Instead of looking for refurb residential properties, title split opportunities or new build apartments to flip, many property investors are increasingly heading straight for the commercial property. Then, they’ll do some clever converting and end up with a house or apartments to sell/rent.
Yes, there’s work involved and you really need to know what you’re doing – which is why it’s regarded as the type of strategy for property moguls – but changing a commercial property into a residential buy to let etc. can be highly profitable, producing impressive yields.
It’s important to have the right people on board with you though, and that means a solicitor who specialises in commercial property buying and a developer you can trust to rein in costs if need be (the development aspect in itself will be much more complicated and lengthier than if you were preparing a buy to let for sale or rent). You’ll also need a property accountant to advise you on the tax implications (which are different to residential investment and can involve VAT).
Types of commercial property for turning
The type of commercial property which is commonly altered into living accommodation includes small office blocks, small work units, a shop with a flat above, pub, agricultural buildings, and of course, a church. Just walk down your local high street today and you’ll see plenty of closed shops and restaurants.
The government is keen to see these ghost town centres go, which is why they have recently introduced their new Permitted Development Rights legislation. This makes it easier to alter the interior of a commercial premises into a residential house or apartment, because full planning permission isn’t required (the exterior is a different matter and may be subject to local authority planning guidelines). Not only that, but the government’s National Planning Policy Framework features the reuse of empty commercial buildings as one of their main priorities.
Other reasons to consider commercial to residential investment
- Most empty shops and offices tend to be located in the town centre – or at least in its environs. As such, it’s a sought-after location for young professionals;
- The majority of those empty shops and offices will have been like that for months, even years. As a result, you’re more likely to be able to negotiate a good deal with the owner;
- Unlike with residential property, you won’t have to fork out extra money on Stamp Duty for your additional property, since non-residential and mixed-use properties are exempt from this rule. Standard Stamp Duty on the property applies, but only after £150,000 (for residential it’s £125,000);
- You can get VAT reduced from 20% to 5% for building and renovation work you need done;
- It’s easier to get a bargain on a commercial property since properties aren’t listed on the big online portals. Instead, keep an eye on commercial property website listings and get in touch with commercial estate agents.
Speak to our commercial to residential conversion experts
Could it be time you considered such a property investment strategy? If so, here at Sourced, we can certainly help you find the right type of properties to get started with. Just get in touch with us on: 0333 123 1330 and we’ll get one of our specialist team to call you right back.