When evaluating a potential property investment, the focus is usually on the numbers, to see if the deal “stacks up” financially. However, property investors also need screen potential investments for non-financial risks, to make sure the property itself is suitable for the chosen strategy.
With the help of architect and property consultant Teresa Montero of Mona Architecture, I share 7 simple things that property investors can do upfront to screen properties for fit with their strategy, using free online tools.
These checks will help investors tick off at an early stage the big things that can derail or delay a development. Consequently, investors will be able to weed out projects that might seem to stack up financially, but which would come with considerable execution risk.
At a glance
- 1. Decide on your investment strategy
- 2. Is the property subject to restrictions on development?
- 3. Screen for location risk
- 4. Check out the local authority planning website
- 5. Review the building control approvals for the property
- 6. Check the orientation of the building
- 7. Study the floor plan and dimensions
- If it’s leasehold…
- Final thoughts
1. Decide on your investment strategy
Before even viewing any properties, it’s important to decide on the investment strategy. Why? Some locations don’t work for certain strategies. There’s no point going ahead with a purchase if the location’s not going to attract the target market.
Let’s take the example of converting a house into a student HMO. If the property’s not near a university or college, it’s unlikely to achieve the same returns as it would if it’s within walking distance. Likewise, furnished HMOs for professionals are unlikely to be successful in small towns without solid employment opportunities within easy reach
Finally, returns on a single let for the family market are likely to better in locations with great schools and nurseries. For more information on what makes a rental property attractive to families, take a look at this blog post.
2. Is the property subject to restrictions on development?
Once you’ve found a property in a location that will attract your target market, the next thing is to consider whether you’ll be able to develop the property in the way that fits your strategy
Whilst most investors will know abut the difficulties of reconfiguring or changing Grade II listed properties, there are other factors to take into account. (Incidentally, here’s a link to the Historic England website to check if a property is listed).
Teresa Montero of Mona Architecture highlights Article 4 Directions as being a particular area of risk to rule out. Article 4 Directions are issued by local planning authorities to require owners to obtain planning permission for activities that would otherwise be allowed under permitted development rights.
One type of Article 4 Direction restricts the scope of work in conservation areas, in order to ‘preserve or enhance’ the character of the area. There are large numbers of conservation areas across the country. For instance, there are 62 conservation areas in Lambeth, and 36 conservation areas in Liverpool.
Depending on the area, these restrictions can include the building work which may be essential to produce the return on the investment. For instance, small extensions, outbuildings, and changes to windows and doors. They may also limit the conversion of integral garages to rooms, if it would leave the property without adequate parking. Even the wrought iron railings shown in the photo below may require planning permission to change in a conservation area.
Article 4 Directions can also require planning permission for HMOs, to convert it from a residential property (C3 use) into an HMO (C4 use). This is the number one thing to check if your strategy is to convert a property to an HMO. Click here for more resources on Article 4.
Consequently, it’s important to check whether any Article 4 Directions apply to the property that will affect your development. The areas are constantly changing, so it’s important to check regularly.
3. Screen for location risk
Particular locations can be subject to a number of different considerations which may bring risk. However, it’s easy to do free desktop research to screen for risks on a proposed property investment
A local park or a semi-rural setting can make properties very attractive to renters. However, architect and property consultant Teresa Montero recommends using the free Biodiversity in Planning website. This will advise whether a proposed site is likely to need professional ecological advice and further assessment. (Which would slow down and potentially restrict the development).
If the property has bats in the loft, and you’re wanting to do a loft conversion, work will need to be carried out outside of the breeding season and mitigations will need to be put into place. This can have a knock on impact on development timelines.
Another free check is for flooding risk. Click here for the government flood risk portal for the risk of surface water flooding and flooding from rivers and the sea. Remember that properties by water may be more affected by rising damp.
Insurance will be harder to obtain in an area at risk from flooding, and the cost of future flooding needs to be factored into forecasting.
It’s important that surveys for properties near water specifically check if the damp proofing membrane is intact.
Properties on busy roads, by railway lines or my airports may be less attractive to renters. The noise levels may lead to a higher turnover of renters, increasing voids and potentially the rental income.
A useful resource is the free government-funded Extrium Noise and Air Quality Viewer. It’s also a good idea to note the noise levels when viewing the property.
4. Check out the local authority planning website
Before a second viewing, I always have a look at the planning applications and decisions on the local planning authority website. In the image above, you can see the research results for where I bought my last property in Maidstone. I found this by searching in the portal for Maidstone.
Every planning authority will have a similar portal to the It can be very useful to look at the plans for other properties and see how they’ve reconfigured the space. You’ll be able to get an up to date impression of what types of developments are rejected, and why. For instance, their approach to loft conversions and extensions. It’s also interesting to see whether many neighbours complained about the proposed plans, giving an indication of neighbourly relations!
I set up alerts for my target areas so I can keep an eye on developing policy.
5. Review the building control approvals for the property
I always check the building control approvals before a second viewing. It’s surprising how often that basement conversion hasn’t got building control. I use the Rightmove Sold Prices section to check the previous listing of the property, and spot what work has been carried out since then. This enables me to check it off against Building Control.
It also gives me a heads up when the boiler was installed (if building control approval was obtained), and whether I might need to get an indemnity from the seller. Alternatively, it can help the negotiation of a price reduction.
If all of the work has received building control sign off, it gives me some comfort it’s been done properly. I would walk away from a property without building control approval for a basement conversion. Not worth the hassle in my view.
The building control section is normally accessible from the same portal as the planning permission.
Another related source of useful information is the government portal which has links to all the Approved Documents for meeting building regulations. The Manual to the Building Regulations is particularly useful as it has an overview of the Building Regulations and the building control process.
6. Check the orientation of the building
All things being equal, I’d always prefer a south-facing garden over a north-facing garden. Not only is it nicer having a sunny garden, north-facing gardens can carry risks.
Teresa Montero advises against buying terraced properties with north-facing gardens, as they’re more likely to suffer from damp.
7. Study the floor plan and dimensions
A popular way of adding value to a property is to reconfigure the space to, say, add another bedroom. The wider the house, the more options they’ll be. Properties that are over 4m wide with hallways can be very flexible. The placement of windows is important as all bedrooms must have a window under building regulations.
When reconfiguring layouts, it’s important to keep an eye on room dimensions. However, often there’s either no plan, or the measurements aren’t accurate. In any event, don’t trust the measurements in the floor plan. It’s easy to measure them yourself using a laser measure. Click here for the link to Amazon to buy the one I use when I view properties.
Bedroom dimensions are particularly important. Although they apply to new properties, the bedroom dimensions in the National Space Standards are a good rule of thumb. They also help guide descriptions of rooms (single or double) when letting or selling. For instance:
- Single bedrooms: must have floor area of at least 7.5m2 and be at least 2.15m wide.
- Double/twin bedrooms: floor area must be at least 11.5m2. One should be at least 2.75m wide and the others at least 2.55m wide.
That said, the statutory room sizes for HMOs are smaller:
- Single bedrooms (child under 10 years): floor area of 4.64m2.
- Single bedrooms (over 10 years): floor area of at least 6.51m2.
- Double/twin bedrooms: at least 10.22m2.
- No room with a floor area of under 4.64m2 may be used as sleeping accommodation.
If it’s leasehold…
Remember that if the property is leasehold, you’re likely to need to get consent from the freeholder to do all but the most straightforward of building works.
It’s worth asking to see the lease early on to check if there are any unusual restrictions. For instance, the lease may prevent the leaseholder of the top floor flat building into the loft space, or the ground floor flat building an extension.
In any event, do allow extra time in the project to allow for freeholder consent.
For more information on the pros and cons of flats as buy to lets, take a look at this blog post.
It’s worthwhile spending some time using free resources at the second viewing stage, before much time and money are spent, to screen for red flags on property investments. This helps minimise risk by ruling out properties that aren’t suitable, and goes hand in hand with financial analyses.
Many property investors take an expert along to the second viewing, if the feasibility of the project is dependent on building work to extend or reconfigure the property.
Experienced builders may be able to give a rough guide to the cost of a refurbishment. Many architects, like Teresa Montero, are happy to attend viewings as a consultant to advise on what may or may not be feasible.
Investing in property is inherently risky, and the hoped for income generator can turn out to be a money pit. However, once you’ve checked all of the free databases I mention in this blog post, you can be more comfortable with the non-financial assumptions that underpin your project plans.
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