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Auction Finance

Making the most of a large plot

Picture of a t with a blue dot next to it, in front of a purple background.

It's easy to forget in this day and age – when new homes are often crowded tightly together to make the most of the available space – but there was a time not so long ago when homes were built on some very generous plots.

Astute developers have spotted the opportunities that come with acquiring a property on a large plot – often buying at auction. But what about the average British homeowner?

A recent survey* conducted on behalf of Together revealed that over a quarter of Brits have a garden they’d describe as larger than average. If that’s you, and you don’t necessarily need the outdoor space, why not maximise on the opportunity?

Extend your house

One obvious option is to extend the existing property.

Over the last year, many Brits have come to realise that after spending so much time trying to live, work, educate, entertain and sleep at home – they simply don’t have the space for it all. As such, almost a fifth (18%) are looking to extend or build an outhouse this year.

If you’re one of the lucky few with more outdoor space than you know what to do with, extending could prove ideal for getting a better balance from your property. First though, it’s worth checking that buying a new home with the layout you want wouldn’t be the cheaper option. Speaking with a local estate agent or browsing property listings online should offer you a good indication.

If you’re a developer, getting your hands on a property with large grounds could provide an opportunity to create a large, modern property to sell, by adding an extension and renovating the rest of the property for it to appear a new-build.

That's the approach taken by developer and Together customer Paul Whitlock. Among his recent projects was the extension of a bungalow into a bright and modern executive property, in a picturesque part of Norfolk.

Once again, an estate agent can give you an indication of your development's potential value, which can help you set (or may possibly dictate) your budget. You should also ask yourself some questions about the market – for example, is there a buyer for such a large property in that particular location?

Whether you’re extending a property for yourself or as an investment, you also need to do some research into any planning permission you might need. Often, guidelines known as ‘permitted development rights’ allow you to extend a house without having to make a planning application.

At the time of writing, the rules offer planning exemption for small, single storey extensions up to four metres long for detached houses, and three metres for any other property, and double storey extensions up to three meters long (with the roof pitch matching the existing house as far as possible).

If your proposal is more imposing, or if your extension would take up more than half of the garden, you need to make a formal planning application. We’d always suggest checking with your local council regardless, because the rules change frequently and other exemptions could apply (for example, if your property is listed, or if it’s already been extended by a former owner). The rules can be found in more detail here.

Replace the existing property altogether

For developers, the maths of the project may mean the land is more valuable than the property on it, especially if the current property hasn’t been lived in for a while and is particularly dilapidated.

If that's the case, you could raze the existing property entirely, then use the newly-cleared space to build several small properties on it.

You could apply for development finance to cover up to 75% of the project costs, or 100% with additional security. You can borrow over two years, only paying the interest each month before paying the loan back in one lump sum at the end. That gives you the time you need to complete your project and sell the properties, or arrange longer-term borrowing based on their ultimate market value.

One example local to Together HQ has been developed on the site of the former Kingsway Hotel in Burnage, Manchester. The former pub, which sat on a large corner plot at the junction of two main roads, has been demolished; the developer had secured planning content for a combination of apartments and large family homes before breaking ground.

While you’re usually within your rights under Permitted Development to demolish a building (providing it isn’t listed or protected), the planning application process could be very lengthy for this type of project. So it’s vital you seek advice before getting carried away with your plans.

Divide the land and build additional homes

It could make better financial sense to keep the property as it is, but use the extra-large space you have to create another (or potentially even multiple) houses on the garden. The new development can often 'piggy-back' onto the existing property's services, reducing development costs. Though you need to beware of covenants and potential access issues, and of course get permission from your local authority.

This may be particularly profitable, as the value of the original property is unlikely to be affected by the reduction in the size of its garden, provided the building plot doesn't rob too much of the space. Consider also that there are Capital Gains Tax exemptions available if you move into the new property as your home after developing it, even if it's subsequently sold on.

If you’re living in your home, don’t write this option off completely. A phenomenon that's become more popular in recent years is the decision to create a 'garden plot' that can be developed as a separate property.

Providing they had the space, 10% of those we surveyed said they’d be willing to build a property in their garden to sell on. In London, this increased to 18% of homeowners, which makes sense considering how valuable land is in this region. If you’re also in an area where land is incredibly expensive and hard to come by, this could prove an excellent money maker.

14% of our surveyed Brits said they’d build a property to house a family member, and it’s no surprise that we want to keep our loved ones close from now on – whether that’s an older parent or even a child that’s moved back home. This figure was highest among the younger generations we polled, a whopping 50% of 18-24 year olds. We’ve written about this in more detail in our previous blog.

Perhaps TV programmes like Grand Designs have given the younger generation aspirations to design their own home – as 20% of 18-34 year olds would love to build a property to live in themselves.

As well as giving you the opportunity to design a home exactly the way you’d want it, self-building could prove considerably cheaper than buying a new home, and give you a few extra rooms than you’d be able to afford on the market. Furthermore, building your own home could save you thousands of pounds in Stamp Duty – as you won’t need to pay anything on the value of the property once it’s been completed.

We recently helped one of our customers Tim Lamont downsize to a two-bedroom bungalow, which he built by sectioning off part of the large garden of his current, five-bedroom home. We looked into his detailed plans and agreed to remortgage the family home, paying off his existing lender and releasing £177,000 to fund his exciting self-build project.

Divide the land and sell the extra plot(s)

If building on your garden sounds like a lot of work, or you simply have no need for the space whatsoever, you may prefer to section it off and sell the land to a developer – if you don’t mind living next to a construction site.

Of those we surveyed, 20% of Brits said they had no emotional connection to their gardens, and almost 15% of those aged 18-34 said they’d willingly sell part of their garden as a vacant plot.

If this is of interest to you, keep in mind that your land will probably be worth much more if you sell it with planning permission in place.

First of all, you should decide how much of your garden would be needed to accommodate a building plot, and how much you’d actually be willing to sell. You’ll then need to ask a surveyor or architect to draw plans and help you apply for planning permission.

You’ll also need consent from your lender if you still have a mortgage on the property – which will depend on the value of the land and how long you have left until you’ve paid the loan off.

Once permission is in place, you’ll need to instruct an estate agent to deal with the sale and ask a solicitor to prepare the ‘transfer of part’, which will be needed to handover the plot to your buyer. This document should also detail access rights, to make sure you’re still able to enjoy the garden you’re retaining.

Can we help?

If you’re looking to finance an extension or development project, there are a number of options which could be available to you. You can read about remortgages, secured loans and development finance by visiting our product pages, or get in touch with us to speak to one of our experts.

*Survey of 2,000 UK homeowners conducted online on behalf of Together, March 2021.

Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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