You will need to get an understanding of how your trading profit will be taxed and whether you will be liable for capital gains tax. Getting planning approval from the planning department, Installing new gas, electric and water meters, Separate heating systems, including boilers. Personally leave the house as is , and just share a suitable house with your father. You’ll need your solicitor to sort out the ownership of the freehold when you divide the property into separate leasehold flats - as the freehold and leaseholds cannot be held in the same name - along with a maintenance agreement, etc. These include: You will need to get consent from your lender before you can begin a project to convert a house into flats. You will need to instruct your solicitor to arrange leases and title deeds for every flat upon completion of the work. If turning the house into flats means you’ll have to carry out extensive work on the property, you may need development finance. Once you have found the right area and the right house, you’ll need to get in touch with the local authority’s planning department. Thread starter steverogers84; Start date ... My brother and I are looking to buy a terraced house in Cardiff and splitting it into flats to sell on and make good profits hopefully. I would like to convert a house I own into flats, but I’m still paying off the mortgage on this property. Converting a House in to Flats. Converting a house into apartments can yield a comparatively higher income in the short term from individual rents plus a greater capital return in the longer term once the property is sold, either as a whole or individually. You may have a helpful bank but this is not what we hear about the market. You would have no intention on living in any of the flats, therefore you would need to take out a buy-to-let mortgage on each one. This is if you plan to divide the flats into separate leasehold properties. It’s worth noting that you won’t be able to sell any of the flats without putting individual leases on them first. When you first took out your current mortgage, the lender would have granted it on the basis of your property being a single dwelling, therefore they must be notified of any proposed changes to their security. Another factor that may play a part is the availability of parking. In order to gain any finance for the conversion, a lender will want to see that you have planning permission. Some lenders will allow you to borrow up to 75% of a property’s current value, while some will consider lending on up to 75% of its potential value if you agree to sell within 90 or 180 days. Roll-up interest is also available for bridging loans, meaning you repay the loan plus interest in full when you remortgage or sell the new flats. Splitting a house into flats can be a great way to turn a profit, but not all houses are the right fit. The interest can be paid off monthly or you can choose a roll-up interest option. You typically receive this money in installments, subject to regular valuations on the property. Target Markets. We are considering converting both flats into one large property to live in rather than pay costs to move. If you plan on retaining the freehold in your name and renting out all the flats, rather than offering them as leaseholds for sale, then the value of your property will likely increase overall but might not be worth as much as the collective value of multiple leaseholds. They’re suitable if you have the money to carry out the conversion, but your current lender won’t allow it. This simple question is something many landlords neglect to ask when investing in a house to convert to flats. Hello, we're just heading into the last stages who am I kidding of converting two flats into one house. When you divide a single freehold property, like a house, into multiple leasehold flats, you don’t split the freehold. Collapse. Time. You would then rent out each flat individually while remaining the freeholder. 01-April-2019. Filter. The reason is that any prospective buyer of the freehold may want to take out a separate lease on each flat to give them flexibility for selling later on. This would mean you wouldn’t have to assign leases to each flat – contact Think Plutus to discuss this in more detail. or if you require independance, then by two flats or maisonettes, one above the other. Can I do this even though I have not paid off the mortgage? The factors influencing the costs include the following: New house design; Size of the property; Condition of the house; Number of flats to be converted to; A standard conversion should cost around £25,000. My Partner and I jointly own two neighboring flats; we have resided in one for 9 years and purchased the neighboring flat 3 years ago, renting it out ever since. You’ll need to arrange a residential mortgage on the leasehold flat you intend to live in. However, the big disadvantage is that the amount you owe increases a little more each time the interest is added. Combining funding requirements into one mortgage, the idea was then to convert the two flats into one larger house at a later date. Find out below what you can do next. Like with development finance, bridging loans are short term solutions so you have to remortgage onto a new product or sell the flats as soon as the work’s completed. At this point, you’ve done your research to confirm that there is demand for flats in the neighbourhood in question. Privacy Policy / Cookie Policy You may find that an experienced broker is needed to ‘translate’ for the bank and find the right product. John Charcol is a trading name of John Charcol Limited and its Appointed Representatives. The interest then compounds which means the next round of interest is charged on the new amount – i.e. As you make your plans, be mindful of the following points: You should also note that each flat will require its own boiler, and a unique central heating system should be in place for every flat. Some lenders do not like the fact they have mortgages on several flats in the same building. It is extremely important to get quality advice from a tax adviser or chartered accountant to get a clear picture of what your tax liability will be. It’s important to instruct your solicitor to arrange a title deeds and leases for each  flat as soon as the work’s completed if you plan on dividing up the flats into separate leasehold properties. Local estate agents can offer some insights into the places that are selling quickly, the ones that aren’t, and any emerging hotspots in the locale. 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