We have just secured a deal in North West London. Judging from all the interest we had in the last deal I wrote about, in the same location, I don’t think it will stay around for very long.
The property is freehold with two 2 bedroom flats, both let out, bringing in an income; however, less than the current market level.
The property comprises of circa 3,000 sq. ft. in total, with a large vacant commercial premises on the ground floor; which will no doubt be burning a hole in the current landlord’s pocket, due to the empty business rates it attracts.
The property has very good head height on the commercial element and backs on to a street at the rear. This is a very important point, as any flats which will be built to the rear will need to have access from the back side of the property.
This development will utilise both full planning and a little known process that comes under planning, but comes with the certainty that full planning doesn’t. The little known process will be used for the commercial element, and full planning will be utilised for extending the building backward and upwards.
We envisage a GDV touching £2M at the end of the project, the purchase price is just over £1M going in.
Converting within the existing fabric of the building keeps the cost down. One should be looking at £50-75K per flat. It’s important with small developments not to get bogged down with layers of professional fees. Keep these to a minimum.
Therefore, two flats are expected to be at a cost of £150K max.
With planning we mostly use a bite size approach. We secure the certain confirmed planning rights as quickly as we can, from the point of exchange, and then we work on the rest of the building bit by bit. Here the commercial will be converted by using the certain planning element, this must be granted within 56 days. This means if we delay completion by more than two months, we will be completing on a building at a much higher value than we exchanged upon, because we will have changed the usage class of a large portion of the property.
Once this is under our belt, we then go for stretching the building both backwards, and upwards; which judging from the neighbouring properties should not be a contentious issue.
We will aim to end up with 5 to 6 flats in the property once it has all been completed; or perhaps less flats but larger flats with an HMO element to them. This is an exercise we will undertake later on down the line.
It is likely that the investor in this deal will purchase this property within an SPV, as this seems to be the most tax efficient way of doing such property deals at the moment.
In another deal we set up another company below the existing one, to park the completed BTL properties there; thereby separating the development part of the building and the long term income generating BTL portion. This made sense on several levels, and is likely to have a six figure saving over a 5 year period.
This deal is fresh and looking for investment, please get in touch if interested.