based on the above information (a rough idea will do)?

    What are my options once the siblings all leave:

    • Will I have any issues converting back to one large house or 2 houses?
    • Will I get a hefty tax bill if i sell the entire block to an investor?
    • Do I want the hassle of keeping it and renting the units?

    Thank you for reading this far... I really look forward to your response(s)


    Be very careful on how you go about it if you do, When i built some flats I made some errors and as a result was unable to reclaim the vat , basically i said i’d built them to rent and as such vat recovery was not possible. Took me a few years to reover from that financial oversight.


    I can only imagine how much that must have stung!

    Thanks for the heads up! 

    Did you live in any of the units or just develop and rent the whole block out?

    I wonder if the £7,500 rent a room scheme is allowed for the spare unit?


    The Rent a Room scheme could possibly be used, but its tenuous. Here's the HMRC manual:


    Also, understand the situation regarding common law tenancies and licences to occupy, you can't have ASTs. These links for Tessa Shepperson's site give a good overview:



    Unfortunately, I can't help with the rest of your questions.