A lot of property investors have a desire to buy a decrepit property and transform it into a charming home. This is a very fulfilling task that can also be profitable. With the right property and the right budget, a property renovation can lead to a substantial return on investment.
Here is our guide to making money from property renovations:
How to choose a property
There are two ways in which properties in need of renovation are put on the market.
- Through auction
- Via an estate agent
Contacting estate agents
It’s worthwhile to contact all the estate agencies in your preferred areas and let them know that you are genuinely interested in purchasing a renovation project. By doing so, the agents can inform you when suitable properties become available, and you will be their first point of contact when they obtain a relevant property.
Auctions are a faster way to buy properties, but they can be more competitive. In particular, unconverted properties are highly sought-after by investors, and as such, guide prices can quickly be exceeded by eager developers. So, it is important to set a price limit and not to go over your ceiling price. Remember that if you aren’t successful this time, there will always be other properties available. It is far better to miss out on a deal than to lose money during the project.
Before you buy
A thorough inspection of the property is crucial before making an offer.
Conduct some research on the area. Look into the selling prices of similar properties in good condition. Consider if a new and clean finish can fetch you a higher price. Also, find out the time taken for properties of this type to sell. You can use Rightmove to obtain house prices and other statistics. Please be realistic with the figures you obtain.
If you need further help, get in touch with your local Woolley & Wallis office to explain your plans, ask for advice, and remember to invite them for a valuation when the project is completed. They can also give guidance on the types of properties that are most popular now.
Setting a budget
Setting a realistic budget is crucial to ensure a profit. Nearly all renovators spend more than originally anticipated. Therefore, add a 10-20% contingency fund to your budget.
Don’t forget to factor in the cost of fees and Stamp Duty. For second homes, there is an additional Stamp Duty charge of 3% on homes up to the threshold of £500,000, so don’t forget to include this in your forecasts.
Before work starts
It is common for renovations to be poorly planned, resulting in increased costs and a subpar result. Making changes midway through the project means that certain steps will need to be redone, leading to further expenses. Therefore, it is recommended to hire the services of a professional during the planning stages to avoid such issues.
Follow these tips for hiring experts:
- Consult professionals before you start renovating. These may include town planners, contractors, attorneys, project managers and the bank.
- Make sure to check building lines, by-laws, and regulations before you decide on any additions to the property.
- Investigate funding options. Work out how much money you need to spend and where it is coming from.
- Consider an emergency backup fund in case the project runs into difficulties, such as requiring a new roof or boiler.
- Have a proper legal agreement drawn up to cover timelines, delays, payment systems, costings, and disputes.
- Unless you have no alternative, don’t complete the work yourself. A lack of professional experience and outside opinions may lead to a poorer quality finish.
- Consider hiring a project manager to oversee building work and don’t forget to visit the site regularly to ensure the work is carried out to a high standard and is delivered on time and within budget.
- Don’t underestimate how much work and energy is required. Even if you’re not doing the work yourself, organising contractors and making endless decisions can be tiring.
Other things to consider before getting started.
- Do not build or renovate without approved plans. The council has the right to demolish an unauthorised building.
- Visit your neighbours before your plans are drawn up and have a discussion with them about what you want to do. This will save unnecessary objections later.
- Plan, plan, plan. Grand Designs presenter Kevin McCloud recommends spending three years on the planning and then six months on the building work. This may be excessive for investors looking to turn around a property quickly, but it certainly shows the importance of making calculated decisions before moving forward.
- Get three quotes for every job to ensure that you are getting a good price for work completed.
Once the work starts
- Keep areas partitioned to make sure the mess doesn’t spread. If different areas are being worked on simultaneously, it pays to tape or nail heavy plastic sheeting across doorways, archways, and any connecting passageways to contain dust and noise.
- Cleaning should be constant throughout the job. Take away dust as it accumulates and vacuum as much as reasonably possible. Workers should be happy to help accommodate, as it will create a cleaner environment for them and means that they’ll be breathing in less dust.
- Offer tradespeople a bonus if they complete work on time or early to ensure they are motivated to work efficiently.
- Be polite and friendly to your tradespeople. Maintaining a good relationship and seeing a friendly face regularly can help to improve morale. Providing snacks and treats is a good idea. Motivating a team to do a good job for you will ensure a higher-quality finish.
- Think about the quality of the finish. Who is your buyer going to be? If they expect luxury, spend a lot on the kitchen appliances. If they’re a first-time buyer, basic appliances will be acceptable.
- Decorate well but without too much personality. Keep the walls neutral and accessorise with colour. This way, the purchaser can easily put their stamp on the home without the extra cost.
- Instruct a reputable estate agent to sell the home. Our property professionals are local experts who know the market, so they can advise on the best time to sell.
- Once your renovation is complete, contact Woolley & Wallis who will guide you through the stage of selling your property and ensure you get the best service and price possible to maximise profits.
For more information and advice, call your local Woolley & Wallis office which are always happy to help.
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