Number One – Be Clear in Your Own Mind Why You Want to Renovate
There are two main reasons why we will probably want to refurbish a property.
The first is because it’s a rental property for letting out.
The second reason is because it’s a property we’ve bought to refurbish and sell on.
If it’s a rental property we’ll probably be trying to make sure that we:
*Make it easier to rent and so reduce our voids
*Increase the rent
*Increase the capital value so that we can refinance and pull our money back out if we want to.
If we’re renovating the property to sell it on, we’ll need to be aware of two potential markets:
*The first is to owner occupiers
*The second is to other investors
The standard of refurbishment will be different for both of these potential buyers. If we’re renovating to sell on to owner occupiers then we’ll generally have to provide a higher standard of refurbishment, and conversely, a lower standard of refurbishment if we’re selling on to other investors.
The premise behind this is that the other investors will be looking to rent the property out and so a refurbishment for a sale to an investor will be identical to a refurbishment to rent the property out. In that case we’ll be looking to bring the property up to a good, but not exceptional standard and use hard-wearing finishes.
If we are renovating a property to sell on to other investors their main concerns will be:
*The yield
*Buying at a discount, what we could call nowadays below market value.
Of course there are always exceptions to every rule and the refurbishment will need to be in keeping with the property, in other words its size, age, character and location, regardless of whether we’re renovating to rent out or to sell on.
And in some areas the appropriate market may be high-end tenants, in which case the finish for the rental market may be identical to the finish we would provide for owner occupiers or, in some cases, such as higher end corporate, higher than for owner occupiers.
A lot of people think of renovating property to sell-on at a profit when the work is done. But don’t forget that buying to do up and buying to hold and let are not mutually exclusive. In fact there are definite benefits in combining the two.
Having cut my teeth doing up a couple of properties to sell-on, but having also enjoyed the benefits of “let and hold” through buy to let, as often as I possibly can I now try to combine the two by buying to do-up and then letting and holding.
The premise behind buying to do-up is that it will result in a profit. The money you spend should be on things that will improve the property, and so the value of the property should increase by more than the amount you spend on the works.
If you buy to “do-up and sell-on” you would take this profit as a lump sum. If instead you do up and then “hold and let”, this profit will translate as an increase in the equity you hold in the property. If the equity increases, this can either be seen to reduce the gearing if you have used finance or, alternatively, can be taken out by way of mortgaging, re-mortgaging or as a Further Advance, and can be used to buy or refurbish other properties, or to pay your salary as a property developer.
If you are interested in renovating property, either to sell-on at a profit, or so you can refinance and borrow all of your money back out to spend on your next project, you might be interested to know that I have rewritten and updated my best selling ebook The Successful Property Renovator’s Workshop.
This is a ‘course in a book’, which will take you through the whole process in detail including how to do your sums to make sure you make a profit, how to raise finance for the purchase and the project, and how to refinance when you have completed.
The good news is that I’ve taken all my knowledge and experience, which I have gained over the years from doing countless renovation projects, and have put it all down on ‘paper’ in this ‘easy to read’ ebook. In it I’ll show you how you can find, plan, prepare and do each project to ensure your own profitable success every time.
And none of this is just dry theory. This is all based upon my own, personal experience of refurbishing and renovating property, which is why I use case studies of actual properties I’ve refurbished, along with photographs, to illustrate many of the points made.
I’ll show you all the things I did right, so you can copy them, and all the things I did wrong, so you can avoid them. They say that ‘trial and error’ is one of the most effective ways of learning but I can save you the time, the grief and the cost of having to go through it all. Hopefully I can save you months, even years, of trying to work it all out for yourself!
To find out more, please go to:
http://www.thepropertyteacher.co.uk/the-successful-property-renovators-workshop/
Here’s to successful property investing
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
