All too often, fantastic investment properties get overlooked in the auction catalogue because they don't look that appealing when judged by themselves. Yet, by reading the small print, or better still, taking a drive-by viewing of the lot, it could be revealed that the real value is not in the property itself but the garden. Houses with huge gardens should scream ?building plot' - and the land may well be worth more than the property itself.
So, what if you want to buy a house with a large garden and build another property(ies) in the grounds? What are the issues?
1. It's fair to say that you may not be your neighbour's best friend if you decide to build in your back garden. If you have lived in the same house a long time and so have your neighbours, you should prepare yourself for some complaints. Manage their expectations by talking through what you propose to do and how it may impact them. You may consider joining up with other neighbours and each offering part of your garden for sale - a potential site for several homes can be worth far more, proportionally, than a plot with room for just one.
2. It is difficult for planning authorities to resist applications to build houses in back gardens, thanks to planning guidelines which obliges houses to be built at higher densities then in the past. So, this is particularly relevant if you already own or intend to buy an older property - built in days when land wasn't so sought after.
3. Access to the new house will be of primary importance and if an application for planning permission is turned down, it is usually because access to the site is difficult. The ideal building site has frontage on an existing road. As little as 30 ft to the side of your house can provide enough land for a new house, although planners will look at the density of the existing houses in the street to see that any new building is in keeping.
4. If the bulk of your garden is to the rear of the house, all is not lost, however - so long as there is some means of creating access to the road. This may mean getting together with a neighbour and sharing the profits from the development. You have to be careful, however, that the access road you create cannot also be used for subsequent developments in neighbours' gardens. Otherwise the developer, having bought your garden, will knock on your neighbours' doors and buy several back gardens. If this happens, the access road beside your house, which you thought was only going to be used by one household becomes the way into a development of 30 homes.
5. The way to prevent that happening is not to sell the land to be used for the driveway to the new property. Hang on to ownership but grant a right of way - or "easement" - to the new house. Access cannot then be used for other houses without your granting further easements.
6. Be mindful that you may not be exactly sure how the development will change the landscape of your street, or impinge on your own privacy, until it is actually built. There have been cases where several owners have clubbed together and sold part of their gardens for development, only to find that their services were compromised because of the extra drain on them. Cases such as baths no longer draining properly because the existing drainage systems could not cope with the extra load might be rare but you can't rule this sort of thing out.
7. Protect your scheme by taking out a ?restrictive covenant' if you are worried that the eventual development may not be what you have in mind. i.e. a developer buying your garden with planning permission for say, a small bungalow and then resubmitting an application for a large house(s). A restrictive covenant might limit the building to one storey and to a particular size. If a developer wishes to build bigger he will then have to ask you and the planning authority for permission. Be aware however, that whilst restrictive covenants will protect you, the more restrictive covenants you put on a plot, the more they affects the price you will receive.
8. Prepare yourself for the fact that a developer may try and make you sell your house as well as the portion of garden. The developer may make a calculated decision that it is more economic to buy your house as well as the garden and demolish it to rebuild more properties. This can seem very heartless to you - particularly if you have lived in the property for a long time or it has strong emotional ties.
How much to sell for?
As a rule of thumb, developers expect to pay one third of the value of the finished development for the plot. So, if a £150,000 house can be squeezed into your back garden, you should think in terms of receiving £50,000.
The effect on the value of your own property is less certain, and will depend on how much garden is left, and to what extent the new property will affect your home. If you live in a five-bedroom home and the sale of a building plot will leave you with no more than a patio, you could find your house extremely difficult to sell.
