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  • Refurbish/Develop

    Small Development Tips

    In his excellent blog Bruce asked for suggestions on how to improve his chances of recycling his cash at a later date and I suggested adding value through small developments. Seemed like an interesting topic and something that might give others a head start. It would be great if others could add their development tips, thoughts and suggestions, not just the experienced dust munchers (Me, Rich, Ray), but also anyone else who has something to add. I’ve excluded tips on renovation works but feel free to add as you see fit. This is only a general guide and is how I see things.
    Adding value
    The three common ways to add value to a property are rearranging the layout, loft conversion/extension and ground level extension. Lofts are generally promoted as adding the most overall value followed by kitchen/diner type extensions and then changing the layout. This appears obvious when you think about it as a loft conversion is adding an extra bedroom which, to a landlord, means increased rental possibilities while the kitchen/diner makes no difference to the amount of tenants you can let to so will not necessarily increase rent.
    When people talk about small development work they normally mean one of the three examples above and seem to instinctively grade them in the order I have listed. Although generally this holds true, if you dig a little deeper you start to see how this order can change. For instance, a ground floor extension that adds a bedroom should be cheaper to build than a loft and more lucrative to a landlord than a kitchen/diner. What about a double height side extension, not cheap but it will increase the capital value of the property enormously and could more than double the amount of rent you receive.
    In my mind, the most overlooked by small landlords is changing the layout. It’s the easiest, the cheapest and possibly the most beneficial to landlords. Why? Well, by being creative a landlord can dramatically increase cashflow by adding extra bedrooms. This can turn a one bed flat into a three or four room multi-let. Take a look at the attached before and after plan of a typical Victorian property, maybe not the best example as I should have squeezed in another bathroom but hopefully you get my gist:

    In rearranging the layout you can add two or three additional rooms and therefore produce much greater cashflow.
    Miscellaneous Tips
    • If space is at a premium you may want to get a bit creative: Washing machines in bathrooms, foldable beds or, my favourite, recessed furniture. Thought I’d invented sliced bread when I built recessed drawers into my eaves space, then I found someone else had beaten me to it - can't find the link. Still, my version only cost me £170 for two compared to £800 each for the others. Image attached:

    • If you own a flat and are thinking of adding an extension to that flat then you should consider Section 19(2) of LTA 1927, specifically the part that says you need the freeholders consent for improvements. What most don’t realise is that as lessees you can override this requirement because the freeholder is not allowed to withhold consent unreasonably. When you seek consent to extend from your freeholder many of them will automatically rub their hands together, lick their lips and say “money, money, money.” Provided your development adds value, is on your property and your freeholder doesn’t own an adjacent property then you only have to pay your freeholders costs. An obvious example would be a downstairs flat that has its own garden; you could build a kitchen/diner extension without an extortionate fee provided it adds value. Even if you still feel you need to pay your freeholder something to 'ease the stress' at least now you can quote this as a bargaining chip.
    • When tendering for works you need to be mindful of whether or not the builders you approach know each other. Illegal but it does happen: builder A deliberately puts in an above priced quote while builder B puts in an even higher quote making the other one appear reasonable and therefore acceptable. Even more common is when you employ a single person to organise your tendering, normally an architect or project manager. This person will happily suggest several ‘decent’ builders willing to provide you with a quote, but as before, don’t be surprised if they already know each other. I’m not saying this is rife but it DOES happen. Sometimes professionals (architects, architects, architects!) inadvertently allow themselves to be ‘gently’ coerced by the savvy builder.
    This will already be familiar to some but maybe not so obvious to others, especially landlords who suffer from develophobia or novices in general.
    Any other ideas, experiences or tips etc.
    PS: Another little tip concerns the way we should approach building or planning officials and is addressed here by Richard.
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    Maybe a bit of a tangent.
    When buying look for properties that are out of favor because they are ugly. Properties that do not need anything major done. To me major is anything that requires layout changes or the items that Marcus mentioned.
    Look for cosmetic changes where fresh paint, a good clean and clearing the garden of weeds transforms the property.
    One investor I met a while back focused on trashed properties where there was junk everywhere. He would buy cheap, haul out the trash and repaint only the side of the house that faced the street. Curb appeal plus removing the scary stuff. It would take a couple of days to do the above. Then he would resell to an investor looking for a project. This works well when the property does not attract stamp duty. Assuming a 1 week turn and a quick sale you can make a lot of money by recycling a small pot of cash.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Follow me on Twitter -> https://www.twitter.com/john_corey
    PS. A slight modification that really help is to use an option to buy rather than actually complete on the purchase before you resell. Small transaction costs compared to buying and selling.
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Good advice John and not off on a tangent as it goes under Miscellaneous Tips. Thanks for contributing.
    Another tip I remember from a couple of years ago concerns gaining planning permission for a small development when planning have suggested you wont get it.
    Imagine a house that you would like to add a loft conversion and a kitchen/diner extension to. Problem is, your permitted development rights will only cover one or the other, not both. To make matters worse, planning have also indicated that they don't like the idea of both, although they are favourable to one. What you do is apply for one and then, when permission's granted, use your permitted development rights to build the other. Once completed you can exercise your planning permission to build the other one. End result, you end up with what you were advised you couldn't have.
    This will need verifying as I don't know if the recent changes to the planning laws have affected this. Can anyone confirm if this is still viable?
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    Thanks for sharing Rich, it's great to get an expert dust munchers view.
    Concerning original loft size, funny how people have no idea how much an area shrinks once it's been built to building regs. I had a friend visit who wanted me to advise him on his loft. He looked at my converted loft and said that his would probably be far more expensive to convert as it was a lot bigger. This threw me as the property I remembered wasn't any bigger internally than my place so I politely suggested he may be a little misguided. "Misguided moi, I don't think so." With that he bet me dinner that his loft was at least two foot larger in both directions. Measured it, end result: one foot less width and two foot less length, yum, yum!
    A little tip but something builders may conveniently forget to mention as it take a little longer to do: To gain extra head height ask your builder to under-sling your joists between the existing joists using long-leg joist hangers. May nick another 6" if lucky.
    Marcus
    PS: The PP tip worked a couple of years ago. Best to check though as I'm not up to date with any new changes.
    PPS: I'm not going to comment on your last post as I'm eating my dinner ;-)
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    Great thread Marcus,
    All this talk of adding value has really got me thinking. Especially the possibility of buying a place with a convertible basement and making it into two flats - a decent-sized 2 or 3-bed upstairs and a one-bed or studio in the basement.
    Would I be right in thinking that the main stumbling block with this apparent no-brainer is PP? Is there some way of being reasonably certain it will be granted before committing to buy?
    I suppose taking out an option to buy might be the other possibility here (see John, I was listening!). Arrange an option, apply for the pp, then exercise the option if it's granted.
    Is there anything else to watch out for with this kind of scheme?
    "One of the pitfalls of planning permission is that it takes little or no account of the practical possibilities of getting your build past Building Control. This is particularly applicable to flats, of course."
    Rich, would you mind expanding on this please? I'm not sure I know what you mean.
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    Rich: Worth pointing out, applying for PP to increase the propertys value is only applicable if you intended to sell. Great suggestion though as it's probably the cheapest to accomplish. Arguably, if you are going to sell then you don't need to worry about the feasibility of your planning as building regs compliance can come later. Another tip: Look for neighbouring properties that have already been granted permissions, download the drawings from the council applications database, change the details in an image editing programme before finally resubmitting them as your own planning application.
    When I mention underslinging I am referring to hanging joists below universal beams (normally) so they run alongside/between the existing joists and nearer to the ceiling. As opposed to being set level in of the flange of the UB and over existing joists. See image for undersling:

    Another way to achieve more head height would be as you suggest, remove the ceiling completely and 'steal' some head height from the room below. You're right, removing a ceiling is a disgustingly filthy job.
    Bruce: Spot on, planning, planning, planning! No way of making certain but you can improve your chances by looking at whats been allowed before and by talking to your PP department before you submit your plans. You can even submit plans on a property you don't yet own.
    Spot on again with the option idea as a means of securing your interest. You don't even have to exercise as you could profit by assigning your rights onto a third party and not buy the property.
    Rich will expand but briefly, planning may be granted even when the drawings don't meet with building regulations. The two departments are seperate and have different objectives.
    PS: Rich, evidence of councils having different guidelines: My road is the dividing line between two councils. On one side of the road you can build full width loft conversions that can also cover the rear addition, while on the other, you are only allowed to build "two 1m dormers that are subordinate to the roof slope." Guess what side I'm on...
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    Bruce Coker said:
    Would I be right in thinking that the main stumbling block with this apparent no-brainer is PP? Is there some way of being reasonably certain it will be granted before committing to buy?
    I suppose taking out an option to buy might be the other possibility here (see John, I was listening!). Arrange an option, apply for the pp, then exercise the option if it's granted.

    Bruce,
    Making an offer "subject to Planning Permission being obtained for a proposed change" is very common. Call it an option or call it a contingent offer.
    In some cases you will need to provide an incentive to the seller so they play along. They will need to somehow engage in the process (the current owner proposing the change to the planners). They may need to wait a fair amount of time before they know if the sale will go thru. Bringing them into the deal at some level (better sale price if PP is granted, profit split on the back end, etc) are all possibilities.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Follow me on Twitter -> https://www.twitter.com/john_corey
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Thanks Marcus & Rich,
    Interestingly enough, I was looking at this today. Looked interesting, but when I called the agent he said that although you would probably get PP to convert (there are already flat conversions in that street), the cost of development would be prohibitive due to the stringency of building regs. According to him you would need to pick up the house for around £70K to make it financially viable to convert.
    I'd still like to see it, but it's in Hastings and I'm in Waterford and he reckons it'll be gone by tomorrow.
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    Rich, I’m picturing you as an 18th master carpenter who only uses hand tools, very impressive that you don’t use steels. Quick off tangent question: do you ever do lofts where the joist span is prohibitive for timber?
    Bruce, on the subject of using option agreements with PP. Planners are concerned with how a development fits in with its surroundings and if it conforms to the local plan. Building control is concerned with ensuring any works meet the applicable standards as laid out by the building regulations. If all you intended to do was sell on a successful planning application then you wouldn’t want to bother with the additional cost of detailed building regulation or engineering drawings, there’s no point as you’re looking to save money. You would only need basic plans, building compliance would come later.
    Developments will always be less favourable to the public, over a builder, due to having to pay retail price – unless you intend to get down and dirty. Having said that, getting dirty isn't really the small developers job. In my mind you need to be willing to shovel sssh... now and again but you don't need to concern yourself with anything too technical as that's the job of the tradesman. It's your job to organise everything and make sure the figures work. (This whole thread is aimed at landlords looking into small developments as another income stream. Most landlords will just BTL with a quick spruce up, much better financially than getting dirty.)
    As it’s a conversion into flats then adhering to the regs may well make it cost prohibitive - hard to tell without knowing the area.
    Would the property work as a multi-let? It would be less expensive than converting to flats. Still a pain though if you have to bring it up to HMO licensing standard.
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    Excellent and informative post!
    Richard Greenland said:
    You also need a minimum landing at the bottom of a flight of rising steps which is 400mm beyond the swing of the door, or for falling steps 600mm. It can be hard to squeeze all this in sometimes!
    Memories, I once had a DS pull me up for providing less than 200mm clear beyong the swing of a bathroom door at the top of a flight of stairs. Silly mistake I know but in my defence I had intended to hang the door so it swung inwards... then I realised it wouldn't open fully because of the slope of the ceiling, idiot. So after all that, it was a silly mistake, albeit a different one:-) (Solved it with a bi-fold door in the end.)
    On time consumption, your application has first to be 'validated' (they make themselves satisfied that the 1/2 inch or so of paperwork you have submitted is all in order). If you miss anything out this can take weeks, but should typically take about 5 days.
    A slight tangent that I've commented on before. It's always best to visit your planning office before you submit your plans to get a general feel for whether you have followed the local plan or not. I've been the good boy scout before and followed this routine with 3 seperate designs in tow: the never done before extravagent plan, the one that conforms to the local plan but with a fair bit of creativity and the safe one that matches a neighbouring development completed a little while earlier. Obviously the planning advisor recommended the last one, fair enough. Eight weeks later the answer lands on my mat... refused! It turns out that the planning advisor I had seen that day was a 'commercial' expert with no expertise in residential. They also hadn't realised that the local plan had changed a few years earlier making my design a no goer from the off. Cost me 3 months by the time I had got my act together.
    Bigger spans could be dealt with by using deeper timbers or glulam timber, but if faced with that prospect I would, like you, probably reach for a UB.
    When I mentioned longer spans I was thinking of a couple of jobs that I've offered advice on recently for a developer pal. Some of the spans involved were pretty scary so I was picturing red-wood trees in place of UB's. It looks like these jobs are going to be photograped for Home & Garden, if that happens I'll post the link so you can appreciate my thinking.
    For anyone reading this, Rich's post is a great overview of the hurdles faced with planning.
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    Yes, great post Rich. Some stuff there a few people I know should read.
    Thanks.
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