In 2018, the need to sell is starting to become apparent with a slowing rate of increases in property prices across the nation and with changes to Buy To Let tax legislation which is making it harder for private landlords to achieve their desired ROI. But, selling doesn’t necessarily have to be the objective for the coming few years.
If you follow the tips in this article about what conversions, extensions and other additions you can add to your property to improve your property value and also, increase your rental yields overall.
It is important to note, however, that although conversions and extensions do typically add value, it is possible to overextend and as a result, lose value or be stuck with an ugly, over-extended property that nobody wants to buy – the caveat of overextending a property is that it typically results in living space that can then be rented out and potentially, massively increase rental yields but do you really want to sacrifice property value for increased rental yield? I guess it depends on how long you intend to keep the property.
So, what conversions can you do to your home to increase rental yields and property values?
- Cellar Conversion
You can often increase the value of your property by a staggering 30% just by insulating, decorating and turning your cellar if you have one, into living space. Cellar conversions can be expensive, as can any extension, so it’s important to make sure the build cost per square metre is less than the buy price per square foot in the local area (calculate this by dividing the property value over the area you’re converting and compare this to the overall cost of conversion).
Because a cellar conversion is classed as a “change of use” for planning purposes, planning permission isn’t required which also makes cellar conversions one of the least complex conversions available to property owners, you could probably even get started today. You will need permission to convert the cellar of a listing building though. If you don’t have a basement, you could consider building one however, this takes skill, determination, a lot of hard work and will make a huge mess. Only embark on this endeavour if you’re ready for a massive challenge and unless you’re well skilled in excavation, building and other works associated with building a cellar, hire a professional!
- Convert the house into flats
By converting a two bedroom house (at the current rental value of £500 pcm) into two one bedroom flats (at the rental value of £395 pcm each or £790 pcm total), it is clear that you’ll massively increase your rental yield as well as adding up to 30% on to the value of the property.
Some important considerations include costs of rewiring, informing Royal Mail and the local authority of the addition of a new address, council tax changes, increased tax payable, separation of utilities, installation of a second bathroom and kitchen, installation of new radiators as well as, most importantly, whether a one bedroom flat over a family house would be suitable in the area the property is in. Converting houses into flats is especially popular in professional/student cities, London have seen a massive increase in flats and studio apartments whilst families and those on a lower income have been driven out of many of the major London boroughs, closer to home, along Narborough Road, there are very few family homes left as they’ve all been converted into student accommodation whilst more and more Victorian properties are being snapped up for the purposes of conversion. In Leicester City Centre, we are seeing industrial buildings being developed into loft conversions with rooftop gardens. Nationwide, property investors are seeing the prosperity that comes with compounding their large, family houses into multiple, small flats.
- Garage Conversions
Having a house with a garage can have massive benefits, it’s somewhere to park your car, somewhere for yourself (or your husband/partner) to make into their personal den but for property investors who want to add an extra 15% on to their property value, converting their garage into a small, studio apartment may be the way to go. Converting a garage doesn’t typically require planning permission unless you’re planning to alter the structure of the building. Even for residential landlords, converting your garage into living space could fetch upwards of £80 per week (or £347.60 pcm), which could help to really make a dent in any mortgages secured against the property or other loan repayments.
- Loft to Bedroom Conversions
When you convert your loft into an extra bedroom, you automatically make a property which is suitable for a small family with two children into a property which is suitable for a much larger family, depending on the size of the loft and available space between the upper floor and the loft itself will determine how many extra bedrooms can be squeezed in up there, each bedroom typically adds between £70 and £100 to the rent per month or upwards of a further £100 per month if you’re converting an upper floor flat into a maisonette by utilising the loft. By converting a loft, you’ll typically expect to find an increase of 15% to the property value though this will depend on the number of bedrooms, space and how the loft is accessed.
By choosing one or more of the above conversions, you’ll be able to maximise your property values as well as significantly increase rental yields. Two final considerations to bear in mind are in regards to your mortgage and insurance. You must seek approval from your mortgage lender if you intend to let out your property and inform your insurance providers of any conversions or structural changes. Not doing so could invalidate either your mortgage and/or insurances which may cause your lender to ask you to repay the full debt immediately or face repossession.
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