Planning to convert a house into flats? If it’s your first-ever property conversion, it’s especially important to go over the costs extremely thoroughly – and to err on the side of the caution by giving yourself a slightly bigger budget than you should need.
Costs of Conversion
The cost of this type of conversion ie a house into two flats averages around £25,000. Factors that will influence the cost include the location, state of the existing property and how ‘high-end’ you plan on making the flats. Here’s a list of the main costs broken down:
- Development finance (including arrangement costs and possible exit fees)
- Fitting individual meters for utilities such as gas, water and electricity
- New kitchen and bathroom (depends on quality of materials)
- Individual boilers
- A second entrance and other building works such as erecting partition walls and plastering
- Decoration (painting, carpets etc.)
- Planning consent (cost of application plus architect’s drawings, surveyor costs)
- Building Control approval
- Ongoing council tax, utilities bill during development phase
Where to Find Funding
Buy to let mortgage. You can take out a mortgage on the property if you plan to keep the flats and rent them out on a buy to let basis. This requires you to pay a deposit (of around 40% of the value of the property pre-conversion).
You should then be able to get a mortgage for 75% of the property’s value. You can then pay it off for up to 25 years.
Bridging loan. Another way you can fund the conversion is by taking out a bridging loan to fund the costs of the build. You’d normally do this if you plan on selling the flats after they have been converted. You can then pay off the loan and pocket the profit.
This tipe of loan usually allows you to borrow 70% of the value of the property. It has a high rate of interest, which is why it’s usually for short periods of time, such as six months up to one year.
Peer to Peer lending. This is where investors agree to fund your project and pick up a profit at the end. The loan is based on the predicted end value of the project (ie what the building will be worth once the flats have been converted).
With peer to peer (P2P) lending with Sourced, you can borrow up to 70% of the GDV (gross development value). It’s usually for anything from six to 18 months.
Finance Through Sourced Capital
When you’re a franchisee of Sourced you can get exclusive access to our in-house funding facility, Sourced Capital. It allows you to borrow up to 100% of what you need to purchase the property and pay for the works, due to the 70% LTGDV. That’s because our loans are based on the end value of the project (GDV), rather than its initial value.
Get in Touch
Our franchisees use Sourced Capital to fund a variety of property projects, such as those involving property conversions, heavy refurbishments, new build and below market value refurbs.
To find out how Sourced can help with your first conversion project, download our Sourced Network prospectus today.
