Written by Neil Taverner, buy-to-let consultant
Demand for rental property is growing at pace. According to Rightmove, rental demand increased by 6% at the end of Q2, compared to the same period last year and the number of available properties is down 26%. As a result, Rightmove says that rents have risen by nearly 12% in the last year and show no signs of slowing.
The opportunity for landlords is clear, but the number of properties for sale is falling, so how can property investors make the most of this opportunity and grow their portfolios?
One approach that is becoming increasingly popular is making the most of Permitted Development Rights (PDR). These are automatic grants of planning permission that allow certain building works and changes of use to be carried out on a property without having to make a full planning application.
PDR was initially introduced in 2015, but last year a number of changes were made to encourage the building of more homes in areas with disused commercial property, such as high streets for example.
Whereas existing PDR granted a right to convert offices to residential, these new rules enable the easier conversion of other buildings, such as shops, restaurants, professional services, surgeries, nurseries, and other high street uses – opening up a whole range of new opportunities for investors who want to convert and refurbish property either to let out or sell for profit.
Investors may need the approval to demonstrate to the local planning authority that the proposal will not have a negative impact on transport and highways, noise, or natural light, but whereas applying for planning permission can be an uncertain process, PDR provides a right to development given by central government as long as the predefined criteria are met. As a guide, prior approval can often be achieved in less than two months, whereas planning permission could take eight weeks to many months.
Achieving planning permission through PDR itself presents an opportunity for investors to make a profit and can deliver an uplift of up to 30% of the site’s value before any work has started.
When it comes to financing the conversion of a property using PDR, many landlords opt for a combination of bridging finance to fund the works, followed by a Buy to Let mortgage. This buy-to-let mortgage can be used to pay off the bridging finance and even release capital to fund future purchases or pay for EPC improvements on other properties in a landlord’s portfolio.
At Brightstar Financial, we frequently work alongside our colleagues in our specialist bridging finance team to structure solutions for property investors who want to convert or refurbish the property to let to tenants, using a combination of short-term and term finance to help maximise their returns. And this is a combination of expertise and strong lender relationships that you can use to help your property investor clients. You don’t need to be an expert in short-term finance and specialist Buy to Let – you just need to partner with someone who is.
PDR presents opportunities for property investors to realise capital gains and meet the growing demand for rental property, and by partnering with Brightstar you can help your clients to make the most of those opportunities.
