Although the population growth in the UK slightly slowed over the years, many will still call it home by 2025. According to Statista, during this period, there will be nearly 70 million in the country. That’s around 5 million more than in 2015.
And since houses in the country are expensive, many are likely to rent flats for the next few years. This makes an idle property or even your present home a possible lucrative venture: you can break it down into units.
The question is, how do you do it? Here are the basic guidelines:
1. Determine the Ideal Size of the Unit
When you’re trying to convert your home into different units or add more rooms for lease, you cannot divide it in whatever way you want. One of your foremost considerations is size.
The basis for the size of the area will be the 2015 national housing standards. Some guidelines say that a unit should have a bedspace and storage. The minimum size of the entire space will also depend on the number of bedrooms, bedspaces per person, and dwelling stories.
For example, if it is only a one-story dwelling with one bedroom occupied by a single person, the smallest size is about 39 square meters with a meter of built-in storage. If two people need to use the same space, the minimum area increases to 50 square meters.
The Centre for Cities, however, notes that the actual sizes of flats can also depend on the location. They may be much bigger in Blackpool, where the minimum space is around 45 square meters, and smaller in Slough, which is already near Central London. This is because housing costs are higher in the area.
2. Get the Necessary Permissions and Certifications
Contrary to popular belief, you may not need to get a permitted change if the proposed and the existing class of the building or land is the same. However, to make sure you don’t get yourself in legal trouble, reach out to the planning permission office through the local council.
The local planning authority will need your development plan to determine whether to grant your permission, and the entire process can take between 8 and 13 weeks.
It considers factors, like the size and layout of the building, its façade or external appearance, the infrastructure such as water supply and roads, landscaping, and its effects on the surrounding area, including traffic.
Some properties become a house in multiple occupation (HMO). This means that the dwelling has at least three stories with five or more individuals from two or more families. The landlord may need to get a special license for this.
It is expected that every unit will have a separate of many things. These include heaters, insulation systems, water supply, etc. Some of these may need inspection and certifications.
One of these is the landlord safety gas certificate, a legal requirement since 1996. An expert will check the flues, gas lines, and gas-operated appliances to ensure they are up to standard and safe.
3. Calculate the Costs
The costs of converting the home into flats can be high. It can range from £15,000 to £25,000, and we’re talking only the basics here. The figure is also less likely to include the professional fees for architects, solicitors, and inspectors, as well as other charges for processing your documents.
Usually, one of the best steps is to apply for another mortgage or refinance an existing one. However, not all lenders may allow it. You may need to consider other financing options, such as a business loan. You may also dip into your savings (if it’s already big enough) or apply for a property development loan.
4. Know the Tax Implications
If you become a landlord by converting your home into flats, you can already earn in two ways. First, you can lease the units. Second, you can change the use of the property and then sell the flats. Either way, though, you will have to pay the taxman.
Normally, when you sell a property to someone, you generate a capital gains tax (CGT). When it involves a converted property, taxation isn’t that straightforward. Take, for example, the principal private residence relief (PRR).
It protects the individual from capital gains tax when they sell their property, but it depends on many factors, including the full years of ownership.
New landlords might need to work with tax accountants who specialize in commercial buildings or property conversions.
There’s no doubt that converting a house into a flat can help you earn money, but before the rewards come the responsibilities. Keep these processes to heart to avoid making costly mistakes in your journey.