Repossessed houses offer great value for money – however, due to the nature of this type of property, renovation costs, at times, can be steep. Because of this, it’s essential to have knowledge on how much renovations can potentially cost for repossessed properties.
Firstly – If you are viewing a repossessed property that clearly needs renovating, this is not necessarily a bad thing:
Over a third of home-owners in the UK bought properties that required renovation, as they were more affordable. Typically, these homes will be sold well below market value. The report from which.co.uk revealed that 9/10 renovations were finished within 12 months, and over half of the home buyers spent the same, or less, on the renovations than they originally anticipated.
What does this research indicate for you as a potential property investor?
If you understand the costs for each sector of renovating and know reliable workers that can conduct the renovations, you can buy properties for well below market value and increase the value dramatically in a matter of months, just through smart refurbishments that won’t break the bank.
(according to https://www.realhomes.com):
Please note – These calculations are for high quality renovations, that will increase the market value of the property. You can refurbish all of the below at cheaper prices (check out our quick tips page for some cheaper ideas), but to truly get good value for money when buying repossessions, it’s best to spend a little extra, which will add a lot to the properties value once finished.
Installing a bathroom:
Tiling, installing a bath and shower, labour, skip hire and architects drawings will come to a price of around £3,000.00, or more depending on the quality of bathroom you desire. But, as for all types of refurbishments, there are certainly ways to cost cut. Getting good deals for showers and baths are more than feasible if you search vigilantly. Try and make the most of appliances from the bathroom already installed in the house by recycling the objects that look less dated or used. The more simple labour can also be done without professionals, especially once you have renovated one or more bathrooms already.
Installing a kitchen:
The kitchen is another room that may be damaged if it’s a repossessed property, due to there being a higher risk of any mould in the area as well as it featuring electrical appliances. You will have to put money towards worktops, appliances and fitting, kitchen units and labour – which will probably escalate to around £4,000.
Rewiring the whole property:
Hidden damage can be a common occurrence with repossessed houses, and the electrical appliances are often an area that may have be targeted by past tenants shortly before being evicted. This is one of the reasons the term ‘Buyers Beware‘ is so relevant when sourcing repossessions. Getting the entire distressed property re-wired will cost around £4,000 depending on the contractor, who will cost upwards of £150 a day. A way to minimise the contractors cost would be to get everything ready prior to them arriving to do the job, so no furniture or appliances are blocking points they need to access.
Hopefully this will be a cost that is not required with your next property investment, however there is a chance that a repossessed house that has not been looked after may have traces of damp. The good news is this should result in a drop in the asking price. Depending on the type and seriousness of the damp, it can cost around £2,500 to remove. However, it’s important to conduct research on the area before consulting a professional to remove the traces.
Installing Central Heating:
Occasionally, repossessed houses for sale will not have central heating included. Sometimes this will be due to the age of the property, or down to the fact there may be serious damage to the current supply of heating. Installing central heating will require you paying for labour work, a new boiler and new radiators, which will combine to cost you around £5,500. The majority of this cost will be on the labour itself, therefore indicating that the plumber you choose is a very important part of the process. However, this is something you shouldn’t try and cost cut over. If done poorly, it can still cost thousands , only for the whole job to be re-done from scratch.
Warning – Look out for structural issues:
In terms of renovation costs, if a property has structural damage, it can amount to tens of thousand to properly eradicate. There are some things you can find in a property that is far from ideal, but do-able to eliminate, such as Japanese Knotweed, damp, electrical issues and so on, but serious structural damage is one thing that should make you consider ending your pursuit of the property.
If you do find a sizeable crack in one of the walls, this does not necessarily indicate that the distressed property has structural damage, so don’t panic. If this is the case, get a qualified professional to conduct a survey on the building to check for structural issues. This survey can cost around £1,000, but will give you full disclosure on whether the repossession has structural damage, and if so provide information on how serious it is.
Common mistakes made in the renovation process:
Not hiring the right professional for the job:
As mentioned at the start of the article, there is always ways to limit the amount you spend on renovations, however it’s important not just to go for the lowest quote. If someone’s prices are cheap and they are available at short notice, there’s probably a reason behind that. Don’t forget, with repossessed properties, quality renovations help determine the return of investment on the property, so it’s essential to do it properly.
Choosing the right, or wrong, contractor for the job is not just down to cost-cutting, it’s also about finding the one that is the correct fit for your specific requirements. Each professional will have niches of work they expertise in, so make sure their previous work fits you’re specific visions, if not there may be an alternative option that would conduct more suitable work without being any more expensive. Also, ensure you get references for the contractors you go with. Not everyone will do this, but it allows extra due diligence on the professional at no further cost.
Changing your mind mid-way though the process:
When renovating a repossessed property, it’s important to be decisive from the get go. Usually, if an individual unexpectedly over spends in the renovation period, it’s because they have altered their plan mid-way though. It will also add to the amount of time it takes for the renovations to be completed. It’s important that when you first invest in the repossessed property to have a clear and detailed vision of the changes you will make to it, as well as the time it will take to complete. An easy way to track progress is simply by setting goals you need each part of the renovations to be completed by. This way, if you are falling slightly behind of schedule, you become aware of it before time gets away form you.
Not being honest with the professionals:
It’s very common for individuals that hire contractors to not be totally honest with them throughout the renovations period, despite there being a lot on the line. You can be guilty of this without even realising, which can result in you not gaining enough understanding of the work they will be doing and how it will affect the property. First of all, do not be afraid to ask lots of questions, they will be used to this and, assuming they have expansive knowledge of their work, should be able to answer all questions you have regarding it. Even if you believe there may be an obvious answer, ask it, you’re paying for their time after all. In addition to this point, if they are explaining something to you in detail and you do not follow, ask them to repeat themselves or explain in further detail. Don’t risk not knowing an important bit of information just to save face, they are professionals in what they do so will understand if you need further explanation when they are discussing the topic.
Not anticipating when is best to finish renovations:
Assuming you plan on putting the property on the market soon after completing renovations, try your best to finish at a time that is prime for selling property. Typically, the best time of year to sell a house is in the spring. This is mainly because people tend to have less distractions this time of year. Summer’s are usually focused on breaks away or generally planning more activities, while the back end of the year people are planning their winter/festive periods events. In addition, if you have finished the renovations on the repossessed house you have invested in, any foliage you have will be blooming throughout the Spring time (and the sun being out is never harmful). Autumn usually comes second to spring for the best time of the year to sell a property, again this is down to there being less distractions this time of year. Considering this, it might be best to try and get the labour done as early in the year as you can (January or early February), so the house can be ready for viewing at the start of Spring.
Assuming modern designs add more value:
The factors that combine to make a ‘modern looking property’ are forever changing, and always will be. If you have a repossessed property that you plan on letting out for an extensive period of time, the smartest thing to do may be to go for a classic design. The reason being, assuming you keep it in good condition, it will be years before you have to consider a new look. This point is mainly applicable for kitchens. A classic kitchen style will have timeless appeal, so unless you plan on flipping the property, a classic look may be the best way forward. Another thing to remember in the planning period of renovations is that you cannot apply your personal preferences too much to the design. If people, particularly hired professionals, have contradicting views to yours, always re-consider your idea.
If you wish to build, or start, your property portfolio via investing in regular properties, then understanding the renovation process and costs are beneficial. Even if a property looks in good condition, as a property investor it’s important to have a good level of understanding on average pricing for different areas of refurbishments. However, if you plan on going down the route of looking for repossessed houses for sale, then it’s essential to have a good understanding of the renovation process and costs. This is not to say every repossessed property you invest in will need work. However, the best success stories from repossessed houses are often due to the investor buying it in questionable condition at a price heavily below market value, before conducting some renovations to it that increases it’s value dramatically. There are a very high number of success stories, just searching for ‘repossessed property renovations’ via online searches locate endless examples (have a look yourself!).