Can You Make Money Refurbishing A Derelict Property?
Property investors are always looking for new ways to make money. New locations, styles of housing, and financing options all play a part. But sometimes it’s better to take the plunge and commit to refurbishing a derelict property because of the money-making potential.
Financing can be difficult, of course, but these days there are a number of options, including so-called refurbishment mortgages, bridging loans, and buy-to-let loans. Property investors have options – it’s just a question of whether they can execute on a plan and take home a profit.
Get A Survey Done
You might think that getting a survey is optional for a derelict property; after all, you already know that it’s in a state of disrepair. However, investors need to see the level of disrepair in order to offer a suitable price for the property. In some situations, a property appears to be derelict because the paint is falling off or there are a couple of loose tiles, but fundamentally the building is sound. These properties, if going cheap, can actually be a bit of a bargain.
Other times, you’ll need to do expensive things, like repair the foundation or replace a supporting wall. Surveys will reveal these problems ahead of time so that you can arrive at a sensible offer. Remember, houses with serious issues are not a definite no-no, they just need to be priced reasonably.
Look For Easy Renovations
Smart investors know that one of the best ways to add value to a derelict home is to knock through and create an open plan living space. You see this kind of thing all the time in barn conversions. Find the locations of supporting walls and then take a look at the floor plan to see whether there is any scope for merging kitchen, lounge and dining areas. Also, check the bedrooms to see whether any areas would allow for an ensuite bathroom.
Check All Hidden Costs
Once you’ve generated some initial ideas for how you want to renovate a property, the next step is to get in touch with an architect and negotiate an hourly rate. Remember, though, that when planning building modifications, there are additional costs, besides the cost of the architect. You’ll have to submit your plans to the local authority, which can cost a substantial amount of money. And you’ll need to get the planning office to sign off your idea, who will also charge a fee. All these costs can eat into your overall return, so you’ll need to consider them ahead of making any renovations.
Always Plan For Contingencies
If you’re a seasoned property investor, you’ll know that renovations usually cost more than anticipated. Much more. Try to set aside around 10 to 15 per cent of your overall budget in a rainy day fund. Almost always, you’ll encounter additional problems as you carry out work. A boiler may need relocating, or you might discover mould or damp not unearthed in the survey. All of these problems will increase costs substantially.