Converting houses into flats is becoming increasingly popular. There’s a high demand for flats in North London, and splitting a property into units can maximise both rental income in the short-term, and profit on sale in the long-term.

But where do you start? Here’s everything you need to know about converting a house into flats…

Research the market

Are flats in demand in the neighbourhood you’re considering? This is one question many potential landlords forget to ask when purchasing a house to subdivide – and if a mistake is made, it could be costly.

Before you even start thinking about turning a house into flats, you must make sure that you’ll have a market for your new rental properties. Researching the market takes a little time, but it’s the best way to ensure that the flats you’re planning on building will be wanted in the area.

It’s well worth noting that when it comes to rental flats, some neighbourhoods are in higher demand than others. Researching the housing market is one of the best methods for maximising rental profits, as in-demand locales and higher rents go hand in hand.

Do some research, and ask us about the current market; we will be able to give you expert advice about what’s selling quickly, what’s not, and the new hotspot areas. If four bedroom properties aren’t shifting but studios or 1 bedroom flats are, conversion seems sensible.

Planning implications

The next thing to do is contact the planning department of your local council, as you’re likely to need planning permission. If you’re given the go ahead, you’ll then need to apply for Building Regulations before you start building.

If you haven’t yet purchased a house to split into flats, check with the local planning department before you invest. Depending on the neighbourhood, there may be requirements related to minimum flat size, soundproofing between neighbouring flats, insulation for comfort and energy efficiency, fire safety, and more. In some neighbourhoods, parking availability is an additional factor that comes into play.

Besides checking with the local council and Building Control, you’ll want to consult a solicitor to ensure that there are no legal barriers standing in the way of your planned renovations. If the house will be mortgaged, your lender will need to play a role in your plans as well. Some banks readily accommodate landlords by offering loans to help with refurbishment and/or development, while others discourage or disallow mortgage holders from turning houses into flats.

Tax implications

There will be tax implications when converting a house into flats, and you’ll want to take a closer look. This is particularly true if you’re planning to sell your flats rather than renting them, and the amount of profit will have an impact on how much you owe. Living in one of the flats rather than renting or selling all of them will allow you to take advantage of private residence exemption, at least for the time being.

Each case is unique but in general, authorities take the original property cost into consideration along with conversion costs and disposal costs. Additional factors include trading profit and of course, capital gains tax.

Planning for residents’ needs

You’ve confirmed that flats are needed in the neighbourhood in question, you’ve ensured that your plans are in compliance with regulations, and your estate agent has helped you to ensure that the property you’re considering is the ideal candidate for transforming into flats. Be sure to work alongside your estate agent as you’re planning the best approach to attracting quality renters and meeting future residents’ needs. Along the way, keep the following points in mind:

Flat size: Do renters in this neighbourhood tend to go for one-bedroom flats, or is the population comprised of roommates or families who need rentals with more than one bedroom? What is the average flat size in the neighbourhood, and how will your planned flats compete?

Flat design: What kind of design details will work best in the flats you’re planning to build? What will the floor plans be like? What kind of floor plan will work well in the space?

Services for each flat: Each flat needs its own electric, water, and gas connections. Since service providers have busy schedules and installation time varies, it’s important to contact the services before work is underway. If services are delayed, your project will take longer to complete.

Accessibility issues: All flats need private entryways, and if there are gardens, they’ll need access to these as well. Consider proximity to parking when working out how residents will get to their flats, and think about adding helpful extras such as secure bicycle storage.  

Look into big-ticket items. Since each flat needs a private kitchen and at least one bathroom, you’ll probably need to undergo some major renovations to install the necessary plumbing. Existing baths and kitchens often require updating.

Additionally, each flat will need to have its own boiler, and all flats will need to have individual heating systems. Your estate agent can help you determine where changes can be made, and where new boilers and heating systems will need to be installed.

Costs

Costs will vary hugely from property to property, depending on the size, the new house design, condition and the number of flats you’re converting. We’d say you will expect to pay around £25,000 for a basic conversion, which would include putting up walls, installing bathrooms and central heating units. (You’ll need to talk to the utility companies so that each address has its own gas, electricity and water meters.)

There are lots of things you’ll need to consider when budgeting for the project, including: 

Planning approval from the local planning department, Building regulation approval, Installing new utility meters, installing new kitchens and bathrooms, finance for development, sound proofing, creating a second entrance, decorating costs and finance.

It’s imperative you shop around for the best mortgage rates and loans, as this will be where your profit margin is made. Our experienced sales team at Adam Hayes will be able to help you with any questions or queries you have.