With house prices being so high in many parts of the UK, particularly in commuter hot spots such as the South-East of England and major cities, investors are seeking new ways to make money. Some are converting former factories or other commercial buildings into residential homes.
One great example is a property developer who bought an old furniture showroom in Liverpool, to turn into 15 flats. Rather than seeking the entire funding for the project upfront, he turned to Lowry Capital to secure the funds in six parts. He was able to do this because the valuation of the building increased as the work progressed. He bought the showroom with offices above for £240,000, but after getting planning permission to convert it into the apartments, the valuation increased to £400,000. Lowry Capital provided initial funds of 80% of the purchase price, namely £191,500, because the building’s value had increased. This meant the client had funds to start renovating it. Once works progressed, its value increased to £505,000, so Lowry released another £111,750. A further four advances were made following inspections, so that the company provided total funds of £585,000 on the building which was eventually valued at £975,00, with a gross development value of £1.2 million. By only paying for funds in line with the schedule of works, rather than a big lump sum at the start, the developer was able to keep costs down and is line to make a profit of £250,000.
This flexible approach to funding could be a solution for other developers and buy-to-let investors who want to seek alternatives to buying expensive residential properties and would rather work on a conversion project.
Increasingly, underused commercial buildings, such as office blocks or vast newspaper offices, are being converted into residential accommodation. This is helped by the government’s permitted development rights, which allows developers to convert offices into flats without having to go through a lengthy and expensive planning application process. Similar projects include a former building society in Bradford, which has been converted into 57 flats and an office block in Castleford, which has become 24 rental apartments. A 19th century church in Cardiff and an historic Edinburgh high schools are also due to provide housing in the near future.
These innovative projects go some way to easing the lack of rental accommodation. It means new life can be breathed into an old building, which could be a landmark whose façade deserves to be saved too.
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