Of course, the vast majority of properties that I visit during my filming of Homes Under The Hammer are being bought up by savvy property investors / developers with a view to renovating them and then renting them out as a Buy to Let investment. You would have had to be on the moon in recent years not to know that this activity has become really popular over the past 15 years or so as people have turned to property to achieve their long term financial goals. Of course, the availability of competitive and easy access specialist Buy to Let mortgages (until very recently) has done much to fuel this desire when, at the same time, returns on other forms of investment (i.e. traditional equity based products and pensions) have looked poor in comparison.
The other hugely appealing thing about renovating a property in order to generate, hopefully, a healthy long term income stream, is that is can get the creative juices flowing and if you are the kind of person who likes to get your hands dirty and see a project coming to fruition before your very eyes, then property renovating can be a really exciting prospect.
However, whilst its great to get charged up with enthusiasm about a property with ‘great potential’, its also vitally important not to leap into making drastic changes and spending a fortune on a property that is quite simply not going to give you the financial return.
Such was the case with a contributor who I met last week whilst filming in Devon. He was actually about to start on renovating his second investment property but was at pains to tell me that he had learned some harsh lessons on his first project. Although he had always intended for this property to be rented out, he had gone into restoring and redecorating it with the same passion as if it were going to be a property that he personally, would live in. This is a really common mistake often made by people starting out in the property developing world, but in these uncertain and ‘tight’ times, it’s a mistake that many people will not be able to afford. In the case of our contributor, he had spent over £25,000 on renovating a property, that should have cost him (and for which he had budgeted for) nearer to £10,000. That’s £15,000 of profit wiped away and is catastrophic if you don’t have access to other savings or capital.
So, how do you avoid overspending on a renovation project and which areas of a property are worth concentrating on?
Firstly, as I am always saying, research at the outset is an important part of the answer. Its great to pick up an undervalued property at auction, but you might want to ask yourself why it is undervalued in the first place and even then you don’t want to blow all the money you have saved by going over the top with the renovation. Remember, if you are buying with investment in mind (and that’s equally true if you are planning on Buying To Let or Buying to Sell), then this is a wealth creation exercise and careful research and budgeting at the beginning is time well spent.
So here are my ‘Top 20 Hints and Tips’ on renovating shrewdly... Click here to read the full article