Congratulations! You’ve decided to buy a run-down house and renovate it into a beautiful home, hopefully making a profit in the process. Original single-glazed windows, dated kitchens and bathrooms, rotten roofs, flaking plaster, funky wallpaper, no central heating, lead pipes, dodgy electrics… a house that just screams out for some TLC and oozes potential is exactly what you are looking for: but how do you find it?
My search for the perfect property to renovate and make money on was heavily directed by my budget, a steep learning curve and a harsh reality check! Sure, I'd have loved a gorgeous piece of period architecture in a quaint village location on a big plot, but let's be realistic - this was my first step onto the property ladder: I wanted a project to make money on and I had to be able to afford it and all the work required.
So here are 10 of my top tips to help you on your search for a renovation project:
1. Be honest with yourself:
Why are you are looking for a renovation project?
What do you hope to gain from it?
How much of a project you want?
Taking on a renovation project is not for the faint-hearted and whether you're doing the work yourself or planning to get tradesmen in, it is going to be hard. Be totally honest and realistic about what you are prepared to take on and the compromises you are prepared to make. Searching for your forever home will have different compromises, timescales and budgets than a property to sell on for profit, and this must be factored into those early considerations. All these considerations have major potential impacts on your budget, potential project viability and end result. In the simplest terms: the more you do the more you save and increase your potential profit.
Finally, ask yourself: is there a degree of “life” future proofing in this property? If I don’t move on in 3-5 years will this property meet my needs? In my case I started this project 7 years ago as a single woman with the aim of selling it within 3-5 years; I’m now a married mum with 3 children and it has become our home. So yes – always consider that life ahead may contain unexpected changes and where possible “future proof”.
2. Know your limitations: time, skill and budget.
I truly believe ANYONE can turn their hand to good quality DIY and do most, if not all, the work themselves, saving thousands – which is the key to turning a substantial profit! Just because you may not have ever done something like this before, doesn’t mean you can’t. I’d go so far as to say: “if I can, anyone can” with a little help. But you must be realistic about your limitations (e.g. time, children, cost) and what you are prepared to compromise on.
It is also vital you consider the limitations of the property itself: purchase cost + legal fees + renovation costs MUST be less than the ceiling price of the property if you are wanting to save money or turn a profit.
3. Set a REALISTIC budget
It is so important to set a realistic budget, not only for the purchase of the property but also for the renovation work – and factor in a contingency fund as no matter how carefully you budget, there will be unexpected costs. (I’ll give some ideas and outlines of this in another post). Do your research, get quotes and be prepared to make compromises.
4. List your essentials and desirables
Consider what you need the property to have, both as a starting point (e.g. plot size, bedrooms, utilities, access, location, amount of work needed etc.) and as an end goal (i.e. does the property have the potential to achieve this). Use this to make a list of essentials and desirables, prioritise it, and ensure it reflects what your budget will allow. Then use this to drive your search and weigh up pros and cons of any potential houses.
5. “That feeling”
Don’t rely on or hold out for "That feeling", especially if you don’t plan to make the property your home. Often this can be created. However, whatever you buy you need to feel some excitement towards: this project is going to take up a huge chunk of your time, money and emotions so if you feel nothing for it, it may not be the one.
6. Go straight to images of floorplans and plot
Instead of judging a book by its cover, study the floor plans and plot! It’s easy to change the layout and aesthetics but you cannot make a plot bigger and you will in all likelihood be limited by the footprint of what is already there. Consider practical aspects like access too. Then look at your list and see what criteria it meets. Can you create what you want from this canvas? Google maps is a great tool to see how the building sits in its plot and what neighbours have done: look for extensions, skylights etc. This not only gives you ideas, but provides an insight into what has previously been approved by county planners.
7. Research Research Research!
Do your research: it is the most powerful tool in your property search. I cannot stress this enough. Ask questions, explore the area, speak to neighbours, be nosy, know the value of similar properties in the area (and their ceiling price), assess the costs, get quotes and know the property’s limitations. I’ve discussed this in much more detail at the end of this list as there is so much to consider.
8. Build up a rapport with local estate agents
This might sound obvious but a good estate agent, who understands what you want, can often get you viewings on a property before it even goes on the open market. Share with them your budget and "essentials and desireables" list as they may suggest something you've overlooked. Remember, these “bargain” properties often sell fast (and if they don’t then there is usually a good reason why) so any heads up you get about them is a bonus!
9. Age matters
Now this is speaking entirely from experience and there is no rule, but generally the older the property, the more work it will need and there is a sweet spot between there being enough work to make it a great buy and so much work that it is going to be expensive. 1930s properties seem to hit that sweet spot of older, good-sized houses with some character, on good-sized plots, that are well built and have bundles of potential. Of course that's not the only era to consider but is a good starting point. I found that 1940s-1960s houses tended to lack character and can be quite expensive to improve the exterior aesthetic; pre 1930 can be more expensive as you're paying for character.
10. Be ready to act
As I’ve already said, the type of property you are looking for typically sells fast. One thing that will either help or hinder is your readiness to go. Do you have a property to sell first? Are you a cash buyer? Is your mortgage approved? Can you complete quickly? These things may seem obvious but they matter. Consider a seller’s point of view: if they have more than one interested party, the fact you are ready to go, without delay or complication, can make you very appealing.
Not sure what you should be looking for in a renovation project?
Keep your eyes peeled for a post on that coming soon.
What should you research?
As I have already said, the most powerful tool in your property search is research and is a big topic to cover so here it is in more detail:
Ceiling prices. When you find what you think is a suitable property, look at ceiling prices both in the immediate area (i.e. on the same street/estate) and for similar properties within a 0.5 mile radius (or quite possible less if you live in a city). Ultimately, if you want to make money, you're potential for doing so is capped by ceiling prices. When I bought my house it was advertised at around 70% of the ceiling price for the street. This was almost entirely down to the condition it was in and the work needed to bring it up to a similar specification to those at the top end of sales. I knew that to make any profit, allowing for future selling and moving costs and assuming no rise in property prices, I had to keep total costs below £45K so giving myself a budget of £10K I knew I would make a comfortable profit, even if I ended up going over a little (which we did!)
House price trends. Look at the trends of the values of properties in the area, specifically for the postcode you want to buy in. How quickly do similar properties in the area sell? How does the price compare to others locally? How have prices changed over the last 3, 5, 10 years? I found that Mouseprice.com and Rightmove.co.uk are great websites for this sort of information. Consider how quickly you want to turn the house around: we've owned our house for 7 years and we knew when we bought it that property prices for our postcode were on the rise – from research we discovered that the value of houses on our road was predicted to rise more quickly than others. This is one the biggest factors in how we've increased our property's value by so much BUT we've had to see it as 5-8 year investment to make that return.
Cost it. Look at what work you want to do and cost it. If you've got a mate who's a builder, buy them a pint (or 3) and ask their advice. If you want to proceed, get a structural survey done so you don't get any nasty surprises. If you're getting tradesmen in, get quotes.
Speak to the estate agents. Find out as much as you can from them. Why is the house for sale? What can they tell you about its history? What would they value it at with what you're planning to do to it? Are prices rising more quickly in some areas than others? Why are some areas "undervalued" compared to others and is this likely to change. In my experience, local agents have been incredibly helpful and it was down to the relationship we’d established with them that we found our house so it really pays to build a rapport with them.