Renovating for Profit
OK so I don’t profess to be a total expert, but I have done up 4 properties for profit, all of which i have made money on, so I hope to be able to give you some valuable tips if you are doing this for the first time.
There are some key things that you need to remember to start off with before embarking on this project:
- Buy the property at the right price: this means knowing what the property will sell for once you have done it up and knowing how much it will cost to do up. Once you have these figures then you need to figure out how much profit you want to make and figure out what the maximum price is that you will pay for the property;
Sale Price – Cost of Renovation – Profit = Purchase Price - Know the costs involved in renovating the property. This is a bit of a tricky one if you have not done up a property before as a lot of this knowledge comes with experience. It is easy to put a budget together with big ticket items like central heating and double glazing but also easy to forget things like doors, light fittings, paint and wallpaper etc that can all add up to hundreds of pounds. It is also really difficult to know exactly what needs to be done on a property by just looking around a few times as there can be hidden problems.
- Know your market. For example, if you are buying an ex-council property on a housing estate then you may want to keep the budget relatively low key and not go for top level fittings as you may not get your money back. Conversely if you buy a property in a nice or up and coming area you may want to spend that small amount extra on say nicer bathroom fittings or wall sockets.
Living in a property whilst Renovating it
This is a key fact that you need to decide on before you go ahead. There are (some) pros and a lot of cons for doing so.
Pros:
- you may have all of your money invested in the property and not be able to afford to live elsewhere, thereby saving you rent or mortgage payments on another home.
- you can keep a close eye on the works as they happen
- you can be there for any deliveries
- as the property will be your main home, you will not have to pay Capital Gains Tax on it when you sell.
Cons:
- never underestimate the amount of dirt and dust involved.
- you will likely have to have a lot of your belongings in storage for a while.
- there will be times where you probably won’t have heating and/or hot water or possibly even a toilet!
- you can’t get away from the place.
- dust
- dust
- and more dust
Kitchen
The kitchen is one of the key areas that can sell a house for you. You don’t have to go out for a high spec kitchen as quite often, a brand new kitchen from a budget range will look really good anyway. Choose light colours and nice worktops with neutral tiles and incorporate as much storage as possible. If you have space then add in a dishwasher as this always looks impressive.
Many of the high street DIY chains have good value kitchen units and will provide a service to plan out your kitchen for free. Some stores sell the carcasses, doors and handles separately (B&Q and Homebase to name 2) and some sell the units as a complete package (e.g. Wickes). Work out which makes better financial sense for your design.
Some kitchens come with soft close doors and drawers which can add an extra touch of luxury to the kitchen.
Bathroom
The bathroom is the second key room. If a house has a brand new kitchen and bathroom then you are already half way to selling. As long as you keep it pretty neutral. Try not to put your own taste on the design.
Hunt around for bargains for bathrooms. You can get a really nice bathroom suite for less than £500. Don’t forget to also factor in taps and a heated towel rail. There are lots of bathroom stores online where you can check out their designs and prices. If you can fit one in then a separate shower is good but if not then a shower bath or else a bath with a mixer tap and riser rail will do just as well.
You can buy very cheap taps on eBay and some of them can be quite good but others you get what you pay for and they may not be great quality. Watch out for items that are for sale in the DIY stores as a half price sale tap there can be great value.
If you have a small space to work with then don’t forget that you can get smaller baths to fit in these kinds of spaces. For one bathroom I used a 1500mm bath as there was not enough room for a full length one but it worked just as well.
The Budget
OK, now this is the trickiest part, and I think the best thing that I can do is to include a list of all of the items that I ended up paying for in my budget so that you maybe don’t miss anything. Of course some properties will require different work and the costs will be different depending on the size of the property.
- Stamp Duty
Light fittings
Tiles for bathroom
Bathroom Suite
Bathroom taps
Bathroom floor
Bathroom fitting
Towel Rail
Kitchen units
Kitchen tiles
Worktop
Extractor
Kitchen Fitter
Cooker/hob
Paint
Wallpaper
Flooring
Plasterboard/Plaster
Plywood
Skirting/architrave
Electrician/Wiring
Outside (painting/gutters/fascias)
Knock through walls
Double doors
Plastering/Coving
kitchen tap
kitchen sink
Loft ladder
Dishwasher
Plumbing/Central Heating
Garden
Doors + handles
Light Switches & sockets
Skips
Fireplace
Hall
Radiators
Double Glazing
Building Regs Fees
This is obviously not an exhaustive list. It also assumes that you will do the painting and decorating yourself to save on labour costs. Hopefully you will also be able to do some of the other jobs yourself too as this can significantly save on costs which at the end of the day means more profit for you.
I would say that if you want a rough estimate of what I have spent in the past I can give you the following info:
- Small 2 bed terrace that needed general minor updating, most of which could be done by yourself – up to £5,000 including updates to kitchen and some extra double glazing
- Large 2/3 bed terrace, full modernisation including adding central heating upstairs, moving bathroom upstairs, new kitchen and bathroom – £15,000
- 2 bed bungalow – in low value area but needed complete CH installation, new kitchen and bathroom, some rewiring, plus redecoration and some plastering work – £12,000
- 3 bedroom semi – new kitchen and bathroom, complete rewire, new ceilings and total replaster, boiler moved, walls knocked down – £20,000 including stamp duty.
It is possible to cut down on these costs, as I say, if you do more of the work yourself. You also need to remember to add in fees when calculating your profit. Also none of these projects needed a full new set of double glazing so that would add to the cost.
Summary Tips
- Know your market in terms of buying/selling prices
- Stick to your budget if possible (sometimes things will come up that you just have to pay for) and don’t add personal touches
- Know what you are going to buy in advance and wait for special money off deals or try and get big budget items when there is a sale on or 10% off weekend.
- Get an expert round to tell you what needs doing before you buy somewhere if you are not totally sure yourself.
- Add in a contingency as there will always be extra costs.
- Be prepared for delays.
- Book tradesmen in advance as the good ones will be booked up.
Do It Yourself
If you are keen to do some of the projects yourself then there are loads of tuition videos on YouTube that you can follow. It is likely that you will need a whole bunch of tools for a house remodel but you may well have some of these already.
Be aware that one way of learning is by making mistakes! Try not to make ones that are irreparable but just accept that if you do make a mistake on something then you know that you will do it right next time. Also be aware that sometimes there is no substitute for a skilled craftsman for some jobs in the house and also you will need to be certified to carry out jobs involving plumbing and electrics.
