Off Market Leads - The Equivalent Of Cold Calling - Be Discerning!

byAlanJE

2.5K followers

1 month ago

Hi Everyone,

I hope you had an enjoyable and successful week and are enjoying your weekend wherever you are in the world.

I had a very busy week with my son and his family who were visiting us from the US, so we showed them around the area where we live, and also they went to London and saw all the usual impressive sights there for a couple of days.

Now its back to work for me and catching up with things needing action, of which there are plenty.

One of the tasks that I have is to follow up on scores, hundreds in fact, of off-market leads for possible property projects in my area.

These are potential increased value properties where it is possible to extend or convert the properties into higher value assets for resale or possibly for rental.

The problem if that we take a single storey house or a bungalow that could in theory be extended upwards into a 2 storey house, is that there are inherent risks with doing this sort of project, the first of which is the permission to carry out the works.

The extension of a house upwards is a form of Permitted Development in the UK, however nothing is ever straightforward in the UK, so the project's design should conform with 5 key considerations in order to qualify for Permitted Development, otherwise it must go to a full Planning Application which can be more onerous and potentially risky regarding the outcome (the application may be rejected and or require going to Appeal, which can be very expensive and time-consuming).

Here are the 5 key considerations for Permitted Development on residential property, encompassing design, impact on neighbours, and specific project types, Design, Neighbourhood Impacts (or local streetscape and neighbouring properties), Site Context, Building Control or Code Regulations, and Specific Project Limitations.

Here's a more detailed explanation of these factors:

• Design: Your proposed project's design should be in keeping with the surrounding area and not significantly alter the character of the building or neighborhood. This is fairly obvious, as you wouldnt want a house in the middle of a terrace of 2 storey houses to suddenly add 2 storeys so as to become a 4 storey house!
• Neighbourhood Impacts: Consider how your project might affect your neighbors, such as potential loss of light, noise, or privacy. This again is fairly obvious, that you cant put a great big wall or roof up that will block your neaighbours light, or erect a workshop for commercial use involving noisy activities in a residential area.
• Site Context: Factors like the location of your property (e.g., in a conservation area, near a listed building, or a flood zone) can impact what's permitted. Again, these are fairly obvious, and conservation areas are particularly sensitive in the UK, so you must not spoil or change the streetscape, and must always use similar materials so that your extension (if it is allowed) does not
• Building Regulations: Even if your project falls under permitted development, you still need to comply with building regulations regarding safety, accessibility, and other standards. Of course every building project no matter where it is in the UK must comply with the national building code, commonly termed The Building Regulations and these are rules on how to develop and construct any building no matter how small, compliance is obligatory.
• Specific Project Limitations: Permitted development rights are subject to conditions and limitations, such as size restrictions for extensions, height limitations for loft conversions, and restrictions on balconies or verandas. Normally a residential house can extend up to approximately 30% of its volume, but the guidance is complex: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://assets.publishing.service.gov.uk/media/5d77afc8e5274a27cdb2c9e9/190910_Tech_Guide_for_publishing.pdf

Examples of Permitted Development:

• Extensions: Single-story rear extensions (with limitations on size and height).
• Loft Conversions: Subject to certain conditions, such as roof space limitations.
• Front Porches: With limitations on size and location.
• Conservatories: With certain limitations.
• Garage Conversions: Subject to conditions.
• Outbuildings: With restrictions on size and location.

The reason that I am explaining all this is that even though a property has the potential for extension, and thereby increase in value, you need to do quite a lot of homework about it before you can better understand the economics of the project, is it really worth doing?

For example, lets assume there is a bungalow of around 1000 square feet on plan. By taking off the roof, and adding an upper storey you could in theory double the built area to 2000 square feet. The bungalow may be worth £750k on its present plot (which doesnt change). The question is: would the new 2000 Square feet house actually be worth £1.5m, and how much would the works cost to carry out the additional storey?

There is also a significant risk in taking an asset that is worth £750k, and essentially wrecking it by taking off the roof, and constructing the additional walls under a protective cocoon, so as not to let the rain in, then re-working all of the electrics and central heating and plumbing for the new 2 storey house.

So the above reasons are why I am being very cautious about following up on potentially hundreds of leads. I will be very discerning about those properties that are worthwhile and my rule of thumb would be that the property must be on its own plot, which should be around 1/4 acre, so that a bungalow on such a plot, would fairly predictably be able to be extended using Permitted Development, and that the value would probably well exceed the cost of carrying out the works, and cover all the interest payments on borrowed money for the time period required to carry out the improvements.

I hope that you all have less complex problems to solve in your businesses.

I wish you a happy weekend, wherever you are in the world!

Cheers

Alan