If you’re currently looking at investing your money in buying a new property, you’ve probably already considered the potential benefits of buying a slightly older building and renovating it. While this is often a reliable way to turn a more profitable return on your investment, buying a ‘fixer-upper’ is not for everyone, and there may be elements to such a large commitment that you haven’t already considered.
While every new home or property is going to need varying amounts of work in order to make it match your needs, buying a property that you know in advance is going to cost you a significant financial extra may be putting you off taking the plunge.
Therefore, we’ve put together the most likely pros and cons that you ought to consider when buying a property to renovate.
Create the home of your dreams for the same total price
Finding the perfect property in your ideal location can be extremely difficult, but buying a rundown property in your desired location might be a viable alternative to consider. If you are serious about renovating for profit, buying the worst house you can find on the best street that you can afford, as that gives you maximum scope to add value. In its current condition, the property will likely put a lot of people off, and so the price should reflect that. As an individual renovator, you can’t influence an area or change the street, but you can completely transform the house, totally rebuilding it if necessary.
Most of the profit is made in the purchase rather than what you do to it, so the price you pay is absolutely crucial. Ideally, you will want to buy a property that has potential that others haven’t yet spotted, and so you aren’t paying a premium for it. The chances are unless you’re buying a large property, the potential margin for profit is relatively narrow, so you’ve really got to consider what you’re happy to pay.
Potential to add some serious value
It’s well known that certain investments are almost fail-safe. Investing in areas of the home such as kitchens, bathrooms and unused spaces (lofts and basements) can add substantial value to a property. It’s estimated that spending £10,000 on a new kitchen could add between £20,000 and £30,000 onto a property’s eventual value. Similarly, a loft extension could cost you around £35,000, but it has the potential of adding up to £100,000 in value to a property if another bedroom and bathroom is added, depending on where the property is located.
Even smaller projects can make your new house feel like home
Not every ‘renovation’ project needs to be a huge undertaking, or with large profits in mind. If you’re struggling to find a property you genuinely like, sometimes taking on a project is a nice way of creating a home you really do love. Small defects do not directly affect the value of a property, however together they will prevent it from selling at the optimum price. The following are typical defects that will put many buyers off, yet can be easily fixed by any competent DIY’er:
- Peeling paint
- Squeaking or sticking doors and windows
- Door latches that don’t work
- Dripping taps
- Loose tiles
- Sewer smells
- Broken or damaged windows
- Squeaky floors and stairs
- Cracks to ceilings and plaster works
- Lifting flooring
- Dated décor – yes, this includes artex ceilings and dado rails!
You’ll likely run over budget (and out of patience!)
While there is great scope for adding value to a property by renovating it, there is always a risk of overspending on the project, without adding real value. Just because you have spent thousands on doing up the property, you’re not guaranteed to receive thousands back. When completing a property renovation, you have to be realistic about what you want to achieve, and well-informed on how you’re likely to achieve it. Arguably most important of all, you must be really strict with the budget you have set.
It’s best to allow for an extra 20% on top of your initial budget so that you can be prepared for any unforeseen issues, especially if structural work is required. A simple rule might be: do not spend money on making a major change that will not add to the value of the property. This is where working with your local Leaders property experts could come in handy.
It’s easy to underestimate just how much ‘renovation’ needs completing
Picking the right property in the first place is very important. While you may be open to buying a home requiring a lot of work, you need to be realistic with how much work you can actually commit to. If you choose in invest in an older property, for example, you need to note that some old buildings may be harder to insure and could require different renovation techniques to avoid further damage, often costing more money.
There’s a risk you won’t add real value
Additionally, you have to realise the limitation of how much value renovation can add to your property. Demand for properties is often reflected in the popularity of the area it’s in, rather than the interiors, so make sure you don’t make bold, large changes without considering how much value it will really add. Remember the saying “it’s better to buy the worst house on the best street, than the best house on the worst street”? This certainly applies here, even if the ‘best house’ still requires lots of work.
DIY vs. tradesmen
Buying a home in need of renovation is not something you should rush in to. Even after researching and finding a property with the potential to be perfect, you still need to consider who is going to carry out the work. Since you are likely to spend a lot of money on the project, it is vital that you find tradespeople you trust, whether you have worked with them before or have had them recommended to you. Do your research: never go with the cheapest option just because you think it will save you money.
Investing in a project manager to oversee the project (especially if you live far away, are not able to manage the project yourself due to other commitments or are simply inexperienced in property renovation) is a good idea. Project managers will make sure the builders carry out work to your specification and will make it more likely for the project to remain on budget. But the downside is that you will have to pay for their expertise.