Renovation and property developing
Why take on a renovation project? Maybe you want to bring an unloved property back to its former glory and create your dream home. Or perhaps you want to buy a run-down property cheaply, restore it and make a profit when you sell.
Restoration is a big risk, however. Get it wrong and your property could turn into a money pit or an unsellable white elephant. Particularly if your aim is property development, you’ll need a keen commercial sense as well as building expertise.
Here are our top renovation tips.
What kind of property should I renovate?
First ask yourself these questions:
- Why am I doing this? (e.g. building my own home, resale, buy-to-let)
- What is my budget?
- How much time can I commit to the project?
- How much can I do myself?
- What extra help might I need?
- What are the key risks? (e.g. overspending, over-running, a falling property market, pressure on family)
- How will I manage those risks?
The answers to those questions will provide a good starting-point. Now you can look for a suitable property to renovate, keeping within your known limitations.
Budgeting and preparing for a renovation
Budget rigorously before you begin. Talk to a mortgage broker about how much you can borrow for the project, as this won’t be as straightforward as getting a mortgage for a finished property. You may have to find some of the funds for the project from other sources, such as savings or short-term loans.
Be sure to factor in the costs of new wiring, plumbing, any damp fixing, potentially a new roof, materials and labour. Whatever your total, add 15 per cent for unexpected costs.
Before putting in an offer on a property in need of renovation, get a full building survey to check its structural condition (as there may be issues you can’t remedy yourself, or which would cost too much to fix).
Finally, beware of listed properties, as these may seriously restrict what work you can legally carry out. You can investigate a property through Historic England.
Where do I start with a renovation?
Your first steps should be:
You’ll need renovation insurance in place before you can exchange on the property or start work. This is similar to buildings insurance, but also covers your building materials and works, legal expenses, public and employers’ liability and accidents. Getting a warranty is also a good idea, in case anything goes wrong with the building work or materials used.
2. Protect the structure
If the property is at risk of further decay from damp etc. then protect it as far as possible. Board up any broken windows, cover any holes in the roof and secure the site.
3. Enquire about grants
Sometimes there are grants or VAT concessions available for restoration work, either from your local authority or via a Home Improvement Agency (HIA). Check before you start any work, as applying later may disqualify you. Property developers are also not eligible.
4. Get planning permission (if needed)
If your work is likely to change to footprint of the house or its external appearance then you may need planning permission.
5. Hire a structural engineer
If you want to change any structural aspects of the property, such as knocking down walls, moving beams and widening doors, it’s very useful to have a structural engineer to check your plans. You’ll also need to ensure that your plans meet building regulations (your engineer can help with this too).
6. Hire a trusted builder
If you’re not handling the building work yourself, choose your builder with great care. A restoration is a far bigger task than an extension and requires a serious commitment and level of expertise. Always provide a brief so they can quote properly, and check what the quote includes. Don’t just go for the cheapest estimate.
Renovating step by step
There’s little more frustrating than completing one stage of renovation only to find you have to tear it down because you need to do something else first. Getting things in the right order is crucial. The exact order will vary from project to project, but here are some rules of thumb.
1. Make it safe and workable
Get the structure stabilised, stop any decay and make it safe to work in. Get the water and electricity up and running, as both are needed for the work. Now you can begin with the demolishing and salvaging of materials to make the site as clear as possible.
2. Tackle the structure and exterior
Now you can proceed to changing the internal structures and adding any extensions. Connect the property to sewers, make it weather tight with doors and windows, then move on to things like rendering and gutters. Once the exterior is sound, you can begin external decoration.
3. Make it yours inside
Now you need to take care of anything that will end up being covered by the plaster. Build any internal stud walls, add flooring grade chipboard, install the staircase and start the plumbing and wiring. Once it’s plastered and dried out, you can start on really making it your own with flooring, doors, skirting, kitchen and bathroom fittings and radiators. Finally, you can paint and decorate your new home.
Developing a property for sale
If you’ve developed your property with the sole purpose of selling it on for a profit, you need to be particularly rigorous when it comes to budgeting. Where you might push your finances when creating your dream home, as a property developer you need to focus on your business goal.
Keep track of all your spending on your property, and all the time spent on it too. You may want to allocate yourself a hypothetical ‘wage’ for those hours. Add this amount to your budget, so you know the total cost of the restoration including your own labour. Next, decide what kind of profit you want to see from your project, and so work out the minimum price for which the property should sell. Keep it realistic, but be ready to hang on to property a while if it struggles to reach your reserve price.
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