Onate’s Guide to Commercial to Residential Conversion
Over the past number of years we have seen an increase in commercial properties being converted to residential spaces. This trend is particularly noticeable for properties that have been vacant for over two years, as a result of new planning exceptions aimed at bringing some much needed homes to the market and addressing the housing crisis. For property investors this can unlock potential opportunities.
For investors and developers, commercial to residential conversions can be attractive. Here are some key aspects to consider:
Cost Efficiency: Compared to ground-up construction, conversions can be more cost-effective. Existing structures reduce the need for extensive foundational work, and the timeline for completion is often shorter, leading to quicker returns on investment.
Government Incentives: The Irish government has introduced various incentives to encourage the development of residential properties. These include tax breaks, grants, and streamlined planning processes for conversion projects, making it financially appealing for investors.
Market Demand: The demand for residential properties in Dublin remains high, ensuring a robust market for newly converted apartments and homes. This demand provides a stable rental income and potential for property value appreciation.
Over the past number of years, Onate have worked with a number of borrowers on commercial to residential conversion projects.
Here’s an example of one particular project:
In September 2022, Onate closed a loan for a borrower for €300,000 to complete the purchase of property with a former pub on the ground floor, a residential element on the first floor and six self-contained units overhead. The promoter identified the opportunity and using his local knowledge of the area he was able to identify two potential exit strategies for the loan once the works were completed to convert the former pub to residential accommodation:
The promoter could sell the property to an approved housing body
The promoter had been approached by a letting agent who specialises in short term housing for tradespeople. As there were a number of large scale projects close by this would be a prime location for workers to live. The company was willing to sign a long-term lease with the promoter who would then refinance the loan with a pillar bank.
Once the loan had been drawn down and the property secured, the promoter immediately started the works on converting the former pub to residential accommodation and advised that the works would cost approximately €140,000 to complete. The promoter used his own funds to complete the works and the property was converted from a pub into two residential units.
The works were completed within 4 months and the promoter was able to repay the Onate loan within the 12 month term.
At Onate, we specialise in providing short term finance to property investors and property developers.
Whether you're considering a commercial to residential conversion or exploring other investment opportunities, our team is here to guide you every step of the way. Contact us today if you have an opportunity that you would like to discuss.
