My First Commercial to Residential Conversion (Is It Worth It?)
In this video I explore the commercial to residential conversion potential of converting the top floor of this commercial retail property I recently purchased. I go through all the numbers to see if its worth converting the top floor only to residential use.
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Chapters:
00:00 Video starts
01:36 Property tour
06:13 Conversion thoughts
08:54 The numbers
11:27 Two flats worst, medium and best Cases
13:57 Refinancing - cash in deal
15:17 Key lessons
I give you a tour around the top floor which is the area that could be converted to residential. I explain some of the good and some of the bad, about converting it.
Bear in mind this is my first conversion so I am not confessing to be an expert at it, but did educate myself on the subject before buying it so I do believe I have followed best practice.
I attributed £100 per sqft for the conversion build costs.
When planning a conversion its best to engage an architect and you should include their fees into your costs. I use 11% of the conversion cost as a rule of thumb prior to quotes.
With anything it's always good practice to add in a contigency cost which I added in 10% for a contigency and would use a bridging loan to fiinance the commercial to residential conversion work.
I factored in a 9 month build time, along with stamp duty and legal costs. Fortunately there is no CIL applicable for this area. Check your local area for CIL charges which is a levy imposed by the local council for new development work. This typically costs around £100 sqm but vairous by local council.
When calculating GDV which is the gross development value I used 3 cases which were Worst, Medium and Best case scenarios with a view that the real costs (and profit!) should be in that range.
One the best reasons to look at commercial to residential is the potential for the increase in per sqft value. This is proven when you come to refinancing your development as its new value is based on the residential per sqft price. Refinancing will also allow you to get back your cash and profit from the deal so you can then go again on the next one.
Recommend Reading:
The One Thing, Gary Keller https://amzn.to/3fTDKpK
The 7 Habits of Highly Effective People, Stephen Covey https://amzn.to/3pn81QS
#propertyinvesting #commercialtoresidential #buytolet
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