Maximising the Potential of your Property
Over the past decade, CPS Homes have helped hundreds of landlords maximise the potential of their property. This article is designed to help you consider the finer points of the improvement process.
Why?
First things first - why bother? This question is usually answered by your long-term goals of owning property. If you have no interest in this sector and are happy with no increase on your current return, it’s probably best to stop reading now!
The reasons for maximising the potential of your property can be easily split into two areas; capital value and return (often expressed as a yield).
Capital value is most often realised (i.e. becomes tangible) upon the sale of your property, but can also be realised through a re-mortgage and the subsequent release of equity. The aim here is to increase the value of your property by a greater amount than the cost of the works which may seem obvious, although sometimes the best action to take is none. Every property has a maximum price it will sell for at a particular point in time; if you know your aspirations for a particular price are unrealistic, spending money may be the wrong action to take if the property is not going to increase in value proportionately.<br>
The second reason is to get a greater return on your property, i.e. your investment. Here, you need to either increase the number of tenants or increase the rent; preferably both. However, spending money to achieve an increase in rent isn’t always the right thing to do. Would you spend £50,000 for an increase of £10 rent per person on a three bedroom house? No, you wouldn’t, which illustrates that the increase needs to be in relation to the expenditure or, in other words, what you’re really looking for is an increase in your yield.
There are many ways that you can help rent or sell your property and Daily Mail readers will no doubt be familiar with the perils of putting up fairy lights, painting walls with oppressive colours and putting a family of gnomes in the front garden, but in this article we explore some more drastic methods of increasing the return you can get from your property.
How?
Before you consider extending vertically or horizontally, consider the possibility of creating extra rooms within the current boundary of your property. If you have a large room, usually at the front of the property on the first floor, it may be possible to split it into two rooms. Likewise, sometimes bathrooms can be unnecessarily large or poorly positioned, and an internal re-design can often create an extra room or a better proportioned layout.
Once you’ve checked your internal layout, next you can consider extending. If you wish to extend vertically, i.e. a loft conversion, take a look along the street for any Velux windows and it will give you an indication of other people who have already undertaken similar work. To know if you can obtain permission for a loft conversion and to discover what you will physically achieve, you will need to employ the services of an architect. In all but larger houses, you will often end up lowering the floors in the rest of the property to create enough headroom, so this work is often best done in conjunction with a refurbishment of the property.
Depending on how large your garden is, you may be able to extend horizontally. Again, the quickest indication is to look along your street to see what other people have implemented. You will quickly gain a picture of the size of the extensions that have been built, including if they are single or two storeys. Due to the location of extensions, most landlords carry out this work along with a re-design of the kitchen, and quite often re-position an older ground floor bathroom to a more favourable location. Again, we’d always suggest you speak to an architect to check how far you are able to extend.
What to Check…
Before you commit to any costs, double check your plans will improve the return on your investment.
Demand
More units or rooms aren’t necessarily the right thing to do. If you’re increasing the number of rooms at your property, check that there is a demand for that size of property. It could be that there is a massive demand for apartments and you would achieve a better return by taking this route. Likewise, sometimes increasing the number of bedrooms could result in a property which has a lesser demand than it had previously. For example, due to a more variable demand it would be advisable to consider the risk versus reward when changing the number of occupants in a fringe location.
Quality
There is a lot of choice when it comes to property. Don’t create small or unattractive rooms; students demand a high quality of accommodation, especially if you want to achieve top rents. Double check your layouts to ensure that what you are creating is what the market demands.
Planning Permission
If you are going to carry out any physical works to your property, it is likely that you will require planning permission, although some works can be completed under ‘permitted development’, which negates the need for planning permission. Failure to gain planning consent can result in enforcement action and create difficulties when trying to sell.
Also of consideration is planning permission for ‘change of use’, which is often overlooked. Whilst you might not consider it top of your agenda, remember that if you need a HMO licence this may trigger Cardiff County Council to check the planning status of your property. If your house currently has less than six people and will remain that way after work is completed, then the use stays within what is known as ‘C3 class’. However, as soon as you reach this six person threshold, you enter what is known as a ‘sui generis class’. In basic terms, this means that there is no specific class for a HMO but that it is outside the C3 classification, and therefore triggers the necessity for the change of use application.
Licensing
From the 1st July 2010, every House in Multiple Occupation (HMO) in Cathays has to have a HMO licence. This is separate to mandatory HMO licensing which applies to all houses which are three or more storeys and five or more tenants. An application for a house which is covered by the mandatory licensing scheme is £700, whilst those falling under the additional licensing scheme are £500, although discounts may apply.
Building Regulations
Physical alterations may require building regulations approval. Failure to obtain this can result in enforcement action and create difficulties when trying to sell. The requirement for approval can apply to very minor works, so it is always best to double check before proceeding.
Amenities
It’s not a case of cramming as many bedrooms as possible into a house. There is a mixture of guidance and laws covering the amenities that your tenants will require, which ranges from bathroom facilities and lounge sizes to the amount of fridge freezer space. For example, the requirement for four occupants is one bathroom where the WC may be included in the main bathroom or in a separate compartment. However, the requirement for five occupants states that the WC must be in a separate compartment to the bathroom, although the bathroom doesn’t necessarily need to have a WC as well. For some properties this work can be very minor, whilst for others it is nigh on impossible.
The Next Steps
Give us a call! As briefly explained in our introduction, we’ve helped hundreds of landlords maximise the potential of their property, so have a great deal of experience in this area. We’re also the biggest student letting agent in Cardiff, so we’ll be able to help you work out if there is a demand for your proposed plans, or alternatively give you some other ideas to consider. Our Lettings Team are available on 02920 668585 and will be happy to have a chat with you.
Work out your finances. Don’t start something you can’t afford to finish in a decent timescale. If you need funding, work out how you’re going to arrange this. Is your project actually going to improve your return? If you don’t know what you’re currently receiving, now would be a good time to sit down with a calculator for an hour or two!
Check your timings. For student properties, landlords typically try and complete work over the summer period so as not to remove the property from the academic cycle, which could lead to it falling empty. Avoid this at all costs – it will, of course, eat into your profits.
Once you’ve made a decision, contact us again and we can guide you through HMO licensing, planning and building control, as well as put you in contact with the relevant professionals you’ll need such as architects, engineers and builders.
The process can be daunting at first, but when broken down into stages and armed with a clear plan from the outset, the outcome can be rewarding and profitable.
