The sky's the limit

With urban space at a premium, Mark Perlstrom saw there was profit to be made from rooftops. Zoe Dare Hall reports
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Now that the buy-to-let market has burnt out and renovation means huge labour costs, how can you make a real profit from property? Mark Perlstrom has the answer: he makes money from selling fresh air.

Now that the buy-to-let market has burnt out and renovation means huge labour costs, how can you make a real profit from property? Mark Perlstrom has the answer: he makes money from selling fresh air.

His niche, to be precise, is in profiting from planning gain. He buys the freehold to apartment blocks with flat roofs and gets planning permission to extend the existing rooftop. Then, he sells the freehold on to local developers, who don't have the time or expertise to source sites themselves. "Builders can't borrow the money because banks won't lend without planning, so it takes an entrepreneur to put in the cash up front," says Sheffield-born Perlstrom, 41.

Residents in the blocks he buys have few objections. "Their flats are worth considerably more," says Perlstrom, "their service charges are lower, because they're divided between more people, and their heating bills are reduced because heat no longer escapes through a flat roof." As for Perlstrom, the financial returns are "massive" and relatively quick, with each project taking about 12 months.

The ethos behind his Environmental Land Company is to promote sustainable development. Besides apartment blocks, he deals with any previously developed land or brownfield site, including old schools, pubs and petrol stations, which he finds through auctions, agents and pounding the streets. "Everything I do is underpinned by the national policy document PPG3, which says that we should be building more densely in urban areas," says Perlstrom.

The Government is looking to use any scrap of land to cram people into urban areas and protect the greenbelt. There's been an explosion of single house dwellers, and there is a big thrust to accommodate them by using land more efficiently. "If you have a bungalow with an acre of land, especially in the South East, you could get about 12 houses on that land, according to the Government's guidelines, which means your garden is worth about £3m to a builder," says Perlstrom.

Imitating a loft developer friend, who never touched renovations but made his fortune from getting planning, Perlstrom did his first deal in 1996. "I didn't have much money, so I used my credit card to buy a block of flats in Highbury for £9,000."

He got planning permission to extend the roof, and sold the block to a developer for £30,000. The next deal was on his former flat in Hampstead; with permission for a roof terrace, he sold it for four times the £98,000 he originally paid. He also bought 15 acres of land in County Durham - the site of an old reform school - for £72,000. "I sold it to a national housebuilder at 100 per cent profit, with a clawback condition that we'll make 75 per cent of the market value of any land they develop."

To progress to bigger deals, Perlstrom needed more time and capital. "I took a huge risk - I sold my house and gave up my job as a consultant at Ernst & Young," he says. "I knew I'd regret it if I didn't try." He made an £80,000 profit from the next block of flats in north London, by getting permission to develop the rooftop, and has just completely his biggest deal: three blocks in Putney, bought for £90,000 and sold for £340,000, with planning for three penthouse apartments.

Perlstrom, who has an MBA and did a planning course at London University, says his experience of the public sector in previous jobs has been vital in helping him to understand the minefield of planning policy. "Often an application is refused planning, not because it doesn't merit it but because of political objections. You need the courage to know that even when planning is turned down, you may still win on appeal.

"It's a professional roller coaster, which keeps a lot of people out of the market. You have to be patient, confident of your skills and willing to seek professional advice. Before I bought the Putney blocks, I consulted the planners and they said they would support my application. Then they turned it down twice." For this afternoon, though, Perlstrom is off the roller coaster and on his bike, in search of temptingly flat roofs.

Environmental Land Company: 020-7433 3043