Converting my house into 2 flats - crazy idea or not?

[Briony32]

We bought our 5 bedroom semi-detached house a year ago for £465k. We don't want to stay here for too long for various reasons. The market (I think) is fairly bouyant here (North Surrey). But I think it might be tricky to sell as it's ex local authority with some of the neighbouring houses privately owned and some housing association so I think it might have a ceiling price. But we have made lots of improvements and really want to get over the stamp duty level of £500k. We've put in new windows throughout, new front door, new carpets, knocked through kitchen to living room, about to put in a new kitchen, and converted downstairs bathroom to utility room with loo. Previously each room was let out to individuals while the owner lived in it (young professionals) - not through an agent, more of a houseshare.

We have been trying to make the house lighter and brighter and more family friendly for us and are working hard on presentation. But now I'm wondering if we should switch tack due to the £500k stamp duty level. I've seen ground floor 2 bed maisonettes in the area sell for £300-320k. So I'm betting on us getting £600k for both properties.

Can anyone tell me.....supposing we moved out into rented accommodation, then converted the house into a 2 bedroom downstairs flat and 3 bedroom upstairs flat....

Would we be liable to capital gains tax on one or more of the flats?
Would we need to pay council tax on both properties before we sell?
Would we need to get planning permission to convert to 2 flats or do we just need to comply with building regs etc?
Am I completely mad?

We are not sentimental about the house (can you tell???!) and just want to put ourselves in the best financial place. We kind of know we have done the wrong thing by moving here and want to move in the next 2 years or less.

[Binkybix]

Hello. I have no idea of value you would add by doing the two flats but don't forget you'd need to sort out access for both so that would take space too.

In terms of planning permission I'd have thought so - you might want to see if your council offers pre-planning advice so they could talk you through their requirements (for example there's a restriction on changing houses to flats on my road). Even if they don't do this you should be able to look it up on their website.

Capital gains - they wouldn't be your residence anymore so you would need to pay but you can have 18 months before CGT kicks in. Then it's done as a calculation where you get relief for the years you have lived there, plus you get some other allowances. HMRC have a guide somewhere if you google.

I would assume you'd need to pay council tax.

Good luck!

[Iggly]

Yes to planning permission. Plus it won't be a quick job to convert - think of stuff like separate electricity supplies, fire partitions between flats, water supplies. So by the time it is done who knows where property prices are.

Honestly I would just leave as is and sell when ready.

[mandy214]

There are also the legal formalities of creating 2 separate titles and registering those. Presuming you have a mortgage you would almost certainly need your lender's permission as you are affecting the value of their security. This may involve them getting valuation advice on the potential value of 2 flats which you would undoubtedly have to pay for. Also look at the desire for flats in what sounds like a suburban, family area. There is alot to think about.

[Sunnyshores]

Yes you need PP. I should have a chat with the planning officer, they should be able to give you a definite No or a possible yes.

Have a look at planning regs too, that gives you an idea of the insulation, soundproofing, number of parking spaces, size of rooms. Is this even possible for your property? Let alone costs.

You need to split your title into 2, that costs about £1k per title. Just connecting an extra set of utilities will cost another £2kish. And yes, while you're selling you will have to pay both sets.

The moment you have 2 titles, one will be your home, the other will be a property which attracts CGT

Obviously there is money to be made splitting properties, but I suspect you brought your home for normal market price and having done such a lot of work to it already, you wont have a large enough margin.

[ABlandAndDeadlyCourtesy]

Would yours be the only house on the road split in this way?

Which properties are in shorter supply in your area - flats or family houses?

[ABlandAndDeadlyCourtesy]

Presumably you'd need to put in a second kitchen at the least.

[QueenofWhatever]

You may also need to provide additional parking. Not a bad idea if you've had experience of managing build projects before. If you're a newbie, I'd say it's a high risk strategy.