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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