Thinking of converting commercial property to residential?
While renting out a property this way has its clear advantages, there’s a lot to consider. Ensure you’ve thought every detail through before you decide to go ahead.
Unsure where to start? Here’s a handy guide for landlords considering this path.
What to Consider When Changing Commercial Property to Residential
First things first, you need to decide whether this conversion is feasible for you at this time.
The Type of Property
There are many kinds of commercial building, from office to retail. Some of these may be easier to convert than others – so it’s vital you look into the specific details.
Class J allows developers a lot more freedom, however there are still some exemptions and restraints. Ensure you’re aware of these from the start.
Building Conversion Costs
While you’re not starting from scratch, it’s important to note that the cost of converting the existing building could be considerable.
Particularly if the building requires significant structural work, it might be more costly than expected.
Are you prepared for this?
Planning Permission Commercial to Residential
While it’s not always the case, you may require planning permission before going ahead with any work. Even if the building falls within Class J guidelines, you may still need permission.
Particularly if you plan on knocking down walls, for example, you may need to prepare for this extra expense.
Local Planning Laws
You may need to speak to the local planning authority, or local council, before going ahead with any work.
Location
Bear in mind that the location of commercial properties might not be ideal for residents.
Consider:
- Transport links
- Local amenities
- Nearby schools
- Parking
- Noise pollution
- Access for developers
Ask yourself, ‘Can you live in your commercial building?’ If the answer is no, it’s unlikely it will appeal to tenants either.
More and more people are choosing to rent over buy, but location can make or break this. Particularly if you’re trying to encourage a long-term tenancy, the area is everything. Tenants will only want to lay their roots in your property if they like their surroundings also.
Mortgage
Unless you have enough cash upfront, it’s likely you’ll need a mortgage to purchase the property.
This may mean the conversion is subject to your broker’s terms and conditions.
Insurance
While all landlords should consider insurance, when it comes to conversion, there’s an extra need to safeguard the building.
During the work planned to go ahead, are you covered? Consider the terms of your mortgage agreement – you may be required to get insurance.
Making a Commercial Conversion Liveable
There are a number of requirements that need to be met before tenants could live in the property. A commercial to residential conversion should consider the following:
- Plumbing
- Heating
- Electrical safety
- Removal of hazardous material
- Fire safety
Ensure all these needs are met before you consider letting tenants move in.
Commercial Property Change of Use to Residential – Other Considerations
Of course, there’s more to a conversion than simply making the property safe.
Residential units have things that commercial spaces may not, such as storage areas. Also, how secure is the rental?
It’s a good idea to imagine yourself living in the commercial property. Does it feel like a home?
The Pros of Changing Commercial Property to Residential
There are some undeniable perks with converting commercial buildings, including:
- You could potentially get a bigger property for a lower price
- You may not need planning permission
- There’s no property chain
- Investing in property can be hugely profitable
The Cons of Using Commercial Property As Residential
While there are some positives, there are also some inevitable downsides:
- Sometimes the conversion can be more costly than expected, particularly if planning permission is required
- You’ll need a specialist buildings survey, which can be expensive
- It’s easy for conversion costs to spiral out of control
- Conversions can run on for longer than anticipated
Meeting Your Requirements as a Landlord
Decided this is direction you want to take as a landlord? This journey is both an exciting and difficult one.
As with any property, there are a number of requirements you’ll need to meet as a landlord. But, you’ll also want to ensure your investment is protected every step of the way.
From check-in to check-out, No Letting Go will ensure you’re meeting all the necessary safety standards. As well as this, we’ll ensure your tenants are looking after the property as requested. Our comprehensive property inventory services offer you peace of mind, while making you the best landlord you can be!
New to the buy-to-let game? About to take the first steps to becoming a property investor?
While this is an exciting journey, it can feel overwhelming at times! There’s a lot to learn when you’re just starting out.
To ensure you stay on the right track, we’ve got some tips on property investment for beginners. This advice should help guide you along the way!
Property Investment Basics
Before you start looking at properties – you need to work out what type of property investor you want to be.
Decide Whether You Need Partners
Do you want to invest alone, or with others?
If doing this by yourself, any money you make from letting out the property will be yours alone. However, some people are not in the financial position to do so.
So, first things first, ensure you know what you can afford before you embark on the journey!
How Will You Finance Your Investment?
During the planning process, your investment strategy should take into account exactly how you’ll afford to purchase a property. This should happen before making an offer on a house.
There are a number of different things to consider, including:
- Stamp duty land tax
- Getting a mortgage
- The day to day running of the property
- Current property prices on the market
- Whether now is a good time to buy
- Survey costs
- Solicitor fees
- Insurance
Hopefully, sooner rather than later, the rental income you generate will ensure cash is flowing into your pocket. However, the upfront costs involved with buying a property should not be overlooked.
What Type of Investor Do You Want to Be?
When investing in property, you have a number of options open to you. This could be:
- A new career path
- Your main source of income
- A source of extra income on top of another job
With direct property investment, it helps to have a long-term plan. Imagine yourself in five years’ time. Where do you want to be?
More and more people are choosing to rent over buy. This presents an exciting market for investors to take advantage of.
How to Invest in Property
Once you’ve got the basics sorted and know what type of investor you want to be, it’s time to get started.
But, that can be easier said than done! So, here’s how to find a good investment property:
Choose Where You Want to Invest
Where do you want to invest? Decide early-on.
Here, research is key. There are a number of things to consider, including:
- The average cost of buying a house
- The average rental yield in the area
- The type of tenants in the area (families, students etc.)
- Whether the area is up-and-coming
- How close you want the rental property to be to your own home
Once you’ve decided on the area, it will make choosing the right property to invest in much easier. However, it can be more difficult than anticipated to get to this point!
Identify Your Target Tenant
Who do you want to rent to? It helps to have a target tenant in mind.
For example, if you invest in a studio flat, it’s unlikely this will appeal to families. However, in an area where many residents are postgrads, this could be perfect.
It can be tough to narrow it down – but it’s worth it. Remember, the area you’re in should play a huge role in deciding your target tenant.
Ask yourself who you would and wouldn’t let to. Would you consider renting to students? This may widen your options, particularly in an area with a number of universities.
Make Sure Rental Returns are Competitive
The best way to start investing in property? Be on the lookout for high rental yields.
This can vary place to place, as everywhere in the UK is different. But, these tend to be favourable locations where there’s a high demand for rental homes.
You’ll want to ensure that, over time, the property can not only pay for itself but make you a profit. This includes any extra charges, such as maintenance.
Look for Opportunities to Add Value
The UK property market is constantly changing! Even some of the best estate agents can’t predict what will happen next.
House price growth is one of the main reasons to invest. When you eventually come to sell the property, you want to know you’ll make a profit. One way to ensure this is by looking for ways to add value:
- Consider ways to refurbish/renovate the property
- Choose an up-and-coming location
The best property investments are those which look to the future, rather than just the here-and-now.
Property Investment Advice – Understanding the Risks
If you’ve decided this is the path you want to take, you’ll need some property investment tips to help you along the way.
Ensure you’ve considered these risks:
- Rent is not always guaranteed – which may mean you can’t afford mortgage repayments. Always try to prevent void periods at all costs
- House prices can fall
- Difficult tenants can cause a number of issues, such as damage to the property
- Major house repairs can be extremely expensive
Property Investment Guide – The Potential Returns
Despite some inevitable risks, the world of buy-to-let is an exciting one, and can deliver huge returns.
This market can be a very profitable one! Plus, becoming a landlord is a rewarding career path to follow.
Protecting Your Investment
One of the most important factors to consider? The ways to safeguard your rental property.
Having a comprehensive, detailed inventory is one of the most significant elements – essential for protecting both landlords and tenants.
Unsure how to get started? No Letting Go can help. From check-in to check-out, we’ll make protecting your investment our top priority. Find out more about our inventory services here.
Looking to invest in rental property? There are many things to consider before getting involved in buy-to-lets.
Whether you’re trying to increase your portfolio or you are just getting on the ladder, it’s worth keeping these key principles in mind when choosing a rental property to invest in.
Here’s a comprehensive guide to rental property investment.
Is Investing in a Rental Property a Good Idea?
In short, yes. Rental properties are very attractive to landlords as mortgage rates and interest rates are low and rental return is high. The current housing market means that there is a great demand in tenants looking to rent.
As a landlord, you need to have a business plan for rental property investment. It’s worth familiarising yourself with how much mortgage interest you will be able to claim and what income tax you will need to pay. By 2020, landlords will get a 20% tax credit on their mortgage payments which may push some property owners up a tax bracket.
Before investing in property, you will also need to consider stamp duty, how much maintenance costs will be and whether you need landlord insurance.
Once you’ve decided you will buy a property, there are some significant factors you need to take into account.
Choosing the Right Area
This is the most important thing to consider in real estate. You need to perform market research to work out whether you will get a good return on your investment.
It may sound simple but choose an area that renters would like to live in. There will be a price growth for properties bought in up and coming areas. You will get a higher return by investing in a developing area. Consider:
- Transportation links
- What are the local schools like? (if renting to families)
- Are there enough shops, restaurants and businesses?
- Is there a university?
- What are the other properties in the area like? Do the neighbours correlate to your desired tenants?
This needs to be an area that your tenant will be able to afford.
Carefully consider how much rent to charge. Ideally this will be competitive for the area.
If you’re renting to students or younger tenants, they will be unlikely to afford high rent prices. You need to calculate the percentage of rent return compared to your mortgage rate.
What is the neighbourhood like for insurance premiums? Is the house likely to be broken into? Will you need to pay excess? These are all questions you must ask regarding your property.
Do you want to buy a rental property that is close to where you live or work? Being close to your property will allow you to monitor it if your tenants need assistance. However, there may be better areas further afield. If your property is not in a convenient location, you can hire a property manager to look after it.
Decide which cities to invest in by researching average rental yields. Invest in Manchester or areas surrounding London. Colchester, Essex had the second best rental yield after Manchester.
Choosing The Right Tenant
Deciding who you will rent your property to will inform what kind of property you will invest in.
It is important to choose the right tenant. These are some factors you need to consider about your tenant:
- Their age
- Is it a family? (E.g. single family or two income family)
- What is their financial situation?
- What do they want out of a rental?
The type of tenant you rent to will affect decisions you make about decorating your property, where the property will be located and the type of property you choose. To secure the best tenants, perform a tenant reference check.
Is it worth renting to students? If you decide to rent in a student area, you need to be aware of the benefits and pitfalls of this. There will be a consistent turnover of tenants who will keep your property from sitting empty and generate cash flow. However, students can be unreliable and do not always treat the property well. Maintenance of the home may cost you more in the long term.
The Type of Property
The type of property you choose will dictate what kind of tenant you will have. If you invest in a HMO (house in multiple occupation) property, it will likely be occupied by tenants aged between 22 and 30. A four bed house will be well suited to families or, you can convert a house into several flats and have multiple tenants.
This depends on what kind of landlord you want to be. Do you want to be hands on or would you prefer to outsource to a letting agency? Consider your schedule and your expertise.
What is the Condition of the Property?
You need to think about how much upkeep your property will need. If you want to invest in a property that needs renovating, you need to take into account the amount of time and money a renovation will take. In the long term, you may be able to charge a higher rent which will be a better investment.
Choosing to buy a home that needs little upkeep will be better for landlords who wish to receive a passive income. Tenants will not require as much assistance and you will not need to be too hands on with your property.
The Tenancy Agreement
Creating a good tenancy agreement is fundamental to your investment. Seek legal advice before choosing a rental property. This contract will set out what is expected from your tenants and how you will be expected to act as a landlord so it’s important to get it right.
For a standard tenancy, ensure your agreement covers the following:
- A full inventory of the home
- Clauses regarding the deposit and when it can be withheld
- How you expect the tenants to treat the property
- When the tenancy can be terminated
If it is a HMO property then you may need a license from the council. Your property may fall under the general definition of a HMO but might be exempt from licensing laws. Seek legal advice if you are unsure if this applies to you.
Seek out a tenancy template that will help you draw up your contract and familiarise yourself with the relevant bylaws.
It is important to prevent void periods. Choose trustworthy tenants who will occupy the home for long periods and try to be an organised and efficient landlord. If a tenancy is coming to an end then be sure to advertise your property as soon as possible.
How to Market Your Property
Once you have bought a rental property, you need to be able to market it successfully. You will find the best tenants by thinking about how to market to them.
- Advertise the area your property is in and the benefits of that location according to what your desired tenant would be interested in. For example, a group of professionals are likely to be drawn to somewhere with good transport links for commuting
- How is your property decorated? Is it furnished? What kind of facilities are there?
- What is the length of the tenancy and how much will the rent be?
- Describe the property as accurately as you can
The easiest way to market a property is by using a letting agency. They will be able to do the work for you, such as arranging newspaper advertisements and showing prospective tenants round the property. Agents will also be in charge of collecting deposits and rent payments and drawing up tenancy agreements.
Using a letting agency does not mean you won’t be involved with the management of your property. You can choose how much work you want to delegate to an agency and how much you want to do yourself.
It is important to look after your investment. For help with your property, use No Letting Go inventory services. We can conduct full reports on your properties so you can be confident that your investment is secure. Browse our full list of services to find out more about how we can help.