Converting A Commercial Property To Residential

Post-pandemic many businesses have discovered the benefits of having remote workers – and many workers are embracing the lack of commuting time and the ability to be more flexible.  One of the benefits companies have discovered is the reduction in office space needed.  Some companies have even relocated altogether to an out of town location to take advantage of lower rental and property prices.  The result has been empty office buildings – and there lies an opportunity.

Commercial to residential projects are not difficult to finance, if you know how to do it. The problem is, as the old saying goes, you don't know what you don't know.

First you need to know whether the property is categorised under the Permitted Development initiative or if will you need full Planning consent.

Then you need to be prepared for the fact that you won’t be able to get a mortgage to finance the purchase. Mortgage lenders only lend against what is, not what will be. No mortgage lender will advance money on a vacant commercial property that you intend to convert. It has to be converted first and ready for tenants before they will consider lending.

To purchase this type of property you will need to buy with either cash, bridging or development finance. On the assumption you don't have the cash your options are bridging or development finance. It’s important to understand exactly how these types of finance work and:

•  Whether you are eligible for them in terms of your property experience to date
•  Which lender will offer you the most favourable terms 
•  If the cost of borrowing still makes the project viable for you

This is not something that is easy to do without some guidance so, to avoid making expensive mistakes, my advice would be to work with a specialist commercial brokerage to help you to find the right lender for your project.

Having said that, there is plenty of profit potential from converting a commercial building into apartments or – if the building lends itself to conversion to houses. One of my clients converted a defunct care home back into six terraced houses (which had been the original purpose of the building), making a very healthy profit.  

You have to have the vision to see what a commercial building’s potential could be. Then you need a robust plan of action to see it through from beginning to end.

Here is a video on my YouTube Channel discussing this topic.

How To Convert a Commercial Property Into a Residential

You can learn more here:

• Contact Kevin Wright over on his Facebook page.
• Browse the Recycle Your Cash online training library by clicking here.
• Attend a 2023 Buy-Refurb-Refinance Summit event - BRR Summit