Splitting a property into two dwellings.

They say two is better than one, but is that always the case when it comes to properties?

Subdividing a house can be a bit complicated (it’s never as simple as sticking up a dividing wall and fiddling with the plumbing!), but it’s also a great way to boost your portfolio significantly in a shorter timeframe – particularly if you’ve got the right finance in place to support you.

If you’ve spotted a property that’s perfect for splitting into multiple homes, buy to let expert Matt Kelly, Senior Commercial Product Manager at Together, explains some of the things you’ll need to think about.

What do you need to do?

Before you get the contractors in, there’s a few things that you should do:

1. Talk to a solicitor – Make sure that, legally, there’s nothing stopping you from making the changes to the property. A solicitor, particularly one that deals with property law, is going to be able to identify any obstructions. For example, the deeds of your house may have a clause that means you can’t split it into multiple properties

2. Draw up your plans – You need floor plans of the existing property and your proposed changes, which should be drawn accurately to a given scale and with elevations included.

Using an architect will ensure that all the plans are accurate, and they may be able to spot potential issues with your project at an early stage.

3. Apply for planning permission - Each local authority has its own rules on things like access and minimum room sizes, so you’ll need to know what these are. They’ll also have their own online platforms where you’ll need to apply, usually accessible through their website.

You’ll have to prove that both properties will have their own facilities (e.g. kitchen, bathroom, and toilets) and that they have their own utility supplies (e.g. water, electricity, and gas). Talk to your utility provider as early as possible to make sure this is achievable

4. Speak to Building Control – Councils will also have a separate department that covers the specific standards your property needs to meet, such as sound proofing, fire risk, and insulation. You’ll need to show that your plans meet these requirements to get approval from both Building Control and Planning Permission departments.

5. Back to the solicitor – When you’ve got approval from the council, it’s time to sort out some of the other legal processes. For example, if you’re turning a house into separate flats, you’ll most likely be changing the property from a single freehold to multiple leaseholds. This is done through the Land Registry, and you need to ensure these agreements are in place before you progress to selling or renting out any of the properties.

6. Make those changes – Break out the tools and get your project underway.

What are the pros?

• Higher rental yields – Landlords can collect rent from a higher number of tenants, potentially increasing the rental yield compared to a single-let property.


• Income security – If one tenant moves out or falls behind on payments, you’ll still have rent coming in from other tenants.


• Demand – Smaller properties are an attractive proposition for tenants looking for affordable housing. The individual rents aren’t typically as high as a larger, single property, but your combined rental income for both properties may be more.

What are the cons?

• Legal and approval processes – The processes involved in getting planning permission and making sure you’re on top of all the legal requirements can be time consuming, costly, and aren’t always straightforward. Working alongside experts such as property lawyers, architects and finance professionals can help speed up the process.


• Project costs – Refurbishing an existing property may be cheaper than building from the ground up, but the expenses can mount up. Make sure you know the prices of your materials and labour, when each job will be done and by who, and what the costs might be if your project runs over schedule.


• More tenants can equal more management – Renting out your property to multiple households can lead to more admin and potential issues with or between tenants that you’ll need to sort out.

Getting a mortgage

• If you already own the property and have an existing mortgage - Your current lender may require you to amend your existing mortgage or change the product you have. They could also refuse to fund your application if it doesn’t fit in with their product set and criteria. A specialist property lender who has more experience funding these types of cases – such as Together – may be able to help.


• If you need to borrow to fund the purchase of the single property - Some mortgage or auction finance lenders will only base the amount of money they’ll lend you on the current valuation of the property. Whilst this means you can buy the house with the mortgage, you may not be able fund the work needed to complete the split and refurbishment.
  
  If you’ve got the cash in the bank to pay for the conversion, that shouldn’t be a problem. But if you need to borrow money to cover the refurbishments as well, then you may want to consider a capital raising bridging loan. Make the refurbishments using the short term loan and, once the property has increased in value, exit the bridging loan and potentially secure a Buy to Let mortgage deal with a lower loan-to-value (LTV). This would then allow you to use rental income or projected rental income to prove affordability once your project is finished.

Ready to get started?

Splitting a large home into multiple properties can be a great way to generate additional income as a landlord. Chat with our friendly team of experts to find out how we can help.