Renovating Property for a Sale Considerations


Renovating your Property to Sell on

With property prices ever increasing, many people have come to view the buying of run down property and renovating it for resale as being a good money making  practice. It is true that many people have made their fortune out of this and many more have used it as their full time source of income.  However like all forms of investment renovating property requires a range of knowledge and skills if a successful outcome is to be achieved.

Moving a renovation project from the idea level and through the planning and evaluation stages requires a good understanding of two areas of consideration.

  • Financing a renovation project – Whatever type of project you are likely to consider, you will need to set out how you will be able to fund the project. If substantial amounts of capital are available from your existing resources then this ceases to be a problem. However if your capital reserves are limited and finance will be needed for the project then exploring the options that may be available and obtaining confirmation that your chosen solution will be made available will be vital.
  • Assessing your skills – having an honest appraisal of your skills to manage such a project will be very important as it will define the range and complexity of the renovation projects you will be able to sensibly consider. Having DIY skills is useful but must never be the sole basis for deciding to go ahead with a particular project. Just look at any construction project being undertaken whether large or small and you will find the project being administrated by a project manager. The success of any project will depend on it being carried out on time and within budget. Arranging and controlling this is the function of the project manager and if this is to be you then you need to understand your capabilities and match them to the project to be undertaken.

Assessing a project

Regardless of the size of project being considered the things that need to be analysed are essentially the same with the only difference being in the level of detail that should be undertaken. This will be defined by the complexity of the project. Here are some guidelines to help you consider how a project should be assessed.

Finding a suitable renovation project – In some cases a project just appears and if you are an experienced renovator these can be taken advantage of as you will have practical knowledge to guide you and be in a position to make a quick decision and benefit from the opportunity. However, if you are new to property renovation then these situations should always be avoided as they can be traps for the unprepared. For new property renovators the approach should be to look for something that fits your experience and skills.

  • Local estate agents. Estate agents should offer good local knowledge and getting to know those in the areas that interest you could be to your advantage as estate agents are one of the biggest sources of properties for sale on the market. Speak to your local estate agents and let them know what you are looking for and you might be the one getting the first call when the next renovation opportunity comes on their books.
  • Property auctions – Auctions are often used as a quick way for people to dispose of run down property and because of this they can be a great way to locate neglected properties or properties that have been repossessed by lenders or simply for general problem properties.
  • Online property adverts – Private property for sale websites and even small online local adverts can occasionally bring up some interesting opportunities and are well worth looking at.
  • Local Councils – Councils are continually trying to address the housing shortage in their areas by bringing empty properties back into use. Seek advice from the empty home agency about how you can work with your local council to help bring these homes back into functional use
  • Keep your eye open and ask – Familiarise yourself with the area of interest and note any rundown houses or empty properties that look suitable. Often these are empty and run down because they were owned by elderly people who have passed away and the property may be waiting for probate to be sold. If you can trace the owner or solicitor concerned and your timing is right, you might find a true bargain!

Planning your property renovation project – Having found a potential project and looked it over, you are now ready to look at preparing your plan for the renovation work you want to complete.  The main things to consider here are shown below.

  • List of works required – Make a list of all the work you want to undertake to bring the property to the final condition you want to achieve. This should be set out in as much detail as possible and use of spread sheets will help as they will allow later changes in thinking to be easily made.
  • Planning consent and professional advice – Depending on the degree of renovation envisaged planning and building consent may be required. This can often be a lengthy process and will usually require the services of an architect to prepare the plans.
  • Use of building contractors – where structural work is required such as building extensions or removing support walls to roof repairs and rewiring and plumbing services these need to be defined and assessed for cost and time to build. If renovation of properties is to be a long term activity then getting to know good reliable building contractors will be an important asset for you so building relationships with them as early as possible will be beneficial.
  • Create a project build plan – From your list of work sheets set out in the order of build all of the activities to be completed and put a line on your planning chart to show the length of time allowed for that portion of work. When this has been done for all the different activities you will have completed your base level build plan. This will gives you an overview of how the works should progress and show the total time to complete the work.
  • Cost planning – Again using excel spread sheets, you now want to set out your best estimate of all of the individual costs for materials and services that are required to complete the project. You will want to enter the costs to match the time frames for the individual items of work as this will give you the times when you will need to draw on funds during the build.
  • Financing – You now have a well thought out build plan and a good estimate of costs and how they will be spent. This information will let you clearly see when funding will be required. As arranging funding was your very first area of consideration before starting to look at specific projects you will now have the information to tell you if your available funds will be sufficient to allow you to complete this project against its required build plan. At this stage, it is very likely that finance and build costs will not match. This is common but as you have been sensible and set this all out on spread sheets for easy alteration you can now enter the next phase which is reassessing your project.

Reassessing your Investment property project

As it is likely that you will find that the costs you have allocated to complete the project may not fit with your financial arrangements or the standards of build set out are simply too high for the project to produce the returns that you expected. The plans you prepared in spread sheet form will now allow you to review each cost and work activity and allow you to easily reappraise your thinking on the project.

  • Work schedule – go over the work schedule and reassess if all the items are absolutely necessary. You may find that you are including items in the build that will not appreciably affect the final selling value of the property.
  • Building fittings and materials – are there ways to purchase the materials fittings and furnishings you need at cheaper prices or are there alternative products on the market that will be less costly and be perhaps simpler and cheaper to install.
  • Contractors – where you have only estimated the cost of work that is to be contracted, talk to one or two local contractors about what you want done. This will let you confirm or otherwise if your estimates are sufficiently accurate.

Once you have run your findings through several times you will be in a good position to decide if the project is manageable within you financial and skills resources and whether it will give you the return that you intended. If it doesn’t, leave it alone and move on to the next opportunity and treat your experience as a good learning exercise.

Some things to keep in mind

Entering the renovation market for the first time means that it is highly probable that you will make some mistakes. Here are a few of the more important things to consider before you commit to the project.

  • Property selling values – Any property will have a ceiling value which is usually set by its location and the values of surrounding properties. Adding facilities that would require the property to realise a price above that ceiling value will result in disappointment. Always ensure that before undertaking a renovation project that you fully understand what that ceiling value is likely to be.
  • Individual features – Adding extensions and doing loft conversions will always add value to a property but what you always have to consider is will that added value be greater than the cost of the build. This thinking should be applied to each aspect of the renovation.
  • Project duration – Until you gain experience and have completed a renovation project, it is always best to allow a contingency for the project build time to overrun. Many things can cause this but you need to allow for this in light of your financing arrangement. If the success of the project is dependent on the timescale being met then think hard about whether you should go ahead.
  • Project Budget – Always allow a budget contingency to cover things that you haven’t considered. Things can go wrong and lead to work being needed that was not originally planned. Having a budget contingency fund will help overcome these problems.
  • Legal and finance services – You should find a good solicitor and mortgage broker and build a relationship with them as you will benefit from their knowledge and experience while you are in the planning stage. Expatriates.co.uk can help you with this if you leave an enquiry.

 

 

 

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