Converting a house into two or more apartments is becoming increasingly popular. Landlords are tapping into the increased profit-making potential of sub-dividing a property, especially in city locations, where flats are often more sought-after.

If you are keen to find out more about converting a house, here is a comprehensive guide to help you.

What are the benefits?

There are several advantages to sub-dividing a property for letting purposes. These include:

• Having more assets to sell. If you decide to sell in the future, you’ll effectively have two or more properties to generate money from, not just one. This can seriously elevate your overall profit.
• Renting more than one property. Generally speaking, the more rentable properties that you have, the higher the amount of rent you’ll generate.
• If you decide to down-scale your buy-to-let business in the future, you could continue renting out one apartment, and sell the other(s) to free up some cash.
• Broader appeal. This is especially the case in cities, where many professionals actively seek apartments rather than entire houses.
• Period features. Unlike purpose-built flats, sub-divided houses often offer attractive period features; particularly if they’re Victorian, Edwardian, or built in the 1920s. These are regarded as desirable, which means you might be able to charge a higher rental rate.

Before you get started

As with any property investment, it’s vital to do your research beforehand. You’ll need to carry out some market research, with a view to find out more about:

• The rental market. Who is renting property in the area? Are they actively looking for flats? If so, how many bedrooms are popular? What sort of style of home is being snapped up quickly?
• Average property prices. It’s imperative to find out what the average house price is in the area, to ensure that you are not paying over the odds. Remember, you will need cash to convert the property, so you need to keep an eye on your budget right from the start.
• Desirable areas. There is no point purchasing a property on a street that nobody wants to live on. As a general rule, tenants seek accommodation that is near local amenities and prefer being within walking distance of transport links (especially the train station). If you are targeting families, research the local schools. You will want to buy a house in a high-performing school’s catchment area.
• Up and coming locations. Clever investors not only look for locations that are popular right now; they also keep an eye on places that are likely to be hotspots in a few months’ time. These include towns that are undergoing regeneration, or those that are about to benefit from a new rail station (for example, those along the new Crossrail line).

The legalities

Sadly, sub-dividing a property isn’t as easy as simply hiring some builders and getting started. You’ll need to check certain legalities and obtain planning permission.

Legal matters

Once you have found a property that you are interested in, hire a reputable solicitor to work with you. They will carry out all the research required to find out if you’re legally able to convert the house. Be warned, a few homes come with caveats, preventing changes of this nature from taking place. A good solicitor will also be able to guide you through the process of creating leases for the separate apartments. That is important, as you will not be able to sell them without one.

Planning permission

Gaining planning permission starts with a phone call to the local council. Each council has different policies, and these dictate aspects such as the permitted size of each flat, how many rooms they should have, and whether you can even go ahead with the conversion or not.

Once the council have agreed to the changes in principle, it’s time to phone Building Control, who will also have their own set of requirements. These will determine how you approach the conversion process, and will govern aspects such as insulation, fire safety and security.

When you are working out your budget, bear in mind that you will need to hire someone to draft up some plans. These need to be shown to both the council and Building Control.

Mortgage

Sometimes, there can be complications with getting a mortgage for a property that you intend to sub-divide. If your mortgage lender does refuse, then rest assured, there are other funding options. For example, you could take out a refurbishment or development loan.

Financial considerations

There are other things to consider while budgeting for this type of project:

• It’s likely that there are taxes involved with converting the property, especially if you intend to make a profit from it. Your solicitor will be able to provide advice on this.
• Each flat will need to have its own supply of electricity, gas and water, and this will incur a cost. Be aware, there may be building regulations in place regarding the utilities connections.
• In order to do a good job, you’ll need to work with an architect, or a professional capable of creating suitable plans.
• Labour costs. Sub-dividing can be a complex process. For example, your builders may need to install more bathrooms. They’ll certainly need to add a kitchen for each new apartment! When you’re getting quotes from local building firms, check what the quote includes. For example, does it cover installation of kitchens / bathroom suites? What about new appliances?

What can you expect to pay?

Obviously, the cost varies enormously, depending on the area you choose to buy in, the style of property that you purchase, and the sort of conversion you want to carry out. As a ballpark figure, expect to pay around £25,000 for a basic conversion, which will include things like:

• An additional separate entrance
• A kitchen and bathroom
• An additional heating system
• Planning and building regulation approval
• Utility meters

As with any building project, you should make sure that you’ have factored in all the costs involved, and set aside some additional funds to help cover any unexpected expenditures that might occur.