Buying a home, whether it is for you to live in, to have as a holiday home or to sell on should have the same important considerations when renovating. If like me you are a creative person then looking at the financials are boring but they are an absolute must if you are to make profit and become a successful property owner
Location is everything to start with because unless your planning to live in the house forever how much you spend on renovations matter hugely as to how much ROI (Return on Investment you can achieve short or long term.
For example if you bought a 3 bed mid terrace property for £350k in a busy 1960's housing estate and renovated the kitchen, bathroom and new floors throughout and spent a whopping £75k on luxury fixtures, the property may still be only revalued at say £430k thus the ROI would only be 1%.
Your would either have to wait a while for the housing market to increase to get a better ROI or rent it as a luxury accommodation. However people looking for luxury will be hunting for it either in a sort after location such as by the sea, in a pretty village or a popular city or town.
A better example is if you were to spend the same amount on fixture (kitchen, bathroom etc) but on a property in a more desirable location, that is more expensive in the first place and thus worth spending the extra money on to add value and be in keeping with the property structure and demographic.
If the property was bought for £450k and you spent £75k and sold the property on for 600k the ROI would be 14%
So how can you get a good ROI on any property that needs renovating whether it is in a sought after location, a large or small, characterful and old or newer and perhaps simplistic?
Work out three most important things first:
What is your type of future buyer?
What % of money do I want to invest to get the best return?
How do I make the house seem appealing to the perfect buyer/holiday let?
Bearing in mind that if you buy a property that the older the property sometimes comes with beautiful features but a bag load of problems so this is where practicalities, common sense and a good surveyor and builder come to hand.
If you are looking to buy an older property then taking a builder with you to view the house is always a wise move.
Once you have worked these three factors out then it's a case of putting a scenario together to create your brief when hunting for your property.
Lets take a 3 bedroom Victorian mid terraced property as an example.
The property say, is in the town of Wadebridge, ( a small pretty town with a few schools and the house is Victorian with some beautiful features currently covered up such as wooden floor boards, 2 fire places and a long narrow over grown garden. It is walking distance to the town centre and a 15 min walk to the nearest school.
When renovating I would definitely aim at a young family. They are probably busy people and therefore want a stylish home, with little maintenance on the garden but like to entertain friends and family. They needs 2 bathrooms but the property currently only has one.
This investment due to the location would suit a renovation flip (a quick turnaround before going back on the market) instead of holiday let use. Thus I would want a good return on investment within a year.
I would make this property appealing to the types of people (demographic) who may possibly buy it by doing essential renovations such as:
Add an additional bathroom (en-suite) in the master bedroom
Take out the old kitchen and replace with a new one that is functional and stylish (without spending a huge amount)
Expose original features such as the fireplaces and strip back the floor boards.
Open up the garden and re design, adding plants that are easy to care for that look good all year round such as ornamental grasses and put down a patio that leads out from the kitchen to create an entertaining area for guests.
Replace the bathroom, adding in stand alone enclosed shower and separate roll top bath to aid relaxation after a busy working day!
Paint throughout with subtle tones to appeal to to a wider audience with a splash of colour to add warmth and character. and make the most of the natural light and artificial.
This dining room showcases the large beautiful windows, allowing natural light to flood in, by keeping the window area clear and having the dining table as the main feature. Using the smallest pendant so it brings light onto the table when needed but doesn't detract the eye from the main focal point
The idea is to create a space that people relate to and that works well for their family and how they want to connect to it emotionally. This can be done with consideration for the potential buyer and to a budget by being clever with how you style and renovate it.
Adding generic yet simple touches such as a few houseplants, art and a few books (but not too many) adds a feeling of home.
To how to get a good ROI and still make the property desirable?
Spend on items and spaces that get used a lot, such as a kitchen/living space as it's known as the hub of the home and perhaps extensions or additional rooms if needed, flooring, lighting and then save on the rest. Unless of course you are developing a luxury mansion or a modern new build that warrants the spend. If you spend on a kitchen be careful where you spend the money, hand made kitchens cost you a lot be savvy on how you spend the budget.
For example, overall for this type of property the average house price when they look their best is around £550k
This property say in on the market for £420k but has been on the market for 6 months and hasn't been bought, probably because the average family doesn't have the time or inclination to do the work needed. So If you can get this property to start with for £400k you have already saved 20k before you have begun.
I would want to get a return of around between 10-20% so therefore I cannot realistically spend more that £60k on renovations to make a decent return.
£18k Kitchen
I would look to do this by buying a kitchen from a reputable supplier such as Howdens who provide good quality kitchen but are not handmade. I would then spend a bit more than I could on a decent quartz or similar worktop as this will not only look more high end and luxurious but it will last well and a work top will get very well used over time.
New in-built appliances including a large or double oven for a family
New tiled floor
£5k New en-suite in Master Bedroom
Simple shower cubicle, toilet and sink choosing good quality mid range tiles throughout
£6k New family Bathroom including a freestanding bath like this one, if there is a window that shouts out at you, having a bath under it adds a luxury relaxed feel people appreciate as it reflects how they wish to live
£10k Flooring strip wooden boards, new carpet upstairs, clean up/restore fireplaces and paint walls throughout house
£3k spotlights and other lighting where needed
£8k Garden, patio front and back
A big consideration with buying any house especially if your investing to get a quick return is stamp duty. At the moment stamp duty for first time buyers is zero up to £420k, however if you state that this is an additional property purchase then for a £400k you will have to pay £19,500. This amount would have to be considered and added onto your budget.
Talking to tradesmen and setting up accounts with local suppliers is an essential part of property development. You can get trade discounts on items and understand labour costs and other possible expenses before you start any project.
When renovating a home to resell it is important that once the renovations are complete, you style the property well. Idle Interiors can advice on how much furniture is needed, tips with sizing and all those finishing touches that make a bland space seem homely and welcoming to attract potential buyers
My top tips when viewing a property:
- Take a knowledgeable local build with you
- Check out the roof on first view and the windows as these can prove costly if replacements are needed
- Look at the heating system they have in place and the cost effectiveness. If this needs replacing it can cost thousands. A bonus is a property with a sustainable heating system such as solar panels
- In an older property look for damp, potential signs of woodworm (although this is more of a surveyors /specialists job) and electrics such as the fuse board
- Look at the direct neighbours left, right and behind as a quiet street with well kept properties around are always a good sign for resell
- Look for features such as floorboards, fireplaces, beams, large windows and South facing properties/gardens as these add value instantly
- Check the running water in all the taps and the loo!
- Last of all I would ask as many questions you feel appropriate to the estate agent /owner to get good knowledge of the property and this also shows your a serious potential buyer
If you are looking to go into property investment but are unsure whether it's best as a renovation flip or as a holiday let, Idle Interiors can guide you on both scenarios to get to a decision best suited to you and your lifestyle
contact us on 07834992381 or email [email protected]
If you are serious about going into property investment and need a low down on whether to buy the property yourself or via a limited company check out Buying through a company: the pros and cons | Property Geek for a lot of information to guide you, they also have info on various types of finance for different property investments so worth a read.