Planning 'Gain' and Development
It has been discussed in our section The
Economics of Buy to Let why it is unlikely today, following a buy to
let boom, that purchasing a property and executing some minor repairs
will yield a decent investment. A case can possibly be made for the
longer term view but Buy2LetExpert advocates purchasing with an
additional potential profit driver in mind. The driver is derived
from potential planning gain.
The planning system is the U.K. is a mess. Rules are plentiful and
difficult to understand and vary from Council to Council. Planning
offices are under resourced and planning applications can take enormous
periods of time and effort. The consequence of such a mess is that a
property being sold may have 'planning potential' but not planning
permission. The U.K. system provides very little idea of what planning
permission is likely to be gained if an application were made. The
buyer, however, knows that obtaining planning permission may be tricky
and so need only pay a small premium for the 'potential' permission.
Should permission be obtained later there can be an enormous gain in the
value of the property long before a single brick is laid..
Buy2LetExpert turned away from pure buy to let in the late 1990s.
1997 saw its last house to be purchased, refurbished and then let. Even
that house had a former brick built stable with road access in the back
garden. Clearly there was a potential for a garage, office or small flat
at least! Every investment that followed had a development component.
Our business now is more buy to develop to let.
Smaller development opportunities can be found from the changes to
'permitted development' rules that came into force in 2008. This is a
complex area but it relates to what development is allowed at a house
without planning permission. The rules are quite complex but
Buy2LetExpert and others can advise to see if there is any potential
development potential in a proposed property purchase without the
need to apply for planning permission. It is these properties that
should be targeted so that the investor can benefit from an additional
profit driver. For example, not many would know that rear dormer
extensions can be built in non conservation areas in certain
circumstances without planning permission! This may easily add a large
bright bedroom with en suite to a property. A huge planning gain.
Buy2LetExpert can also advise on larger projects for more experienced
investors who want to move beyond minor development opportunities. Our
experience includes purchasing and developing former commercial
buildings such as public houses and developing small pockets of land in
London. So, we convert to let and build to let. Such investment must be
long term. Finance and planning can be a huge challenge but if overcome,
the returns can be enormous.
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