What is the subdivide strategy?
What is the subdivide strategy?
What is subdividing?
Subdividing is similar to commercial to residential developments because the idea is that you take one space and create more smaller spaces within that original building. Therefore, it is a similar idea, however it is more reserved for the residential. So, this strategy is more about taking a large family home or a large town house and converting it into two or more flats. This is something that often happens, and you will have most likely have seen this happen in your area.
This strategy is actually a really great strategy because you are taking one house with one value and splitting it up into more units that all have their own individual values. The key idea behind this strategy is that the individuals value equates to a higher overall value than the original value that you started with. Subdividing is that simple to understand.
Why might you do this strategy?
This strategy is and this way of living is becoming much more popular in todays world. Society is changing. If we are to think about a Victorian, traditional town house, typically they had big ground floor spaces where they would have had a lounge, a dining room, and office space and upstairs they would have had very large bedrooms. This was because the lifestyles were different.
Today people want something that is typically more modern, easy to run and easier and cheaper to maintain. These types of properties often produce some amazing conversions into flats because you can still retain some of its original features such as the high ceilings but the overall design is adapted to become more innkeeping with what the market is looking for.
This strategy is relatively easy to employ, however something to mention is that you will have to go through planning, although this process should be fairly straight forward as long as you check out your local plan and policy first. In the first instance, this strategy is relatively easy to become involved with because it won’t take too much of your time. There will be a planning process which could take anywhere from 8 to 16 weeks and a couple of months build out process to complete and convert these units, however you could maybe turn one around in 6 months. Therefore, it could be a great strategy to start with if you are first starting out in this sector.
Another reason as to why this is a great model is because you can develop homes that young people can afford within their communities. For example in certain communities they very often only have one type of housing, therefore it can be hard for younger people who are wanting to move out of home and get on the housing ladder to actually do it because these houses are too expensive. However, the idea of buying a flat within one of these houses is something that they are more likely able to afford. Therefore, you are actually providing housing to first time buyers which is really adding value and adding back to society.
Who is this strategy best for?
This strategy is great for people who are just starting up in the property sector or those of you who are wanting to take your property developing to the next level such as developing from Buy-to-let or beyond a standard refurbishment model. This strategy is also great for those of you who want to get into the development space but aren’t feeling ready to go into developing commercial to residential properties or building.
Typically, this is the kind of model is something that you could employ if you just want to make some money and trial it one time. It might not be that you want to be a full-time property entrepreneur. However, it could be that you systematise this model and create a whole business out of it.
Again, like most of the strategies in property, don’t limit yourself to the depths of your pockets. With this type of strategy, you can attract investment providing that you can get positive returns and big enough profit margins. Of course, this is something that you can use your own cash with and work with finance products. So, don’t let money one of your deciding factors when it comes to this strategy.
This type of property strategy can be run over evenings and weekends therefore it doesn’t require all of your time however, I always believe that the more time that you can invest, the further you will go and the faster you will get there.
Where should you employ this strategy?
You need to ensure the area that you are in has the need for a property development like this. Is there a need for apartments in your area and is there a large supply of these larger houses that we have spoken about? If that is the case, then this could be the strategy for your area. This strategy works well in high population areas such as large towns and cities where there are local amenities and transport links.
Although this strategy works exceptional well in larger areas, I have come to find that it can actually work in smaller areas to where people just don’t have access smaller one-bedroom flats. For example, I know a lot of villages where there could be a demand for a smaller one bedroom flat but all that is available to buy are larger houses. Therefore, there could be the demand for this type of property but nothing available.
As a caveat to this entire model, something you need to be aware of is that a lot of local housing policy is protecting 3 and 4 bedroom houses so through your own due diligence, you need to make sure that this is a model that will work well in your area and the council are going to support this through planning.
When should you implement this type of strategy?
This question depends on the supply and demand. For example, if you are looking at an area that has got 300 1- and 2-bedroom flats on the market that don’t seem to be selling then that is not when you would do this. You need to employ this strategy when you know that you have demand for these flats.
Something to mention is that this strategy is particularly good when you combine it with the refurbishment model. For example, if you buy a house that is already in need of some TCL and add this subdivide strategy on top too you will be adding even more value. When you combine the two together it begins to get a lot more powerful.