New area for me – Block of flats help?

1) if semis and terraced work for you, why do anything else?
2)I bought a detached victorian house with five flats and converted it into a single dwelling. Very substantial capital gain.

Make sure you understand why you wish to change tack from single let house into a block of converted flats. They are different beasts. You should consider checking that everything is lawful about the conversion and that sound protection and insulation is good. Are there any tenant issues, inter tenant squabbles etc. What sq mtr are the flats, are they mortgageble? Not just for you but for your exit in future? Having just converted 3 shops to flats the mortgage companies do not like several flats on one title so you may wish to consider title splitting. What are the EPC levels, are they lawfully let to tenants with the latest changes? You are buying the freehold and thus you are responsible for the site maintenance, as its a block you must look after, clean etc the communal areas as i assume the ASTs are for internal of flat only. You will also be paying for communal area utilities and don't forget the cost of insurance is different to a single house.

Reply to the comment left by andrew sheppard at 07/02/2020 - 11:49
Thanks Andrew.

The reason for the change is a move into this area which is a longer term plan. It is a seaside town and so i am thinking about possibly holiday lets. I also like the fact that this money is tied up in one specific unit and so management and maintenance will be easier. The alternative is to buy 4 semi's and replicate what i have done before in my normal area. But prices are well up and the value isn't there. Also the town is a cheaper area than the city where i am based, but the specific area of the house is in the more upmarket part of the town and the building is one of those drop dead beauties you see. Put this in a city in the north and its value will be £1.3m

The flats are 45sqm on average and 330sqm overall.

Tenant issues i will be finding out about, but they are all longer term tenants, so it sounds stable.

Grounds maintenance is fine as will be done by myself. The one issue i can see i need to sort is the cleaning of the halls. I may well end up doing this as i think i am likely to be working here 1 day every 2 weeks. Seeing as i do all my own maintenance bits now, this is not a problem. Yesterday i was fitting a new DG lounge window on a property for example.

The EPC's are surprisingly good. 1 x C, 5 x D and 2 x E. Solid walled with single glazed sliding sash windows. I can see longer term i will be insulating the attic areas with new kingpan, as i have done this on a few properties already where you have no void for soft insulation to sit. So i am confident longer term i can update the whole building to become a C rating. This will need attention to secondary glazing i think as the sashes are worth keeping because they are beautiful.

There is also the potential to develop the basement into another flat. It was done i think in the past, but it doesn't look as though it has been carried through. Again i will find out more when i see it.

The yield is the lowest i have ever had at 7.5%, moving up to 8.1% with smallish rent increases (the older family have not really kept rents up with inflation, hence the stable tenant population i think). So i think an increase is easily possible. The yield will jump to 9% if i do a basement conversion.

So the yield isn't great, just ok, but i feel the property is a good longterm investment to keep for the next 20 yrs.

Insurance is about £1k

The worst time to invest in the propery market is when you are bored.
Are you bored? looking for something to do?
I have bought nothing since 2014.
Buffett sometime just sucks his thumb!

Reply to the comment left by david porter at 07/02/2020 - 14:00You must be bored replying to this thread.

Nothing since 2014 means you have missed out on huge potential. I was working by ass off 2012-16. It was the right time to buy in my area during this period. I assume you are based in London. The UK market moves in a wave spreading north (roughly). This new area still has to play catch up i reckon

You may be right but I dont move as much as 20 miles.

Wow. Thanks very much for the info. Really useful stuff. Lots to be researching.

I own a building converted into four flats (it was three and we split one into two for a better yield).
Tenants getting on is very important! I use agents to find tenants but I always meet them in advance and luckily have only had one issue recently with noise which has hopefully calmed down.
Think about things like bin stores (better to have individual bins for each flat but with 7 flats might not be possible). Space for cycle stores (a big thing in London, maybe not where you are)?
You need Fire Risk Safety assessments on the communal areas. Fire doors / closers to each flat. Smoke alarms and emergency lighting tested regularly and signage.
You’re thinking along the right lines about things like water and cleaning and have had good advise from others.We put in new water supplies. Very expensive!
Think about security too - if someone leaves the communal front door open etc.
And most importantly - check out the mortgage situation. A lot of lenders don’t like single freehold title block of flats (and the same with some insurers). Those that do lend may also think 7 flats is too much. Equally, if you were to split the building into a freehold in one company (or your name) and grant long leases for each flat (in a Ltd co or your name) many lenders won’t lend as that’s too many flats in one building. Look at your exit strategy - I would make much more money selling my flats off one by one rather than as a whole to an investor or to someone who would turn it back into a single dwelling. To do that, I would need to grant individual leases. But if there is a mortgage on the property that is a problem (with consent plus SDLT). If you are a cash buyer then you have much more flexibility in the regard!

If that picture is the building, then it is a beauty!

Presumably you've already looked into this, but you'll need more specialised finance to have multiple flats like this. The mortgage company is likely to want more things guaranteed than you are used to with standard BTLs. Nothing majorly difficult, but it can be niggly. Well worth talking to an experienced broker about in some detail.

If you want to do holiday lets, you are likely to annoy permanent tenants, so this may be hard to combine.

Also, "If the block is a house which has been converted entirely into self-contained flats the conversion will be regarded by local housing authorities as an HMO if it does not comply at least with the standards of the 1991 Building Regulations and if more than one third of the flats are let out on short leases. These blocks of flats will not be subject to mandatory HMO licensing although the local housing authority may introduce additional licensing to cover them."