The majority of homes in the UK are still bought by people that are looking for a home to live in. However, over the last 40 years more and more of us have been tempted to dabble in real estate investment, many through buy-to-let and some of those through buying property in need of renovation.
Of course, whilst the market was, at one time, a fairly small one, the number of people now financially able to buy run-down property (where cash or large cash deposits are usually necessary and mortgages are few and far between) has grown exponentially. Whilst once you could be assured of picking up a bargain at auction, now the number of speculative buyers and TV producers on the hunt for the next big idea for their property-based daytime TV Show probably outnumbers the owner occupier contingent!
Buying today requires, more than ever, that you stick to some very specific rules. In brief, they include;
- Always buy in an area you know and a market you understand.
- Always let your head rule your heart - especially at auction. Have a maximum price and stick to it.
- Always assume it will take 30% longer than you think it will to do the works, assume the building costs will be at least 10% more and always allow for this in a cash contingency fund.
- Never exchange a contract or bid on a property until you have undertaken proper and complete due diligence. This will vary but will probably include a complete portfolio of searches and a survey / valuation.
- Make sure you allow for ALL costs involved in the conversion including legal fees, stamp duty, costs of finance, community charge (if applicable), consultant’s fees, planning fees, VAT (where applicable) and also things like insurance, etc.
- Make sure that your aspirations with regard to the final sale price are realistic and try to get at least three opinions from knowledgeable agents in the local area. At Dunca Yeardley we are happy to work with developers and investors early in the process and we usually charge no fee up front, only asking that we be instructed in the subsequent sale.
- Don’t design and decorate to your tastes. Bold design might be fine, but always decorate in neutral, inoffensive shades. And don’t splash out on gold taps! Save your money and spend it where it adds value.
- Adding floor space, particularly bedrooms, is usually a good way to add value. Also, consider current trends. Is open plan living now popular? Think about knocking through walls. Are car spaces in big demand? Consider adapting that postage stamp front garden.
- Make sure you are aware of all regulations that might affect you and if unsure take good professional advice.
- Make sure that you are allowing for a profit! Too many first time investors forget to price in a reasonable profit meaning they risk their cash and time only to improve a property - for no reward. Ideally one should allow for a profit of between 15 - 20% on cost (or more if possible!).
Clearly, property renovation can be a complex business and requires a mix of skills. It is also full of traps for the unwary. But the acronym KISS still features in the process - Keep It Simple Stupid.
Good luck in your endeavours, and if we can help, feel free to contact us for an initial chat with no obligation.