What's the best way to make a profit from planning permission?

aJasonWilliams

I'm looking for some advice to help me make a decision:

To make some extra money from my property when I sell in a few years time, I'm considering applying for planning permission to build either a 2 bed extension or a 2 bed separate dwelling attached to my existing 3 bed property but I'm trying to work out what would be my best option:

a) sell 3 bedroom house with granted permission to become a 5 bed (2 storey extension).  

b) sell 3 bed with permission to build a new separate 2 bedroom dwelling.
c) sell 5 bedroom house (fund extension myself).
d) sell new 2 bedroom house (fund it myself) and then sell my 3 bedroom house.
e) sell 2 bedroom planning permission to a developer.

I asked the estate agent I purchased from and they said:

"unless you intend to build the extension or the dwelling I would leave it. There doesn’t seem to be the money out there for investors to pay the property price plus the build and get a good return and first time buyers would prefer the garage and garden, unless it was already build and then you can add the value. Investors wont pay the going rate for the house just because it has planning permission. The cost of an average build these days is around 120k and the extension I would say more like 50k. Might be worth waiting until the market levels out a bit if you intend to stay for a while. If you are considering selling up then sell as is."

What would you do? All opinions welcome 

aJasonWilliams

Another response from a local estate agent:

Property is worth £280,000: 

If you build onto the side of your existing property it then becomes a terraced house which will affect the price and reduce it to £235,000 - £250,000 approximately. 

The new build should be worth around £240,000 as a two bed. 

If you made the property a five bed house I can’t see it being worth more than £350,000. 

If you sell the property with planning in place for a two bedroom house to the side then I think you could be looking at £360,000 - £380,000 this then gives any buyer the option to do what they want and alter the planning to suit their needs.

twopenny

Fewer buyers might be looking for a 5 bed. 
Depends on the area the house is in.

Having potential can add a bit. Just the potential. I got an extra few thousand because I had the land and a house perfect for development.
They didn't do what I'd thought of but did extend and add a 4th.  
I was advised not to get planning and they were right.

It's going to cost quite a bit to get archectual plans and planning which you add to the house price and it's not what buyers want.

Section62

aJasonWilliams said:

What would you do? All opinions welcome 

"What's the best way to make a profit from planning permission?"

...become a planning consultant - almost everyone else spends money without necessarily recouping the cost.

There are so many different variables that it is impossible to say without seeing the property and neighbourhood, but if the type of house in the local area is relatively small with small gardens then the most profitable might be to get outline consent for a second dwelling on the plot.

But these aren't always easy to get consent for, both properties will ideally need to front the road, and if a side extension would turn your property into a terrace it sounds like you don't have the plot width to achieve this.  Some councils will allow a second dwelling on a plot towards the end of a long rear garden, but many have policies against these for privacy and access reasons.

In general, unless you are already an experienced developer, it is difficult to turn a significant profit from development of existing dwellings.  More so with construction prices currently so high.  On TV shows they make it look easy... but rarely do they explain the full costs and problems that most developers have.

Developers already have access to the resources needed to make a planning application and the skills needed to maximise the development opportunity.  The average homeowner will spend significant sums on buying their planning consent - other people won't necessarily be willing to pay what you've paid.  If you develop, do it for your own needs, not to try to make a quick profit.

babyblade41

I suppose when we did it it was to make the property a lot more attractive, we had an artists impression from the architect that was available in the property particulars 

I'm not sure if adding rooms to a generic type house would amount to a lot considering costs  and outlay as people would know if they were looking for 3 or 5 bed.
Our house was on it's own so nothing to compare with 

TELLIT01

Land with planning permission will be worth considerably more than land without.  I'm not sure the same applies to an existing property with planning permission to extend.  The likelihood is that the purchaser would want to change the plans anyway so would have to reapply.  I would expect a potential purchaser of a property, who had thoughts on extending, to speak to the planning department at the council before making a decision to purchase.