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The secret to creating wealth through property

A Commercial Property to Residential Conversion, in simple terms, is transforming a commercial property – this is usually an office or workshop area – into a residential property, whether it’s a block of flats, a HMO or a single dwelling. However, a Commercial to Residential conversion is not simple, but it can produce massive returns for investors.

One of the benefits that make this investment strategy appealing is that the price of commercial property is generally lower than that of residential properties. This is due to the saturation of the commercial property market.

Another factor that keeps commercial property prices lower than residential ones, is that commercial properties are often left vacant for long periods of times. As a result, the owner is often likely to sell the property quickly, and at a more affordable price, to eradicate their ongoing maintenance costs.

A high percentage of existing commercial properties are located in highly populated and sought after areas – town centres and near key transport links – where there’s limited space for new residential properties. If you convert the commercial space into a high quality residential property, you’ll attract a more affluent buyer and be able to let or sell it for a higher premium, which will maximise your ROI.

However, as we mentioned, conversions are not that simple.

Commercial to Residential Conversion Planning

While the potential returns are massive, it requires a lot of preparation and due diligence to complete a profitable Commercial to Residential conversion. Planning is critical! You’ll need to know what work will need to be done, especially as planning permission may be required.

You should also investigate the tax implications of your Commercial to Residential Conversion. For example, businesses are able to claim Capital Allowances on the cost of the conversion work, but not on the property purchase itself. We strongly recommend that you speak to an experienced property accountant for advice and guidance before undergoing any conversion projects.

5 Considerations for Commercial to Residential Conversions

Additional Costs

There are many costs involved with Commercial to Residential conversions that you may not yet have considered. You may be unaware of additional building requirements, such as Part L regulations, which relate to the conversion of fuel and power for your property. Make sure you’re fully aware of everything your conversion will require, before committing to the purchase of a commercial property.

Accessibility

Depending on your strategy with the residential property, you will have different requirements. If you’re planning to rent your property to families, it will likely be important for them to have vehicle access, which may not be the case if your property is located in a town centre.

External Work

Current legislation makes it easier for investors and developers to convert commercial properties into residential properties. However, this legislation only applies to the interior of the property. Planning permission will likely be required if you intend to alter the exterior of the property. Also, there may be limitations in place, by the local government, as to how you can transform the exterior of the property.

The Surrounding Area

The surroundings of a commercial property may or may not be ideal for a residential property. You’ll need to investigate the local amenities to ensure your tenant/buyer will have access to everything they may need. If the property is in an industrial estate, it will be worth discovering how much the pollution – both environmental and noise – will affect the value and level of attractiveness of your property.

Tax Implications

You will definitely need to consider the VAT treatment of a commercial property purchase, as it will differ from that of a residential property. If you intend to convert the residential property into a commercial one, you should provide the seller with a certificate confirming your conversion plans. However, this could result in the price of the commercial property being increased. Before any action is taken, we urge you to contact expert property accountants.


If you’re considering a Commercial to Residential Conversion, get in touch with our team of property investment experts by emailing us at This email address is being protected from spambots. You need JavaScript enabled to view it. or by calling us on 0118 599 9712.

"The meeting was really useful to get an idea of what I could do with the equity I plan on taking out of my flat. I'm confident that Prospect Investors Club will be able to find me some suitable property that I wouldn't normally find on the open market, with a HMO potential and at BMV." - Mr Ellis

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