Copyright © More Than Two Publications
First Published 2005 First Revision 2007 Second Revision 2012 Third Revision 2014 Fourth Revision 2016 Fifth Revision 2017 More Than Two Publications, Nottingham
PVJV2017
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the copyright owner.
FOREWARNING
THIS PUBLICATION DOES NOT CONSTITUTE ADVICE WITHIN THE TERMS OF THE FINANCIAL SERVICES ACTS OR ANY SUBSEQUENT REVISIONS, ADDITIONS, OR AMENDMENTS.
The contents are a general guide only and are not intended to be in substitution for professional advice. All readers are strongly advised to take advice from their solicitor, accountant and surveyor before proceeding with any property purchase.
This e-book is not intended to be a substitute for professional advice. No properties should be bought or sold in reliance thereon and readers should only engage in property related activity after consulting directly with their solicitor, surveyor, tax planner and accountant, or other professional advisors.
Please visit my website at:
www.ThePropertyTeacher.co.uk
2 About The Author
Peter Jones is a Chartered Surveyor, an author and a serial buy to let property investor. He has been involved in property for over 30 years having graduated from the College of Estate Management, Reading University, and then qualifying as an Associate member of the Royal Institution of Chartered Surveyors in 1983, before being elected a Fellow in 1992. By the age of 35 he was a Salaried Partner in a well respected firm of Chartered Surveyors, and was managing partner of their West End of London Office. His specialty was commercial property but during the recession of the 1990’s his specialisation became redundant, and so did he. Finding himself with no regular income, and with no savings, but with a wife and 3 young children to support, he borrowed some money from a relative and bought a house to refurbish and sell-on. That was the start of his own property business and, despite starting with none of his own money, he quickly assembled a multi-million pound property portfolio. He now owns over 70 letting units, and lives off the passive income they produce. Peter is still actively involved in buying and renovating property, and regularly flips properties for profit. Peter has written a number of successful property books. The first, An Insider’s Guide to Successful Property Investing, was first published in 2000 and was one of, if not the very first, book of its kind which was written for what we’d now call buy to let investors. On the back of its success he was invited to be a guest writer for Property Secrets, and wrote Spanish Property Secrets, French Property Secrets, and Portugal Property Secrets. He is now a guest blogger for Property Secrets. He has since written a number of other successful titles dealing with UK investing including 63 Common Defects in Investment Property and How to Spot Them, The Successful Property Renovator’s Workshop, and the highly acclaimed The Successful Property Investor’s Strategy Workshop in which Peter describes step-by-step how he built his own property portfolio, starting with virtually none of his own money. Details of his books can be found at:
www.ThePropertyTeacher.co.uk
He has also written for Property Investor News, Property Auction News and Hot Property Alert, and has been a guest blogger for Progressive Property and LandlordZONE. He is also host of the Progressive Property Podcast. Peter’s blog can be found at www.ThePropertyTeacher.co.uk Please also visit Peter’s YouTube Channel - The Property Teacher And his Facebook page www.Facebook.com/PropertyTeacher
3 Why I Wrote This Book
Chartered Surveyor, Author & Property Investor
The Successful Property Renovator’s Workshop
My name is Peter Jones. I’m a Chartered Surveyor, an author and a property investor.
Following the great success of The Successful Property Investor’s Strategy Workshop I was asked whether I could put together a similar manual using my material from my property renovation seminars.
This was a very exciting proposition because at that time The Successful Property Investor’s Strategy Workshop was a completely new way of sharing information, dare I say even ‘ground breaking’. Particularly satisfying was that I was able to give the same information I would normally give at a live seminar but at only a fraction of the cost.
The Successful Property Renovator’s Workshop follows the same format, being a combination of my slides and reference notes. I have also included “handouts” from the seminar as Appendices. These cover topics that were too far reaching to cover on the day. As with The Successful Property Investor’s Strategy Workshop I have to warn you that some of the grammar might leave a lot to be desired – after all, these are my notes and many of them follow my “speaking voice”. But rest assured that these are the resources I would use if I were teaching you, personally, live!
So welcome to The Successful Property Renovator’s Workshop. Over the next 150 pages or so I will give you the benefit of my experience of doing up properties – all that I did wrong and all that I did right, so that you can use it to help you build your property renovation business. And all at a fraction of the cost of a live seminar!
4 In The Beginning But how and where do you start?
Don’t freeze and procrastinate Don’t jump in rashly without proper preparation Break it all down into logical steps And……Make A Plan
The Successful Property Renovator’s Workshop
Congratulations! So you want to be a successful property renovator. However, chances are that you’re not sure how to start, and this can cause potential renovators to freeze and do nothing. Conversely others jump in without thinking things through and make a total hash of it.
The answer to both these problems is a full understanding of what is required, along with proper planning. Any large project of any type can seem daunting so the key is to cut it down into a smaller number of processes, or steps. So we’ll start by first looking at the different stages that need to be undertaken to complete a successful renovation project.
These are:
• Decide on what you are trying to achieve
• Decide on the type of project that’s right for you
• Decide on your budget
• Find a suitable project
• Analyse the profitability of the project
• Arrange your finance
• Buy the property
• Organise the project
• Find your team
• Undertake the work
• Sell the property or, alternatively, let it out and/or refinance and take all or some of the increase in value as a loan
5 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.
6 This Is How I Did It
This is a very personal view
•Based on my own experiences •Based on my own projects
The Successful Property Renovator’s Workshop
Let me say from the start that this is a very personal view of renovating properties. By and large, with just one or two exceptions, the insight and advice I give is based upon my own experiences. If there is anything missing that you feel should have been included, or if in any situation I describe you have had a different outcome, then I apologise: but by the same token you can rest assured that what is included is not theory, or merely anecdotal. This is actually how it has been for me.
As I’ll explain in a minute I have undertaken property renovating as a hobby, as a job and as a business. All three provide different problems and benefits.
How I Started Where I started
The Successful Property Renovator’s Workshop
Let me start by giving you some of my background and experience so far as renovating properties is concerned. I’ve been renovating properties, and by that I mean specifically residential properties, since 1993. But over that time I haven’t been solely renovating properties. I’ve been buying for investment as well as buying to sell, and my investment properties usually require some renovating.
My first property renovation was a joint venture with a friend and I have to say that at that stage I had been thinking of getting into renovation but it had been no more than a nice dream – a “what if” along the lines of “what if I wanted to do something different?” Renovating property was something I quite fancied doing. But at that time I had a full time job, and a wife and several small children to support, and it didn't seem like a realistic option.
7 However, somewhat unexpectedly my friend came to me with a proposition. He basically said “if you can arrange finance, I will find the property and I will project manage it”. That sounded like a good arrangement and I agreed in principle. A little later he came back and said he had found a small terraced house in a town in the south east and was I interested?
By that time I had actually managed to arrange a line of credit with relatives who were interested in funding a project in return for a decent rate of interest, and so we went ahead and we bought the property.
Now I have to say that my friend is extremely practical whereas I’m not. So he started by doing a plan, what we’d call a “schedule of works”, and as I say, he agreed to do the project management. So without any to-do, and without any notice, he just went in the afternoon after we completed and he took out the old bathroom and he plumbed in a new bathroom suite. Then he retiled the whole bathroom. I was incredibly impressed by that. I'd never even have thought of trying something like that on my own, but my friend, who is also a surveyor, just went in and did it.
I have to say that it didn't encourage me to try and do things that I've never done before, not at that stage, anyway. But I kept myself busy doing the simple things such as wallpaper stripping, and scraping textured plaster off the stairwell. They were jobs that needed doing and we needed them to be done as quickly as possible so that we could get on with things like rewiring and re-plumbing.
Now, at that time, both my friend and myself, as I say, were in full-time work and so we had to do this part time and we were doing it mainly at weekends. The property was about 30 miles from where we both lived and looking back this wasn't ideal because it meant we spent something like an hour to an hour and a quarter travelling each way.
But we felt that it was good experience and we thought that the financial reward would make it worthwhile. Just to give you an idea of the scale of this project, the property itself at that time (and remember we are going back to 1993) cost £40,000 and we spend around about £10,000 renovating it but actually sold it for £63,000. You must remember in that 1993 we were really close to the trough of the last housing market recession and, if nothing else, I think this goes to show that renovating properties, if it’s done properly, if you find the right property, and if you do the right work, will be profitable under any market conditions.
This property took longer to do up than we thought it would. We bought it around Easter 1993 and we sold it at the end of 1993, so it took about nine months to sort it out, and we were hoping to do it much quicker than that.
As we’ll see, most of these projects take much longer than you imagine they are going to. In the end, because we were still working full-time and we were getting down to the nitty-gritty and didn't have time to sort out all the small jobs, all the snagging that needed to be finished, my brother who had decided that he would go back to university as a full-time student at the age of 30, agreed to come and work for us for about three weeks.
8 He finished the property for us in return for some pocket money. He’d been on a round the world tour and he needed a bit of money and somewhere to stay, and so we thought this was an ideal opportunity for him to get what he needed, and for us to get what we needed. And so we actually ended up finishing it, once we put our minds to it, quite quickly and quite cheaply.
I thought the whole experience was wonderful and I could see there were great opportunities in renovating property. But because I was still employed, and in fact I was promoted not long after that, I really felt that the time was not right for me to go off and become a full-time property developer.
My friend and my brother decided they would like another project, so they bought another property that was very similar and did a very similar type of renovation. Then they sold it and they made a profit. Which was great, and I watched what they did with great interest. The seed was definitely sown but the time was not right to go full time.
If you have read any of my other books, particularly The Successful Property Investor’s Strategy Workshop, you’ll know that in 1995 I was made redundant. Rather than panic, because we were still in the last throes of the recession, I looked back on that renovation project and I could see that if I wanted to start a business, I had some experience and it was definitely worthwhile.
So that’s exactly what I did and in a sense this was a dream come true. This was something I’d always wanted to do but I had felt I shouldn’t really take the plunge because I had responsibilities and obligations, and the time wasn’t right. Suddenly the decision was taken out of my hands.
I was ready – I had a redundancy cheque, I had the time and I had the opportunity.
I was off and running.
How I Started
My first solo project
The Successful Property Renovator’s Workshop
My next project was actually a solo effort in early 1996. It took me about two months to find my property and I went to see a large number of properties that seemed promising, either from the estate agent's descriptions of the details or from talking on the phone but, to be honest, with most of the properties I was offered, I couldn’t get the figures to stack up.
9 I must admit there was a temptation at times to say “I’ll buy it anyway and I’ll just hope things work out”. And this is, I think, a fatal mistake that a lot of would-be property renovators actually make - they get emotionally involved. They really want to do this; they’ve seen it on telly, they’ve read books about it, they’ve got friends who’ve done it, and they want to get their first property and to get in there and get their hands dirty and they want to fulfil the dream of being successful and making a profit.
I can understand that but the figures have to stack up, and if the figures don’t stack up, with the best will in the world, no matter how much wishful thinking you get into, it’s not worth doing. I’m glad to say that I was disciplined enough to look at the properties objectively, to sift through them and to let them go. But remember I had been made redundant and this was now my living and I found it very difficult at times to pass on properties.
I have to say that having dismissed so many properties, the thing I found interesting was that even at that time, when we were coming out of recession, those properties were still selling. So I imagine a lot of people got their fingers burnt or were at least disappointed because to be honest, if I couldn’t make the figures stack up I’d be surprised if they could.
In the end it all worked out because after about two months I found my first property.
My first solo property was a 1930’s mid terraced ex-council house in an area I could see was potentially up and coming. The first signs were there of the area improving and a lot of rental properties were being bought by owner-occupiers and so it was very promising. The thing I loved about this property was that it needed so much doing to it. It was the sort of place where I could really roll my sleeves up and get stuck in. It was a classic executor sale.
The previous owner had been the only occupier since the property was first built and had lived there virtually the whole of his adult life. He had done very little to it to keep it up to date. In fact, he’d actually died in the property which was quite an interesting story that the next door neighbour relished telling me because apparently they’d gone in, not having seen him for a few days, and had found him dead in his bed.
It is of classic construction brick, tiled roof, and original windows. If it had been rewired it had been in the 1950’s, and so the “new” wiring was out of date, it had a lot of the original plumbing, the kitchen was the original 1930’s kitchen and the bathroom was horrid. I thought this was so exciting. I managed to arrange my finance through relatives again, and we’ll talk about finance later because I know a lot of people are a bit squeamish about looking for money from people they know.
So I got started on the job and I must be honest, because I’m not very practical and I am very impulsive and I am very impatient, I asked my wife to do lots of the fiddly bits. My wife is an artist and she has a great eye for detail so things like tiling, painting, things where I’d just grab a brush and splash it on, she is much better at doing that sort of thing. I’m not ashamed to say that I went down on bended knee and asked for her help, and she very graciously gave it to me.
10 We will come back to this project later. For now I just want to set the scene of how and why I started in property renovating.
Before You Start
What are you trying to achieve?
•Goals •Strategy •Plan
The Successful Property Renovator’s Workshop
Before anybody launches into a new career as a property developer or renovator, I strongly recommend that they think very carefully about whether this is really the best way for them. In fact, what they really need to do first of all is to sit down and work out exactly what it is they are trying to achieve.
I don’t want to say too much about this – but I do want to stress that there is no point doing anything unless you know why you want to do it. I cover a lot of this in The Successful Property Investor’s Strategy Workshop and in more detail in my “Professional Investor’s Course”. But here’s a quick recap – you’ve set your goals including your financial and property goals, you’ve determined your strategy and I assume that as you are at this workshop, renovating and renovation fits your strategy. You’ve determined the type of property that best fits your strategy, you’ve done your research and have determined the target area in which you will find them. I’m taking it for granted that you know all this – if not, and yes, this sounds like a plug for another of my workshops, get hold of a copy of “Successful Property Investor’s Strategy Workshop” – until you have all these clear in your mind you might just as well toss a coin and do everything in a random and haphazard way – you’ll not be making the most of your opportunities.
There are programmes on TV like ‘Homes Under The Hammer’ that have fuelled great interest in property renovation. There’s no doubt that there’s plenty of product out there, if you know how to look for suitable properties, and so most aspiring renovators can get started relatively quickly and easily.
The unfortunate thing about all this is that it has encouraged people to try their hand at something that they aren’t really capable of doing, or to be honest, something they don’t even need to do. I’ve come across so many otherwise sensible people who just drifted into property renovation because it looked like a fun thing to do. The trouble is, because they haven’t understood the basics, or sat down and thought about what they want to achieve and how they are going to get there, they ended up losing from it. I’ve met so many people who have not done very well at property renovation, but with a bit of thought and a bit of planning, and with a little bit of self- examination, they could have been so much more successful.
11 It probably sounds obvious but the ultimate objective of doing a property renovation is to make a profit. Many people seem to forget this because they get carried away with what they want to do, and how they want the property to look. In many cases they get emotionally involved trying to create a property that is right for them rather than one that is right for the market or right for their tenants. That’s a serious mistake.
In some market conditions a renovator can make this mistake and not realise it. In a strong market it’s easy for a renovator to think they’ve done well and made a profit through their efforts, when in fact all or most of the profit is the result of upwards movements in the market. Under such circumstances it’s not unknown for a renovator to spend £1000s and to take months altering and “improving” a property, but in reality they could have made the same profit, just by keeping the property and selling it in it’s un-renovated state a few months later.
Ultimately you must remember why you are doing property renovation. Whether you are doing it as a business, or as a job, you are doing it because you want to make a profit.
If you don’t make a profit the project is ultimately futile.
Sarah Beeny, in her TV series Property Ladder and Property Ladder Revisited, was rightly very strong on this point. Time and again she would bring her “clients” back to two principles:
• Do work that is required by your target market, and not what appeals to your personal tastes
• Keep to your budget
Time and again they overspent on things that will add no value to the property, often things to satisfy their own sense of taste and design.
Unless you are doing a project for genuinely altruistic or aesthetic reasons you must concentrate on profit.
That’s How I Started, How Do You Start?
Ask yourself these questions
•Why do I want to renovate property? •Do I want the money, or to provide myself a new job, or to create myself a business?
The Successful Property Renovator’s Workshop
Before you do anything you need to answer the questions:
12 “Why do I want to renovate property?” and
“Am I just trying to make some extra money, or am I trying to create a job for myself, or am I trying to start a business”.
The second question is particularly important and the subtlety of it is actually lost on many people. But it will affect your outcome and the way in which you organise yourself.
For example, if you want a bit of extra money, it’s very easy to find a property that needs modernising and then you can renovate it and you can do a lot of the work yourself, as a part time venture. Many would-be property renovators often decide to take on projects like this whilst keeping the day job and they devote themselves to it in the evening and at the weekend. But before you do this you need to decide if this is best for you.
Alternatively, if you want to create a job (whether full or part time) you can do all of the work yourself and treat the project as your day job. However, the chances are that when you sell the property, and you look at how much “profit” you’ve made, the equivalent hourly rate will be close to, or perhaps even worse than, what you’d now get on the minimum wage! Certainly this was my experience, as I’ll show you later.
You might be thinking, ”If that’s the case, is it worth my while getting into property renovation?” The answer is “Yes, of course it’s always worth taking on a profitable venture” but I’d suggest that rather than thinking about creating yourself a job where you do all the work, why not consider instead creating yourself a business?
Finding suitable profitable opportunities, researching them and appraising them thoroughly can be profitable either as a part time or a full time activity, and far more satisfying than getting yourself covered in paint.
As an investor’s capital increases, especially as they roll-up their profits, they can take on more projects at the same time, or larger projects, or both, and build their business to a scale where they can confidently go full time knowing they no longer need the day job.
I realise that I am making a big point out of this but I think it’s worth stressing that many renovators find it far more profitable and far more satisfying to leave the “hands-on” practical stuff to the professionals and to devote themselves to finding the projects and managing them.
13 How Will You Take Your Profit?
Are you going to:
•Buy, renovate and hold? •Buy, renovate and sell?
The Successful Property Renovator’s Workshop
Next, before you rush off and buy your first property, you need to think about your “exit strategy” for each project. Are you going to sell on to release your profit, or hold the property as an investment?
Don’t forget that buying to do up and buying properties to hold and let are not mutually exclusive. In fact there are definite benefits in combining both activities as part of your business.
Having cut my teeth doing up a couple of properties to sell on, but having also enjoyed the benefits of buying properties to “hold and let” through buy to let, I adopted a strategy that combines the two as often as I possibly can.
Whilst the market was rising I would buy and renovate, and then hold and let the property. When I wanted to take out the profit, in other words the increased equity, I did so through re-mortgaging.
When the market was stagnant I reverted to renovating and then selling-on.
What Qualifications Do You Need? You don’t need to be good at DIY
•Desire •Planning •Preparation
The Successful Property Renovator’s Workshop
Unless a renovator wants to create himself or herself a job, it doesn’t necessarily matter if they are not good at DIY.
However, there are certain things that a renovator needs to be good at, or needs to learn to be good at, if they are going to be successful.
14 They need to be able to:
• estimate repair, renovation and modernisation costs accurately, or be able to find someone who can do it for them
• set a budget and then keep to it
• plan a project and see it through to completion
• organise, oversee and manage a team
• be creative
• solve problems
• keep calm!
Although a list like this may seem daunting, don't think that renovating a property is beyond your abilities. You really don't need to be a builder or a handyman. In fact, you don't need any special qualifications because you don't need to do the work yourself. As we’ve just seen, often it’s better if you don't. There are plenty of people with the right skills and experience, you can subcontract the work to, leaving you with more time to look for the next project.
All you really need is a desire to do it, and the willingness to plan and prepare properly.
If you can do all or any of these you are on your way to being a successful renovator. So let’s go on and look at the things we need to think about when choosing the type of project that is right for us.
How To Choose Your Project The four ‘facets’ of property renovation
•Optimising •Modernising •Repairing •Making Safe
The Successful Property Renovator’s Workshop
Having decided on why you want to do property renovation and what you hope to achieve, the next step is to decide on the type of project you are going to take on. Normally a renovator will undertake works falling within the following four headings:
• Optimise space. This goes hand in hand with making a profit. After all, if you can use the space more efficiently, you will normally be increasing the value of the property
15
• Bring it up to modern standards of amenity, in other words the current standards required by tenants or owner occupiers for kitchens, bathrooms, gardens etc
• Repair anything that is defective or showing signs of wear and tear.
• Make safe by bringing it up to standard for safety purposes. Normally this means complying with modern regulations on gas, electricity, furnishings, fire alarms, HMOs etc
Undertake one, two or all of these and done properly, the result should be a profit.
From this you will see that renovating in this context is a broad term. It encompasses modernisation which could include putting in a decent heating system, new windows, and a new kitchen and bathroom. It also covers repairs such as damp treatment, roof overhaul or renewal, and rewiring. It can also cover situations where you intend to convert the property, for example from a single dwelling to two or more flats, or from a corner shop back to a residential house (I have a friend who specialises in doing this; since the demise of the corner shop due to competition from supermarkets, he's done very well indeed).
Let’s have a look at these four facets of renovating in more detail.
How To Choose Your Project The four ‘facets’ of property renovation
Optimising
- Altering internal arrangements
The Successful Property Renovator’s Workshop
This includes:
• Changing the internal arrangement of a property to use the floor space more efficiently
• Converting a property to use the floor space more efficiently or to put the property to a more valuable use.
One of the most exciting types of project a renovator can take on is to alter the layout of a property in order to enhance the value. Often this will also require repairs, modernisation and works to improve safety as well.
Enhancing the layout of a property, in other words, being more efficient in the use of the available floor space, requires vision, a realistic idea of what is possible
16 physically and financially, a grasp of estimating costs and valuation so you know you will be enhancing the value by more than you spend, and often Building Control and Planning Consent as well.
Simple examples include moving a ground floor bathroom to the first floor by converting an upstairs bedroom; moving a kitchen from a front room to a back room (drains allowing), converting roof space into habitable rooms (definitely one to check with Building Control), knocking two rooms together (like a through lounge) or blocking up an opening between two rooms.
The key, before undertaking even a simple change of floor space, is to be sure that there will be a positive advantage accruing from the work. This will usually be financial – the value added will be greater than the cost of the work. However, whether this notional profit is acceptable is a matter of common sense – if it takes months of work to add a few thousand pounds to a project it may or may not be worth the physical, emotional and time commitment, depending upon your overall goals and business plan.
For a more sophisticated and experienced renovator, larger projects might be appealing, such as converting a single property into multiple units (such as a large house into flats or bedsits; or it could be commercial property such as splitting a large shop into two or more smaller units or a large factory or warehouse into two or more smaller units) or converting multiple units into a single property (for example a corner shop with residential upper parts into a single house, or two flats into a single house etc).
How To Choose Your Project The four ‘facets’ of property renovation
Optimising
- Altering internal arrangements - Conversions
The Successful Property Renovator’s Workshop
Conversion projects come mainly in two forms:
• Either a large property that can be converted into multiple units
This can be further subdivided into buildings converted to provide self- contained accommodation, such as separate flats for either re-sale into the owner occupier market or for letting, or smaller non-self-contained units such as bedsits in an HMO for letting
• Or a number of smaller units that can be converted (back) into a larger single residence, for example two flats converted into one house
17 A variation on this theme is converting a commercial property into residential property, for example a corner shop into a house, or an old mill, warehouse or office building into self-contained flats
How To Choose Your Project The four ‘facets’ of property renovation
Modernising
The Successful Property Renovator’s Workshop
Modernising or improving are works that will increase the amenity value and specification and could include
• installing a new gas-fired central heating system if there is no existing heating system, or replacing an old and inefficient heating system
• installing double glazed windows to replace single glazed windows
• installing a new kitchen or a new bathroom
• building a garage if there’s no existing garage
• adding a conservatory
How To Choose Your Project The four ‘facets’ of property renovation
Repairing
The Successful Property Renovator’s Workshop
Repairs will be anything that puts the fabric of the property back into a wind and water-tight and functional condition, and are usually “putting right” or “mending” some kind of defect.
Repairs would include, amongst many other things,
18
• making good the roof
• re-glazing broken windows
• damp treatment and associated timber treatment and re-plastering
• underpinning the foundations in the case of subsidence
• re-pointing the brick elevations
How To Choose Your Project The four ‘facets’ of property renovation Repairing •poor design •poor workmanship •poor use of materials, or use of the wrong materials •old age •wear and tear including the affects of weather •neglect by the owner
The Successful Property Renovator’s Workshop
As you look for property to renovate, try to remember that there are 6 main reasons why defects occur, and bear these in mind as you go around any property:
• poor design • poor workmanship • poor use of materials, or use of the wrong materials • old age • wear and tear including the affects of weather • neglect by the owner
Any one of which can result in:
• Lots of small seemingly inexpensive jobs, or one large problem, or a combination of both of these
Also try and remember that every property defect, no matter how large, can be solved. The key issues are
➢ How easy is it to plan for ➢ How long will it take ➢ How much will it cost ➢ Will I make a profit at the end once it is rectified?
If you know that the value of the property ‘stacks up’ at the end, and if you can budget with some certainty by using a fixed price contract, taking on a
19 major problem which others are too nervous to touch can be more profitable than taking on a lot of smaller and, on the face of it, less demanding repairs.
• Conversely, dealing with a large number of otherwise small or minor defects can be more time consuming, can require more management, and ultimately can prove more financially unpredictable than dealing with a single or limited number of “large” or “serious” defects.
How To Choose Your Project The four ‘facets’ of property renovation
Making Safe
The Successful Property Renovator’s Workshop
There are a whole host of regulations a renovator needs to comply with, including those safeguarding the health and safety of future occupants, and we’ll have a brief look at some of these in the next section.
However, as well as needing to be aware of these whilst undertaking a renovation, it is also the case that properties will become available to a renovator as a potential project, because they no longer conform to expected or legal standards of safety.
For example, over the next few years I expect to see a lot of larger properties, currently used as HMOs to come to the market, because they no longer comply with current and proposed regulations.
How To Choose Your Project The four ‘facets’ of property renovation
Which is which?
The Successful Property Renovator’s Workshop
Of course, some works fall between the definitions of modernising and repairing and can be difficult to define. For example, re-wiring and re-plumbing can be seen as being both a repair and an improvement. In the same way, installing new double glazed window units to replace timber framed windows that are completely rotten
20 and which are beyond repair could be classified as being both a repair and an improvement.
Equally the same applies to a new kitchen replacing a dilapidated kitchen, or a new bathroom suite replacing a bathroom with cracked and stained fittings.
How To Choose Your Project The four ‘facets’ of property renovation
Whichever it is the key to success is: •Proper planning •Proper budgeting •Having an accurate idea of the end value of the project
The Successful Property Renovator’s Workshop
Whichever route you decide to go the key to success is
• Proper planning • Proper budgeting • Having an accurate idea of the end value of the project
And we’ll look at these in a later section.
There are many different ways that domestic properties are constructed and each form of construction can be prone to particular wants of repair.
In this seminar I can’t hope to cover every form of construction you could encounter. However, some construction methods are more common than others. Often, at a particular time in history, a particular style or technique has become popular and has been widely used.
In another of my books 63 Common Defects in Investment Property and How to Spot Them I show, in date order, some of the forms and styles of construction of residential property in the UK, along with the most common defects associated with those types of construction that you are most likely to come across.
For readers of The Successful Property Renovator’s Workshop an excerpt from 63 Common Defects in Investment Property and How to Spot Them is reproduced within the Appendices
21 How To Choose Your Project Are you:
•A beginner •An intermediate •An advanced Property renovator
The Successful Property Renovator’s Workshop
Be careful not to be too ambitious when you start. The type of project you should take on will depend on how much experience you have. Possible projects can broadly be classified as:
• Beginners. Dealing only with single units i.e individual flats and houses. These will be rundown but sound, requiring only cosmetic upgrading, minor modernisation, minor repairs, and/or redecoration
• Intermediate. Again, dealing only with single units. These will still be rundown but generally sound, but may require more extensive renovation and modernisation i.e. more extensive non-structural repairs, some renewing of services, new bathroom and kitchen, new heating systems and new windows
• Advanced. This could include dealing with multiple units, such as modernising a house converted into flats, a HMO (house in multiple occupation) or a block of flats. It could also include converting a single residence into multiple units. A typical project will require planning and/or building consent, and you will probably need an architect. The property could be rundown and not sound, and could require some structural repairs e.g. dealing with settlement or subsidence, a major roof failure, major damp problems with associated rot etc.
• Expert. This would include large conversion projects, wholesale redevelopment, or anything to do with listed properties
22 How To Choose Your Project
Key questions:
•Renovations or conversions? •How much work will you do? •How much time do you have?
The Successful Property Renovator’s Workshop
I’d always suggest that if you are new to this you probably shouldn’t start with a conversion. In other words you should try your hand at doing something up before you take on a major project like splitting a house into separate flats, or converting flats back into a single residence.
When you start looking for a renovation project you need to think about how much work you want to take on. I’ve heard other “experts” suggest you should start by taking on a project that is really only decorative or only requires relatively minor renovation. To be honest I don’t altogether agree with this. Although they are trying to protect a “newbie” from taking on a major structural problem, in some ways it can be easier to arrange and project manage a major structural repair than to take on a project requiring a large number of minor repairs. You’re also more likely to make a decent profit than by just finding a property that needs a lick of paint.
I think a “newbie” should take on as much as they feel they can cope with, always remembering to get a survey first so you do know exactly what you are taking on.
Although it's sensible to learn the basics before you become too adventurous, don't underestimate what you can achieve, either. My list is just a guide and there are no hard and fast rules. Even if there were any, all rules are there to be broken.
I’ve heard it said that beginners should only take on projects that require minor cosmetic improvements, and there is some sense in cutting your teeth on something which isn’t too demanding, and building your confidence and establishing procedures and good practice.
However, having said all that, and I realise this is somewhat contradictory, but if you think you're up to it, it can be easier, quicker and more financially rewarding to, say, take on a project with a major structural problem, if that problem is relatively easy to rectify. It can be easier to organise and manage one big job, and keep a rein on the costs, than to sort out numerous minor problems.
Chances are, no project is going to run exactly to plan anyway and so you’ll probably end up doing things you didn’t anticipate. I’ll show you how to budget for this later. And if you are doing renovating “part time” there’s also the problem of keeping your energy levels and enthusiasm up night after night, weekend after weekend, for months on end. This can be very difficult, particularly if every time you take a couple of steps forward you take one back – you get a job done and you realise you’ve done
23 it wrong, or in the wrong order. That can be very discouraging. It’s possible for people taking on renovation projects to get burnt out and disillusioned if they aren’t properly prepared and organised.
Regulations
The Town and Country Planning (Local Planning) (England) Regulations 2012
•Alterations and extensions -Planning -Building
The Successful Property Renovator’s Workshop
Depending on the size and type of your project there are a whole host of regulations that you need to be aware of.
Any major works of a structural nature, including breaking through load bearing walls, renewing roof coverings, converting roof spaces to habitable rooms, installing new toilets with associated drains, etc etc will need building regulation consent, and will need to be inspected and approved by the Building Inspector or Building Control Officer.
You might also need planning consent for some works, including converting a house to flats and vice versa. And depending upon whether your property is listed, or within a conservation area, you might need listed building consent or approval from the Conservation Officer.
One misunderstanding I often hear is that listings only cover the exterior of a property. This isn’t true and you need to make sure that the listing doesn’t preclude works or changes to the interior
Regulations Windows
The Successful Property Renovator’s Workshop
If you put in replacement windows the new windows will need to conform with the Building Regulations. As a rough rule of thumb this means you have to replace on a
24 like for like basis as judged by ventilation and fire safety. In other words, if you have an opening unit in your existing window the new one should also have one.
First-floor windows and above have to have at least one opening casement per habitable room (in other words a bedroom or living-room but not a bathroom) that has a clear opening of at least 45 centimetres wide, or 45 centimetres high, and with an area of no less than .33 square metres. Also, all units need to have a thermal rating of no more than 2u (this measures heat loss, hence a maximum not a minimum value).
If your window installer is FENSA registered they can give a certificate confirming compliance. If they are not then you will have to apply to the Building Control department at the local council for a building notice, and they will send a surveyor to check that your new windows conform. They will also check that your existing lintels, if any, are sufficient.
For example, I recently had some new windows installed, which I bought direct from a local factory and then had fitted by my non-FENSA registered builder. The district surveyor from building control passed the windows but requested that new lintels be installed above two of the windows.
Regulations Electrical Regulations
The Successful Property Renovator’s Workshop
If you are rewiring a property, the new installation will need to be to current IEE standards which are updated regularly. If you are going to retain the property to let out it would be advisable to have a safety check and certificate issued by a qualified electrician although at the moment electrical safety certificates aren’t mandatory.
In 2005 The Building Regulations were amended so that all major electrical work has to be undertaken by a member of a recognised electrical body.
If it is not carried out by a registered electrician the local authority have to be notified and the works will need to be certified by Building Control.
Minor electrical works are exempt, but be aware that the definition of minor is limited and doesn’t cover a lot more than replacing a plug socket or a ceiling rose.
I suggest you make a note of the government website where you’ll find a full definition of major and minor electrical works: http://electrical.theiet.org/building- regulations/part-p/faqs.cfm
25 Regulations
Gas Safety
The Successful Property Renovator’s Workshop
If you are retaining the property to let, you will need all gas installations, including new boilers and heating systems, gas fires, cookers etc to be checked annually by a CORGI registered plumber who will issue a CP12 certificate confirming safety compliance.
Regulations HMOs (Houses in Multiple Occupation)
The Successful Property Renovator’s Workshop
If you are taking on a larger property you will need to be aware of the changes under the Housing Act 2004 that were introduced during 2005 and 2006, and later amendments concerning planning consent in 2010.
The definition of a HMO has been “clarified” and in some ways makes things slightly more confusing! However, from a Property Renovator’s point of view the main thing to note is that basically, if a property is converted into one or more units of accommodation, one of which is not self-contained, it will be a HMO.
Also that a property which has been converted into self-contained flats, two-thirds of which are owner-occupied, will be an HMO if the building work did not comply with building regulations.
So if you are taking a property on to renovate that has already been sub-divided, make sure it already has consent, and if you intend to do the sub-division make sure that you get building regulation consent before you start work.
26 If you intend to keep the property to let out once you have sub-divided it you might also need to obtain a licence. You’ll need to check this with the local authority.
In 2010 planning law was changed by The Town and Country Planning (Use Classes) (Amendment) (England) Order 2010 (applies in England only) where a new Use Class was added to the Use Classes order, Class C4, houses in multiple occupation, meaning all new HMO’s required planning consent.
However, this amendment was itself then amended so that any property used as a HMO with up to 6 occupiers is allowed under ‘permitted development’ unless a local authority deems that this ‘permitted development’ doesn’t apply in specified areas, where planning consent will then be required.
In simple language you can change the use of a property to a HMO with up to six occupants unless it is in an area where the local council have said you need to get planning consent.
The reason why local authorities can require planning consent in certain areas is because of concerns that some areas, in some university town, are becoming student ghettos and some local authorities want a wider mix of residents in those areas.
Don’t forget that even if a property doesn’t require planning consent before you convert it to a HMO that doesn’t mean it doesn’t require a licence from the local authority under the provisions of the Housing Acts.
The Planning laws deal with planning issues, and the Housing Acts deal with standards of accommodation and safety, and the two are separate issues.
A Case Study Changing the layout
The Successful Property Renovator’s Workshop
A few years ago I undertook and completed a project that required some modernisation and repair but which also gave scope to tinker with the accommodation and the use of space to great effect.
At first sight it was a two-bedroom flat. However, it is unusually large, having a good-sized L-shaped living-room, and an en-suite bathroom off the main bedroom. Although that might sound attractive, there were three major problems with this property when I bought it.
27 The first is that the layout of the accommodation was far from ideal. The kitchen had a small lobby area which was really a waste of space, and what was called the main bathroom was actually just a shower room.
The second is that the fittings were all dated, indeed both bathrooms and the kitchen needed to be replaced. For some strange reason a previous occupier had installed a suspended ceiling in the en-suite bathroom which would look more at home in a 1970s office building.
The third is that this is a large flat, but the space was poorly allocated between the individual rooms. The living room could easily be smaller, without detracting from its functionality, and the bedrooms bigger. It would have been great to take out all of the internal partitions and start again, but because of where the services are located, and the main supporting walls for the upstairs flat, this was unrealistic.
A Case Study Bathroom – before & after
The Successful Property Renovator’s Workshop
Still, when I was offered the property for £48,000, it really seemed like it could be a bargain, if only I could think of a way of making better use of the accommodation.
Finding a builder is never quick and easy, and at the time I bought it most had more work than they knew what to do with. So first things first, whilst looking for a reliable contractor, was to sort out the finance. I chose to borrow using a light refurbishment loan. We’ll look at finance later and how light refurbishment loans work. As I wasn't sure, when I put in my mortgage application, what I was going to do in terms of rearranging the accommodation, I made the application purely on the basis that I was going to renovate the bathrooms and the kitchen, overhaul the central heating and redecorate throughout. On that basis the valuer estimated an end value of £65,000, an £18,000 uplift for doing some fairly basic works. The valuer, as is usual, had been asked by my lender to estimate the rental value of the finished property and had come up with a figure of £360 per calendar month.
In view of these figures I had a decision to make. Whenever possible I like to use forced appreciation to boost the returns from my properties, and £18,000 uplift for spending probably no more than £4,000 or £5,000 was an excellent return. But I felt that I still wasn't making the most of an unusually large floor area.
28 A Case Study Partitioning the living room to make an extra room
The Successful Property Renovator’s Workshop
Now remember that this was for a two-bedroom flat. What if I could rearrange the accommodation and convert it into a three-bedroom flat? My experience is that in the private rental market in this location there is actually little difference between the rent achieved on two-bedroom and three-bedroom flats. This is a concept some new investors have trouble in understanding. A three-bedroom flat will not necessarily command a rent 50% higher than a 2-bedroom flat. In practice, in this area, I have found there is more demand for two-bedroom flats than three-bedroom flats and so there is less differential in the rent.
However, there is a clear difference when it comes to lettings to tenants on benefits. The Local Housing Allowance rate for two bedrooms is £420 whilst the LHA rate for 3 bedrooms is £492.
To owner-occupiers a three-bedroom flat will invariably be worth more than a two- bedroom flat. So if I could squeeze an extra bedroom out of the available floor space, I could increase the return from the rent if I targeted tenants on benefits, and I could increase the capital value, and therefore my equity, by way of forced appreciation. This would obviously boost the balance sheet on my accounts, and it would also give me the option at a later date of either selling to release my increased profit or refinancing to pull out some of the extra equity. The key question was “would this be a cost-effective exercise?”
I could potentially spend a lot of money on this property, but could easily get to the point where I was spending but not adding value. So I decided to concentrate on the essentials. The simplest solution that I could see to provide an extra bedroom was to sub divide the L-shaped living room.
29 A Case Study Replacing the kitchen before & after
The Successful Property Renovator’s Workshop
The remaining living room would still be more than adequate size-wise; the new room could then be a third bedroom. I realise that on paper this might not sound very attractive, but in practice this layout works well.
Also, I decided to convert the lobby next to the kitchen into a utility area, and with a bit of a squeeze it was possible to reconfigure the shower room to fit a full bathroom suite.
I managed to find two builders and unusually received two quotes. As an aside this is another frustration - not every builder who looks at your property will bother to prepare a quote for it. Some just disappear while you're left waiting and wondering what's happening. It would be much better if they just said, “I don’t fancy the job” but they never do.
Anyway, one quoted £6,000 for partitioning the living room, renovating the ensuite bathroom, converting the shower room into a bathroom, renewing the kitchen and turning the lobby into a utility area, overhauling the central heating and decorating throughout. The second quote for the same schedule of works came in at £6,250. Unusually I chose to go with a builder who gave the higher quote as he could start almost immediately, well within two weeks anyway, whereas the other could not start for another couple of months. All that time I would still have been paying out on the mortgage, so in the long run it was more cost effective to go with the higher quote.
30 A Case Study Upgrading and decorating the small bedroom
The Successful Property Renovator’s Workshop
Following completion, the valuer estimated the end value, to be £70,000. So by spending £6,250, I increased the equity in the property by about £22,000. That's a 350% return on the cost of the works.
Rather than sell, I decided to hold the property and to let it out, and to take out some of the increased equity by means of a further advance. That meant I could borrow out a total of £59,500 based on an 85% mortgage. That's about £4,000 more than I spent in total, including accounting for legal and valuation fees. And, even using his probably conservative rental estimate, this property will at least break even on cash- flow, and more than likely provide a small, but welcome, net profit.
And after all that, I still had £10,500 in equity and had created an extremely flexible investment that can be sold, or kept and let, either as a two-bedroom, two reception room flat, or as a three-bedroom flat.
In effect, I had created a “nothing down” deal or a “nothing left in” deal, and I now own an investment with substantial equity and a positive cash flow having used none of my own money.
31 Finding Your Properties Main sources
•Estate agents •Auctions •Solicitors •Targeting areas •Your own adverts
The Successful Property Renovator’s Workshop
There will always be an ongoing supply of property. Apart from the fact that some owners will let their property deteriorate, the needs and wants of property owners become ever more sophisticated, and innovations in amenity happen more and more quickly.
Properties fall further and further behind the required standard of today’s occupiers more and more quickly, until in the eyes of the potential “consumer”, they become uninhabitable in their current condition, even though they might well be otherwise wind and watertight. They are ripe for renovation. The cycle speeds up with every year that passes but as a general rule of thumb a property nowadays will be partially “functionally obsolete” after 10 to 15 years.
In some ways it seems premature to talk about this now before I cover finance and budgeting. After all, if you aren’t sure how much money you have to spend, how can you start looking for a property?
So how do you find these properties?
It’s worth making the point here that you shouldn’t necessarily see the steps I outline in this workshop as being sequential. When you commit to being a renovator you will talk to banks and financiers whilst you are looking around for property. A useful negotiating lever is to be able to tell the vendor or their agent that you have finance in place, or agreed in principle, and that you can complete the deal quickly.
Having said that, the majority of renovators will find, or will be offered, a property before they have finance agreed or in place. And it will be at that point they start looking for finance.
Following on from that, when a renovator knows how much a property will cost and how much they can borrow, they can start thinking about budgeting for this particular project.
Of course, even before they arrange finance they will have some idea of how much they think they can borrow, and so if they are looking at properties at that time, they will have a rough idea of the value of the property they can afford, the amount they can borrow and the funds they will have available to cover repairs etc. So in effect they will already have started the budgeting process.
32 I realise I’m probably labouring a point that seems obvious but there is still a part of me that thinks it’s illogical to find a property and then to find out if I can afford it or arrange finance for it. But that’s often what happens. Before I did my first project I thought I’d do things “properly” and see if I could arrange my finance before I looked for a property. I thought this would save time as I’d know exactly how much I could afford before I put an offer in, and so save the embarrassment of then not being able to complete.
This was before the days of buy-to-let so I started by contacting the local branches of the (then) big four high street banks. Two refused to see me point blank until I had agreed terms on a property. The other two would see me but only to say there was no point in talking until I’d found a property. In the mean time they weren’t prepared to consider my income, my level of existing debt, my experience and my circumstances even to give a rough idea of how much they might lend. Nowadays the process is probably easier, with buy-to-let finance, and you should have a rough idea of whether finance will be available, and the likely amounts you can afford.
But what I am saying is that looking for a property, arranging finance and doing your budget figures is really all part of the same process, so don’t think I’m being prescriptive by dealing with these subjects in this order.
The first thing you need to know is that there are plenty of properties available right now that need to be renovated, repaired and modernised.
However, the second thing you need to know is they won’t necessarily fall into your lap and you will have to do some digging around and put some effort into finding them.
So what is the best way to find properties for renovation? To be honest, the same way you’d find any property – and there are loads of things you can do to find your bargains.
Finding Your Properties Main sources
•Estate agents
The Successful Property Renovator’s Workshop
The most obvious way is to register with Estate Agents. The trouble is, some are very good and will understand what you are trying to do, others aren’t so good. For example, I can’t tell you the number of times an Estate Agent has sent me property details which say nothing of the condition. If you ring and ask, they might say something like “The kitchen’s dated”. You need to decide whether changing the kitchen will make enough of a difference to the end value to make it worth your while
33 taking the project on. Realistically, if that’s all that needs doing, 99 times out of 100 it won’t, unless you can get it at a real bargain price.
Now, I think it’s worth making the point again that whether a property will suit or not depends on what your strategy and plan actually are – what are you thinking of doing with it? Are you going to do it up & resell for a profit? Or are you going to keep it & let it out when you’ve finished? Truth is, the “dated” kitchen might well be perfectly acceptable to a tenant, depending on how dated it is (what an agent would call dated & my opinion of dated aren’t always the same). So there might not be any point in spending thousands because it won’t affect the rental value, or at least not in proportion to the amount you spend. Or you might want to let & refinance in which case you know you won’t benefit from an increased rent but you’ll be able to get more money back out at the end. Can you see why it’s so important to know exactly what you are trying to achieve before you start looking?
Then there are the Estate Agents who understand exactly what you want & why, but you are “well down” their list, in the pecking order of their “favoured contacts”. I was going to say clients, but of course technically the vendor is the client. Sometimes you wouldn’t know that but now’s not the time or the place to go into that. But what I can say is you want to be at the top of the list of those who get “tipped off” or who get invited to be the first to view. This takes work & commitment & integrity.
First, you need to be calling in & telephoning – but you need the balance of being high profile without being a pain. Don’t worry, they will try you out at some stage and when they do you need to show you can perform. If they ask if you can view today, make sure you drop everything & get around there. If you dither & ask if you can go this time next week because you’re busy – guess what? You’re off their list. For good.
When you view, do your research and make a budget, which we’ll look at in a minute, and if the figures work then make an offer. Yes, negotiate hard, but if they accept, perform. If you say you are a cash buyer, whatever that means nowadays, make sure you are one, or can perform like one.
It’s easy to list the different ways to find properties, but for most people going through estate agents will be the main, and for some, the only way.
I found my first solo property through an estate agent and in fact on the afternoon that I inspected it they offered me two properties, both of which would have been fine. It’s just like buses isn’t it? You don’t see one for two months and then suddenly two come along together. But this one looked as if it had the potential to make a better profit and to be honest the other property was a bit more expensive and I thought this is my first solo project so I’ll try and restrict my cost and restrict my risk and restrict my exposure and I’ll go for the cheaper property.
As an aside, the estate agents actually became quite chummy and I think they were probably quite amused by this earnest young man who bounced into their office looking for a property to do up. They used to come around and call on me at the property to see how I was getting on, obviously with a view to wanting to take instructions from me if I wanted to resell, but also to see what you could do with a property like that in that condition.
34 Finding Your Properties Main sources
•Estate agents •Auctions
The Successful Property Renovator’s Workshop
Next on the list I’d put auctions, although really I wouldn’t recommend this route until you have loads of experience. Inspecting can be problematic – busy auctioneers often have set viewing times and can be inflexible. This can make it difficult to get your surveyor in – you must have a survey. Don’t ever buy a property without a survey. And you need to check the legal pack – preferably your solicitor needs to check the legal pack to make sure you’re not buying a problem title or a load of onerous liabilities. And after all that you may well be outbid any way, and so consider that all money wasted.
I’d suggest that auctions are best left to more experienced renovators who have enough money behind them to take a few more risks.
Finding Your Properties Main sources
•Estate agents •Auctions •Solicitors
The Successful Property Renovator’s Workshop
Another one often on the list is solicitors. They deal with “Probate”, that is, dealing with dead people’s property, and probate properties often make great refurb projects – old people tend not to keep up with the latest “new-fangled” fads & trends. Getting to know a solicitor in that way is not easy – not many are going to entertain a “cold” phone call and it’s hard to sit in front of them and explain what you are up to unless you are a fee-earning client. Even if they do “tip” you off, the executors are obliged to get the best price for any beneficiaries to the will and so they’ll either negotiate hard and/or put the property on with an Estate Agent.
So, going full circle, you are most likely to find a probate deal through your estate agent contacts but chances are you’ll only be offered it when you have a track record of performing with that estate agent.
35
Finding Your Properties Main sources
•Estate agents •Auctions •Solicitors •Targeting areas
The Successful Property Renovator’s Workshop
A good way of finding properties to renovate is by wearing out the tyres on your car or, even better, the soles of your shoes, and looking around your target areas for properties which look as if they’ve seen better days. More confident investors can knock on the door and ask the owner, assuming, of course, it’s the owner who answers the door, if they want to sell. If you don’t fancy that and would rather write to the owner, or if the property is empty and you’re not sure who the owner is, you can always do a Land Registry search.
There have been a number of times when I’ve spotted a dilapidated looking property which I’d be interested in buying, but I have no idea who the owner is. Sometimes you can find out by knocking on the neighbour’s door and asking, but not always.
For example, I once owned a terrace property and was interested in buying the next-door property. It was vacant and was becoming a little dilapidated. No one knew who owned it, not even the local shopkeeper, and he could usually be relied upon to know everything!
So I did a Land Registry search. Within a few days I knew who the owner was and where they lived. I got his phone number through directory inquiries and I called him. I’d like to say that I bought the property from him at a bargain price, and that it was one of my best ever deals. Unfortunately not. He didn’t want to sell. Why he didn’t want to repair his property or let it out was another mystery. Why he didn’t sell it rather than leave it to rot away is beyond me.
Still, the point is that the system for finding him worked well. I know from monitoring the internet message boards that finding absent owners of properties, or identifying the owners of parcels of land, is something investors want to do from time, but few know how easy it can be in this internet age.
Since 1990 the Land Registry, the government’s records of who owns what, has been in the public domain. In the “old days” you’d have to fill in a form and send it in to the local office, along with your fee – I think it was £8. It would take about 10 days to get an answer by post.
Now you can do it all on the internet and get an instant download. The most direct access is by www.landregisteronline.gov.uk. A search will cost you £4 and you have to pay by credit card. At the moment you can only search between 7am and 12
36 midnight. Internet searches are by postal address only at the moment; if you are interested in a plot of land you will need to make a hard copy application including a plan of where the land parcel is.
If you want to search for the details of a land parcel, and need to apply by post, you can download the proper form to print out and use through www.landreg.gov.uk. Here you can also find out more about the Land Registry, and the other services it provides, including the government house price data.
When you do an internet search at the Land Registry you can choose to download either a copy of the Title Deeds, or the Title Plan, or both. These are £4 each. I usually apply only for the Title Deeds which include:
• A description of the property
• Details of who owns it
• Details of any mortgage lender
• The price it sold for (if registered after 1st April 2000)
• Any private rights of way across it
• And any other conditions or restrictions, such as restrictive covenants in the Title
Title Plans are useful if boundaries aren’t marked clearly on site or if you are thinking of doing a development and want to see the extent of the site, different access points etc.
Finding Your Properties Main sources
•Estate agents •Auctions •Solicitors •Targeting areas •Your own adverts
The Successful Property Renovator’s Workshop
Last but not least of the main ways you’ll find a property is by your own ads in the local paper. This can work, especially if you are able to advertise yourself as a cash buyer. I know of several investors who advertise regularly using a “property wanted” classified in the local paper and they find properties.
37 From time to time I have advertised in my local paper. The cost of an advert for a four week insertion is around £100 and generally that produces around 5 responses a week. From those I would hope to do at least one deal every 3 or 4 months.
If I make £10,000 to £15,000 a deal I consider that to be £400 well spent.
Finding Your Properties
Where should I be looking?
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The instant, pragmatic response is near home, in your own local area. On the face of it this seems sensible. But the answer really comes down to what you are trying to achieve.
If you want to create a job, and by that I mean if you intend to do a lot of the work yourself, it makes sense to find properties nearer home.
If you are creating a business and spend your time sourcing deals rather than doing the donkey work, then theoretically the properties could be anywhere. However, this presupposes that you can visit often enough to keep an eye on progress and quality, and that you can put together and organise a team that you can trust to get on with the job properly when you're not there.
Probably the best approach is to start with doing it as “ a job”; get some experience of what can and can't be done, of organising your team, and of seeing a project or projects through to completion. This is easiest with projects nearer home, and you will feel more secure knowing you can get there quickly and easily if necessary.
Having access to a larger geographical area will give you a greater choice of properties and more chance of making a profit. After all it could be that you live in a relatively smart and prosperous area where renovation opportunities are limited. Looking further afield opens up opportunities in areas that are rundown but improving, all one-offs that make financial sense even at a distance.
I regularly undertake renovations at a distance of 150 miles from where I live, in my chosen area. But I am only confident of doing this because my managing agent, who looks after my rental portfolio, also looks after my renovation projects. He is happy to do this because I pay him a project management fee for his troubles and he knows that if I retain the property and let it he will get the management.
38 We'll look at my most recent project later.
Finance Conventional sources •Light refurbishment
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When I first started dealing in property for myself, buy to let hadn't arrived on the scene. Obtaining finance to buy pure investment properties to “let and hold” was far more difficult and expensive than it is today, and property investing as we know it now was very much a minority interest.
Many of those who were trying their hand in property were mainly buying to renovate and to sell on. These projects were perhaps slightly easier to finance; lenders could see that the loan was for a limited period only, and if the renovation was done properly, there should be sufficient profit to minimise their risk.
Since buy to let has taken off, the pendulum has, to some extent, now swung the other way. Many of today's new investors are far more inclined towards “buy and hold” rather than “do up and sell on” and, if the property is in good condition and ready to move into, all the better.
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 renovate other properties, or to pay your salary as a property developer.
As investment finance generally has become more readily available so has “development” finance.
There are bespoke lending products available for investors who take on large projects. Quoting a mortgage broker’s website:
“Finance is available for most types of residential development and renovation from single units to housing estates and blocks of flats.
39 Lenders vary in their attitude as to how much funding they are prepared to provide but it is typically possible to arrange funding at a level of 75% of the site purchase cost and 75% or more of the cost of works, and possibly 75% or even more of the end value of the projects. In certain circumstances interest can be rolled up. Interest rates are available from 2% over bank base.
As a guide all lenders would be looking for the profit in a specific project to be at least 20% of the total development costs.
Other costs which the lender would expect the borrower to pay are: valuation and project appraisal fees, arrangement and redemption fees, as well as the cost of their legal fees, as almost without exception, development lenders employ their own solicitors to look after their interests”.
For the type of project you and I are most likely to look at, the “Light Renovation” scheme is the one for us.
Lenders require a property to be habitable from day one before they will advance a buy to let loan.
Many buy to let lenders are reluctant to advance mortgages against properties which require even minor works of repair, modernisation or improvement. The rationale behind this is that in lending on the property they are taking the potential income into account, and they want to see that income coming in as soon as possible. So if the property requires repair or modernisation, there won’t be an immediate stream of income, which puts the lender at risk if they ever had to repossess.
For this reason most lenders will insist that the property is in a letable condition from day one, and as a consequence of that I have seen instances where loans have been declined, based upon the valuer’s comments when he has inspected the property, for what would usually be considered fairly trivial reasons.
However, the good news is that some lenders will lend on properties requiring a limited amount of renovation or refurbishment by way of a light refurbishment loan.
The definition of light refurbishment is a little vague but it essentially covers situations where the property requires a cosmetic upgrade, and perhaps minor improvements, such as a new kitchen or a new bathroom.
The way that light refurbishment loans work is that the lender will advance, say, 70%, depending upon their LTV, of the purchase price of the property, or the value, whichever is lower, and will usually also retain a sum of money equivalent to the cost of undertaking the improvement or repair works.
At the time of the initial mortgage application the valuer will be asked to provide an opinion of value of the property in its current un-refurbished condition, and also an opinion of value of the property upon completion of the works.
When the borrower informs the lender that the works have been completed, the valuer will re-inspect, and as long as the valuer is happy with the standard of the
40 works that have been undertaken, the sum of money retained to cover the cost of the works will be released, and any extra equity.
The mortgage will be re-calculated to be 70% of the value of the property after improvement, and any extra equity resulting will be released at the same time.
There are pros and cons with using light refurbishment loans.
The first disadvantage is that only a few buy to let lenders offer a light refurbishment or limited refurbishment loan, so there’s not much choice.
The main lender is Paragon, although the terms of their loan make it very limiting, but others include Shawbrook, Kent Reliance, Aldermore and the Saffron Building Society.
Also Precise offer a bridge to let facility whereby they bridge the refurbishment and then the loan can be swapped to a more traditional buy to let type loan.
The second main disadvantage is that currently loan to value ratios are limited. Most tend to be around 75% LTV.
This can be compared with the best LTVs available for standard buy to let mortgages which include 85% offered by Kent Reliance, and 80% by The Mortgage Works (for existing customers), Mortgage Trust and Saffron.
Another potential disadvantage, depending on what you buy and where, is that most lenders have relatively high minimum valuations for their light refurbishment products. Paragon has the lowest at £75,000, and Saffron and Kent Reliance only lend on properties over £100,000, which is fairly typical.
Paragon describe their limited refurbishment scheme as being for a property that is “currently habitable but where minor works would enhance the overall appeal to the market and its potential rental income. Minor works might typically include the replacement or refurbishment of kitchens and bathrooms, renewal of services or decorative attention. The scheme is not for works that require planning permission, permitted development rights or building regulations approval, and should not involve any major structural works to the property”.
That is a fair summary of how all lenders see light refurbishment.
Let’s have a look at the different products offered by the different lenders.
Paragon Mortgages Here’s how the Paragon limited refurbishment scheme works.
The minimum valuation requirement is £75,000.
Up to 75% of the purchase price or the valuation, whichever is the lower, will be advanced upon completion of the purchase.
41 A retention amount, being a minimum of £2,500 up to a maximum of £25,000, will be held and, once works are completed, up to 75% of the after-works value can be released.
The works must be completed within three months of the initial advance.
The maximum £25,000 retention is the maximum that will be released on refurbishment.
In other words, even if you increase the value of the property by more than £25,000, £25,000 is the maximum amount of extra equity they will release.
If you run the numbers it means that the most efficient way of using it is to buy a property for £75,000, spend £6,000 doing it up to produce an end value of £108,250. Then we’ll be able to get the full £25,000 back out.
But how many properties will fit that scenario? Not many.
But it’s not all bad news! There are other lenders with different products
Saffron Building Society Saffron Building Society also offer a popular buy to let mortgage specifically for light refurbishment works.
The minimum valuation of purchase price is £100,000.
They are currently advertising two buy to let light refurbishment products.
One has a 75% LTV and is on a 2 year fixed rate of 4.47%
The other, which is potentially much more interesting to us, has an 80% LTV and a five year fixed rate of 5.07%.
Their website gives this example;
Purchase price of property £100,000
Initial advance £75,000
Property value after improvements £130,000
Total borrowing £97,500
Further advance £22,500
42 Aldermore Aldermore offer a light refurbishment product.
They will advance 65% LTV on day one, on the lower of the purchase price or the valuation with a retention on the advance to take the total advance up to 70% of the completed value.
The works must be undertaken within six months from the date of drawing the original advance.
There is an arrangement fee of 2.5% with a procuration fee of 0.75% and a minimum interest margin of 5% over the base rate of 3%, with an additional loading of 1% during the refurbishment phase.
Shawbrook Shawbrook offer a short term mortgage for refurbishments, with a 75% LTV and a minimum loan of £75,000, meaning a minimum valuation of £100,000.
The maximum loan period is 18 months. The rate charged is 8% above 3 month Libor which means it’s roughly 8.5% a year at today’s rates.
So this is really a bridging facility.
But you can switch to their standard buy to let mortgage, again with a LTV of 75% and a minimum loan and value of £75,000 and £100,000 respectively, with the choice of interest only, capital repayment or partial capital repayment terms.
The maximum term for interest only is 10 years and the rates are nearer 4% at the moment.
So there are lots of different products, each with pluses and minuses. Whether it’s worth using one of these more expensive bridging type products will all depend upon the figures. You may consider it worthwhile to use a more expensive product initially if you intend to refinance down the line and then switch to a cheaper product like a normal buy to let product.
So it’s worth playing with the figures and seeing which combination works best for you.
43 Finance Conventional sources
•Light refurbishment -light refurbishment & heavy refurbishment bridging loans
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There are also bridging loan lenders who will lend on a light refurbishment or even a heavy refurbishment basis.
For example, I know of one bridging loan lender who give a light refurbishment bridging loan on residential property (not commercial) up to 70% Loan to Value, but subject to a maximum of 90% Loan to Price, at 1.3% per month plus a 2% arrangement fee. In addition, you’ll also need to budget for a valuation and for legal fees.
They define Light Refurbishment as being for properties where:
• No planning permission/building regulations are required. • No change to the overall use/nature of the premises. • Overall project costs less than 20% of the post improvement Open Market Valuation.
They also do a ‘Heavy Refurbishment’ bridging loan up to a maximum of 60% Loan to Value (but 90% Loan to Price) at 1.4% per month plus 2% arrangement fee.
Heavy Refurbishment is defined as being for properties where:
• Planning permission/building regulations are required. • Change in overall use/nature of the premises. • Overall project costs are more than or equal to 20% of the post improvement Open Market Valuation.
Precise Precise have a Bridge to Let facility. Here’s a quick summary of how it works.
They offer a light refurb bridging facility with a maximum LTV of 70% for a maximum of 18 months. The minimum loan and valuation amounts are £50,000. The monthly rate is 0.95%, and there is a 2% facility fee.
Once the works are completed, within 4 months you can switch to their Bridge to let buy to let mortgage. This has an 80% LTV for loans under £500,000, with a maximum term of 30 years and with rates of around 5%.
44 Finance Conventional sources
•The 6 Month Rule
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One potential fly in the ointment at the moment is the “6 month rule”. What does this mean? Basically, the best way to explain it is that many lenders won’t allow you to change the financial status of property within 6 months of the last change of finance or ownership.
So, for example, if you buy a property for cash you cannot apply for a mortgage for 6 months.
Similarly, if you buy a property with a mortgage you can’t apply for a remortgage within 6 months.
And if you remortgage, you can’t remortgage again for another 6 months. This ‘rule’ was introduced following the demise of Mortgage Express who had been one of the main lenders involved in ‘same day remortgaging’. This was where a purchaser could negotiate say, to purchase a property at 25% ‘below market value’, use bridging funds to complete the purchase based on purchase price, but then immediately draw down a remortgage based on the current value.
If they had done their sums right they’d usually get all their money back out plus a nice cash-back. When the market went into reverse a lot of these highly geared loans became delinquent and Mortgage Express, who had been the principle provider of same day refinance got into trouble and was eventually taken over. To stop a repeat of this practice which had allowed many investors to achieve the ultimate No Money Deal, many banks imposed the sixth month rule.
45 Finance Conventional sources
•The 6 Month Rule •You can’t refinance for 6 months •A buyer can’t buy from you for 6 months
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Whether they meant for this to happen or not there are a couple of consequences which affect us as property renovators.
First, if you buy a property for cash or with a mortgage and then renovate it and increase the value, you cannot refinance until at least 6 months after the purchase date (or 6 months of the date of the last mortgage being granted, if that was more recent).
Secondly, a buyer cannot obtain a mortgage to buy the property from you until you have owned the property for 6 months or, if you have refinanced the property, until six months has passed since you refinanced.
The six month rules apply even if say, it only took you 3 months to renovate the property and you can show that you have genuinely increased the value of the property.
A disaster or what?
Finance Conventional sources
•The 6 Month Rule •Not all lenders impose it
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On the face of it yes but, as always, there are ways around it, legal ways I should add.
I am often surprised by how many people tell me the ‘6 month rule’ is set in stone and can’t be varied.
46 But, not all lenders impose it. Remember, this is a ‘rule’ that was generated ‘internally’ by the banks themselves, it’s not a law imposed by an Act of Parliament. And some of the banks that do use the ‘6 month rule’ are flexible enough to negotiate and listen to common sense and will waive it when the circumstances allow.
That’s the good news but in my experience these observations relate mainly to selling a property on to owner occupiers.
So, for example, I have undertaken property renovation projects and have sold the properties on to owner occupiers, and they have not had any difficulty in finding a lender to finance their purchase.
The most recent example is a small terraced house in the North West of England which I renovated and sold. It took about 6 weeks to do the work, which required the property being stripped back to the bare brickwork, and the property completed 4 months and 1 week after I had first purchased it. I sold it on to a first time buyer who obtained finance from a well-known and pre-eminent building society, and the 6 month rule wasn’t a problem to them.
A couple of months ago I was also talking to a fellow developer and trader who specialises in buying property at bargain prices, 25% to 30% below market value, who told me that when he has sold-on, which he aims to do immediately after he has purchased, he has negotiated with the buyer’s bank (usually through the solicitors) and has explained that as a property trader this is what he does, and that there is nothing underhand happening, just that he negotiated a great deal and purchased the property at a very cheap price to start with. Usually the buyer’s lender has been happy to accept that, but if they have not been he, or rather his recommended mortgage broker, has been able to find the buyer a new lender who will accept it.
The bad news is that the situation is much less clear-cut with buy to let lenders and it seems to be they who most vigorously impose the ‘rule’.
This can lead to frustration where the property has self-evidently been renovated and turned from a wreck to a palace, and all within 3 months, but the investor can’t refinance to get his money back out.
47 Finance Non-Conventional sources
•More flexible terms
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I’m glad to say that all is not lost.
There are non-conventional lenders out there who will accommodate the needs of serious property renovators, and who will offer a more flexible version of the light refurbishment loan.
So, for example, I have found lenders who provide a ‘renovation and make-over mortgage’ and will lend 75%, without a rental assessment. Why is that important? Because it means that the amount they lend won’t be restricted by the fact that, by definition, a property in need of renovation will let at a lower rent than a property which is in good condition.
The property has to be habitable, the definition of which is having a working bathroom and kitchen, and the structural condition has to be sound. This advantage of this loan is that this particular lender is more flexible than most conventional buy to let lenders and will accept properties requiring more work than is usually the case. This means that a buyer doesn’t have to arrange bridging and then wait for the full 6 month period.
Finance Conventional sources
•Development finance
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An alternative to a light refurbishment loan is a Development loan. Development loans are generally provided by private lenders, and can be more flexible than light refurbishment loans, but can also be more expensive.
48 If you can’t qualify for a light refurbishment loan a development loan can provide another means of progressing your project.
Development loans are much more similar to commercial loans in nature. The terms under which a development loan will be available vary from lender to lender, so in that sense there is no ‘typical’ development loan.
As a rough and general guide you would expect a development loan to be granted on a higher interest rate than a light refurbishment loan. LTV’s can start at around 60% but if the project is interesting enough to the lender they may advance more.
They may also be prepared to cut the interest rate but in return take a share of the profit.
Some lenders will consider lending part of the development costs as well as lending against the value of the land or the property. Some will lend only against the existing land or property, some will lend against the end value of the completed project.
There really are many possible permutations and often it’s a case of seeing what is available at the time.
For example, one firm who advertise on the internet will give loans up to 90%, from £25,000 to £50m. Depending upon other assets you may have and the equity available, they will consider 100% funding of the project.
Another offers 65% of the purchase price of the ‘undeveloped property or site’ plus 65% of the construction costs which can be drawn down in stages, subject to a maximum loan of 60% of the developed end value, with a maximum term of 12 months with interest payable at 1.5% per month.
Finance Local Authority Grants
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Don't forget you might be eligible for grants from the local authority, or other statutory bodies, depending upon the status of the property and the type of repairs you are doing. But equally, don't forget it might take a considerable time for your application to be processed and for the grant to be released. Still, if there is money on the table and you can use it, you may as well take it.
49 Local authorities are particularly keen to see houses that have been empty long- term to be brought back into occupation and might be willing to pay grants to encourage that. It’s always worth asking the question.
Finance The Green Deal
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As I write the Green Deal is being criticised as being something of a mistake. But that’s not to say that it won’t be refined and improved. Or, by the time you read this, it might have been scrapped! http://www.decc.gov.uk/en/content/cms/tackling/green_deal/green_deal.aspx
This is a Government sponsored scheme which allows property owners and tenants to apply for certain works to be undertaken to improve a property’s energy efficiency and/or decrease the CO2 it generates.
As I understand it, the idea is that an energy assessor will inspect the property and will advise on what improvements are available. If the improvements can be undertaken at a cost which will be equal to, or less than, the savings on energy bills over a, I think, 20 or 25 year period, there will be no upfront cost to the property owner/occupier and the cost will instead be added to the energy bills of the property.
As I understand it, the contract to pay the cost via the energy bills will run with the property and not with the owner or occupier, and so any future owner or tenant will be tied into that contract.
There are also circumstances where it’s possible to apply for improvements where the cost will only be partially covered by savings in energy bills.
Potentially there could be considerable savings to be gained on things like new boilers, heating systems and windows, although eligibility to claim seems a little fuzzy at the moment.
Another potential problem to bear in mind is the possible stance of lenders.
For example, some of the major buy to let lenders have already indicated that they aren’t happy for solar panels to be installed on buy to let properties. The reason for this is very simple. Most solar panel deals come as a long-term lease of around 25 years.
50 All lenders will always be wary of anything which potentially gives a third party rights over a property for a defined term, such as 25 years, as it could potentially impede their ability of repossess and sell the property if the borrower defaults or goes into arrears.
Whether they will take the same view of the Green Deal remains to be seen. The fact that the costs run with the energy bills regardless of who the occupier or owner is may give them sufficient comfort.
But this does raise questions about what its effect on the property and rental markets will be. In theory we could see a two tier market – those properties with lower energy bills and those with higher energy bills.
I think it’s too simplistic to say that a house buyer or a potential tenant will always choose the property which has been upgraded to a higher standard. In this age of austerity people are acutely aware of cost and so purchasing and renting decisions may be influenced by the overall running costs of a property.
Of course the counter-argument to that is that the works undertaken should reduce the energy bills anyway and so in practice there will be little in it.
Time will tell.
Finance Non-Conventional sources
•‘Peer to Peer’ lending
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An alternative to bank finance is to use JV funding, or what is known nowadays as ‘peer to peer’ lending.
Because the banks have tightened their lending, investors have been more willing, perhaps even forced, to find non-conventional sources of finance such as JV finance.
Equally, with interest rates at record low levels and destined to stay that way possibly for several years to come, those who do have cash have equally been encouraged to take some risks and to find a higher yielding alternative to keeping it in the bank.
What’s the best way to find a JV partner?
51 Finance Non-conventional sources
•Friends, relatives & acquaintances
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First, the most obvious is to talk to friends, relatives and acquaintances.
Many people are reluctant to think of approaching friends, relatives or acquaintances, and I understand that. Money isn’t something we like to talk about. “Neither a borrower nor a lender be” is advice that has been passed from generation to generation.
There can be difficulties in borrowing from someone we know. I’d certainly not suggest putting anyone into an embarrassing position or making anyone feel pressured. But nowadays, with uncertain stock market returns, low returns from cash in the bank, and a widespread interest in property, you’ll probably find there will be great interest from individuals in lending you funds to get you started, or in participating as a partner, sleeping or otherwise.
There’s no harm in asking the question, as long as you do so with respect. At worst, a potential backer can only say “no”. In my experience people have approached me once they have heard what I do as a business and have offered me funds.
Back in the early days I got started using a loan from a relative. I felt uncomfortable asking, but they were very enthusiastic.
The agreement was properly documented to avoid future confusion, and they were delighted because I was able to offer a far greater return on their money than they were getting from their bank.
52 Finance Non-Conventional sources
•Networking meetings
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Second, property networking events are becoming a popular venue to broker deals like this, and increasingly those with money and those with deals attend with the expectation of arranging a JV.
One of the main benefits of using this type of finance is flexibility as it is down to the two parties to agree their own terms. The basis of any agreement might be a profit share arrangement, or the lender might want interest as well as a profit share. As a general rule of thumb the terms will usually reflect the perceived risk taken on by the lending party
Again, make sure it is clear what has been agreed and what each party’s role is, and make sure this is fully captured by words on paper.
Finance Non-conventional sources
•Credit cards and rate tarts
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Nowadays it’s easy to accumulate credit cards, and then get instant access to a significant amount of short-term finance.
By shopping around and by taking advantage of swopping funds between zero- interest offers, many investors are able to tap into a ready source of interest free finance.
This can be equally useful for property renovators. Now please don’t think I’m encouraging the misuse or abuse of debt. But I have to say that used properly and
53 “maturely” credit cards can be extremely useful for covering things like the cost of materials, and for providing a source of emergency funds.
Using interest free credit can make a healthy difference to profits, especially for larger projects.
Of course, with enough credit cards some renovators have been able to buy cheap properties to do up, but that’s another story.
Just to set the record straight, credit cards don’t provide 0% finance as usually there is a balance transfer fee, typically 3% to 3.5% of the amount borrowed. Even so, finance at 3% or 3.5% is well worth having.
Budgeting
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Now we’ve thought about the type of project we want to take on, where we are going to buy, and how we are going to finance it, we are now going to look at one of the most important activities of a property renovator, preparing a proper budget.
Poor budgeting along with poor planning will have inevitable results. So one thing a newbie must do is to plan for a profit. What do I mean by this? Well, when preparing their budget they should include a definite fixed minimum sum to represent their profit. If all their other figures are accurate this will be the amount they will be guaranteed to make when they sell the property.
Accurate budgeting for a project is one of the hardest skills a renovator needs to acquire.
Why? Well first, until you actually start work you’ll not always know if the costs you’ve allowed are realistic, because there may be hidden defects for which you haven’t budgeted
The work you have budgeted for might not be as straight forward as you hoped and might cost you more.
It’s sad but true that many renovators, myself included, have had financial setbacks when they’ve uncovered things of which they weren’t aware, or builders have found that doing work is not as straightforward as they’d hoped, or things are done incorrectly and they need to be done again.
54 A difficulty we all face is that we will need to make an offer to buy a property and to agree a price before we are able to dig around fully and establish the full extent and cost of what is required.
This is true even if you have a survey – surveyors and surveys have their limitations. Surveyors are no more able to take a property apart to get the full picture than you are, so they will not be able to spot all hidden defects.
Similarly, builder’s estimates are only that – estimates, unless you are able to get them to be tied down to a fixed price contract. But in reality, unless you are offering a major project, they are unlikely to accept a fixed price contract, and if they do they may well charge over the top to cover their position and to allow for contingencies such as unseen defects.
As I said before, what looks like a good quote on paper might become theoretical when the builder starts the job and only then finds the full extent of the work needed. That’s why you could end up having conversations along the lines of “we thought we could do this by moving that but your gas supply comes in there, which means this, which means that can’t happen….” Or “ we thought this wall supported that but it doesn’t because so and so didn’t do this and that when the extension was built, so rather than doing that we’ve got to do the other, which means we’ll have to charge you this.”
But, of course, one of the biggest difficulties you will have is that often it’s not possible to get all your estimates before you exchange contracts or complete the purchase. A vendor might not want, or allow, a procession of tradesmen to traipse through their property, especially if you haven’t exchanged contracts and aren’t obliged to buy.
These difficulties don’t just apply to repairs. Again, a survey might give a reasonable picture of what’s required repair wise, but a surveyor might not be in a position to, or even want to, start advising on how much planned alterations might cost. Questions like “how much will it cost to upgrade the kitchen and bathroom?” are pretty meaningless without detailed specifications, and you’d be better off going to a bespoke supplier to get an accurate costing.
So ultimately you will have to decide whether to purchase a property using your own judgement, supplemented by one or two sources of information, that may or may not be accurate, and you won’t know whether you’ve got it entirely right until you take ownership and start work.
55 Budgeting Getting Quotes
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If an investor is buying a property that requires some work doing to it, an inexperienced investor will tend to wait until the day after they complete the purchase before they start ringing around and looking for the builders and contractors they need to undertake those works. This is far too late to start thinking about these things. The knock-on effect of this delay can be costly.
Recessions aside, builders and contractors are busy people and it can be days at best before they are able to schedule an inspection just to prepare a quote. If they are busy, it can take them days or weeks to even prepare the quote once they've inspected. If you only start ringing around the day after you complete, it could be weeks before you have the quotes in your hand to enable you to decide who's going to do what.
And that's only the beginning of the story. Once you’ve accepted a quote you've then got to try and get the builder and contractors back to actually undertake the work. During busy periods, it may be weeks, if not months, before the builder can actually start. In fact, frustratingly, you may find that the best builders who give the best quotes are so busy, that you have to accept a higher quote or a quote by a “less good” builder just to keep the project moving.
My advice is to collect names of possible members of your mastermind team. Hopefully you will have the names and phone numbers of several builders, several electricians, two or three plumbers and so on so that when you complete the purchase of your property, you won’t be dependent on just one builder.
You need to be constantly testing the services of different members of your team. If one of them doesn’t come up to scratch, ditch them and replace them, so that the quality of your team is constantly improving.
When I buy a property that requires refurbishment or repair I will do everything possible to obtain access for the builder and contractor before completion. In an ideal world, it would be nice to be able to obtain access before exchange as part of the negotiating process. It would be quite handy when negotiating the purchase price to be able to go back to the vendor with fully costed estimates of any repairs required.
There have been times when I have undertaken surveys on behalf of purchasers when it has been suggested that as part of the survey process we instruct the
56 builder to look at, and quote for, specific items of disrepair before exchange of contracts. However, in general, this tends to happen only when an item of disrepair is so obvious, and of such significance, that it would be negligent not to advise the purchaser to establish the cost prior to purchase.
This is not an ideal world and it rarely happens that you are in possession of all the facts before you start negotiating.
However, once contracts are exchanged, I would have no qualms at all about asking a vendor for access for my builders and contractors. At that point I'm committed to purchase and they’re committed to selling, and frankly I can see no reason why they shouldn’t cooperate. Sadly not all vendors will cooperate and they are under no compulsion to allow access to you or your representatives until the day of completion.
In my experience most vendors will cooperate, but some will not. If they will not, then you will have to adapt your plan.
Plan A, if you're able to implement it, is too obtain access as soon as possible after exchange of contracts to obtain quotes and estimates as quickly as possible. Ideally what you're trying to achieve is for your builder and contractors to be in a position to start work on the day of completion or, more realistically, as soon as possible thereafter.
If you can’t gain access to the property for your representatives between exchange and completion, then you’ll have to implement Plan B and get your builders and contractors in to provide estimates either on the day of completion (subject to my caveats and remarks below) or a day or two after completion.
Now this in itself raises some interesting points. In my experience we tend to get into a rut in the way that we do things and, without being rude to our legal friends, the more I deal with solicitors the less I understand the processes that they adopt. But they tend to stick to them so rigidly!
For example, why is it that most solicitors like to complete property purchases on a Friday afternoon? I recently sold a couple of properties that were due to complete on the last Friday of the month, but the banking system was so clogged by money transfers for completing property purchases that the money from the purchaser did not arrive in my bank account until it was too late to complete that day. This caused a lot of inconvenience as it happened to coincide with the last day of my company's financial year, and it was important that those sales were recorded as having been in that financial year.
For the life of me, I cannot understand why the sale could not have been completed on the Thursday, or even the Wednesday. It would have made no difference to myself or the purchaser. It all seemed to be centred around the convenience of the solicitors and this ultimately resulted in inconvenience to myself, the client.
Some of you might quite rightly be thinking “Peter, you can’t guarantee that completion will take place on the day that you are aiming for, and even if it does, it might not be in time to release the keys and allow your contractor in that day”. This
57 is true. In theory, if completion does take place on the day specified in the contract, you should be able to pick up the keys at two o'clock from the estate agents, but in practice I accept that this is not always the case.
I hope you understand that the point I’m making is that you want to be able to arrange for your builders to have access to the property so they can start the work as soon after completion as possible. To be safe you might need to aim for a couple of working days after the scheduled completion date.
You’ll remember that my first renovation project was an executor’s sale. Although the property was vacant, the executors for some reason would not allow me access prior to completion. However, in my naivety, I assumed that I would obtain access on the afternoon of completion and so I arranged for a plumber and electrician to inspect the property at three o'clock. In the event, everything went through as planned, and I picked the keys up from the estate agent sometime after two o'clock, and was able to start the process of obtaining estimates immediately. In other words, I used plan B and Plan B went according to plan. Because I was quick off the mark I was able to get the project moving along almost as soon as I completed.
Since then I’ve realised that this was something of a fluke and a surprisingly large number of completions are delayed for different reasons. So bear that in mind when you are making an appointment for a contractor to visit to give a quote.
Budgeting
How do I do it?
The Successful Property Renovator’s Workshop
So how do we come up with a proper budget?
The first step, which is essential, is to get an accurate assessment of what needs to be done. I’ve already advised that you should not rely on your own inspection and observations unless you are a surveyor or an architect or a builder – otherwise always get professional advice.
To be sure of making your profit you will need to be clear on what is required, so do take professional advice. Always get a surveyor to do a survey first. Although some problems are impossible to spot until you get “stuck in”, having a survey should cut down on the number of nasty surprises you have to deal with. Once you know what’s required, you'll also need accurate quotes from builders and contractors so you can budget for all the costs.
58 Budgeting When a renovator doesn’t make money on a property it will be because of one or more of the following reasons:
•they paid too much for the property •they sold it too cheaply •they paid too much for repairs •they didn’t account for all the true costs of the project •they didn’t plan for a profit
The Successful Property Renovator’s Workshop
When a renovator doesn’t make money on a property it will be because of one or more of the following reasons:-
• they paid too much for the property possibly because they:
➢ Underestimated the cost of the works ➢ Underestimated the time it would take to do the works ➢ Overestimated how much the property would be worth when the work was finished
• they sold it too cheaply • they paid too much for repairs • they didn’t account for all the true costs of the project • they didn’t plan for a profit
Budgeting When a renovator doesn’t make money on a property it will be because of one or more of the following reasons:
•they paid too much for the property because they •Underestimated the cost of the works •Underestimated the time it would take •Overestimated how much the property would be worth when it’s finished
The Successful Property Renovator’s Workshop
How much you pay for a property will depend on how much you expect to achieve when you sell and how much you think you’ll need to spend to achieve that price. Get either or both of these wrong and you are scuppered from the start.
Add to that one more consideration. Regardless of whether you will make a profit, ideally you should try to avoid paying more than the market value of the property even if you can “afford” to pay more.
59 Budgeting How much can I afford to pay?
The sales price, once modernised -minus any fees and costs payable on the sale -minus notional interest or actual interest -minus the cost of the works -minus a notional profit for you Equals the amount you can afford to pay for the property
The Successful Property Renovator’s Workshop
Here is the formula for assessing how much you can afford to pay for a property. Getting this right is crucial. It’s not just a matter of trying to agree 10% or 20% below asking price and hoping for the best.
Can it really happen that a renovator can afford to pay more than the actual asking price? The answer is yes, and there are a number of reasons why this can happen. We’ve already seen that “cost does not equal value”. This can result in the “market” discounting prices by more than the cost of remedying defects or paying for improvements.
Alternatively an individual renovator might have advantages over the market as a whole that allow him to be able to cut the budget costs.
For example, a firm of building contractors might buy a renovation project for its staff to work on between jobs or during quiet times. If they have to pay their staff anyway, they can legitimately write off their costs, or look at it that they are getting them to do something useful and profitable that they wouldn’t otherwise be doing. Or a builder might buy a renovation project knowing he can negotiate better terms with sub- contractors, and get the work done cheaper, than someone not in the trade. This cut in costs potentially allows him to pay more and “out-bid” the market.
Then there is the possibility that a purchaser might see an opportunity to add value that others are unaware of or miss. For example, they might see scope to increase the building density through an enhanced planning consent for redevelopment or extension, or by renovating to a higher standard if the market will pay extra for that. Building in a higher end value could allow a higher bid, if the enhancement in value is over and above any increased cost of doing the work.
Can this happen? Yes. Look at it this way. Suppose you are offered a property that, when “done up”, will be worth £200,000. You cost your budget at £30,000 and build in a £20,000 profit. You do the maths and, give or take, can afford to pay £150,000. However, for argument’s sake, let us assume the property is only worth £140,000 in its current condition.
If you relied purely on “the formula” you could overpay by £10,000. That’s why it’s also important to do your research to establish how much properties like this are fetching in the open market. Usually the best way will be by means of the “comparative” method where, as the name suggests, you make comparison with the
60 asking and sales prices of other similar properties – the more similar they are the easier it is.
Do make sure, when calculating how much you can pay for a property, that you allow for a realistic profit. When calculating how much you can pay you'll need to:
estimate as accurately as you can the sale price of the property once modernised and then deduct
the amount of any fees, such as estate agents and solicitors, payable on sale
an allowance for interest for a loan on the property and the cost of the works
the cost of the works, including surveyors and architects fees and a contingency (it’ll always cost more than you expect)
an allowance for your profit i.e. build in £10,000 or £20,000 or whatever you think to be a reasonable profit given that the size of the project. and you’ll then be left with the maximum amount you can afford to pay for this property.
Finance How much profit will I make?
The sales price, once modernised -minus the purchase price including fees -minus any fees and costs payable on the sale -minus notional interest or actual interest -minus the cost of the works Equals the profit you will make
The Successful Property Renovator’s Workshop
Alternatively, if you know from your research the best price at which you can buy a rundown property, of that particular type, in your target area, your calculation might look more like this:
the projected sale price once modernised
less
the purchase price including fees payable on purchase and stamp duty (if applicable)
the fees payable on sale
the cost of the works including fees and a contingency
61 notional or actual interest on the purchase price and the cost of the works gives your potential profit (if any)
With this figure in mind you can then consider whether the project is viable, or whether there is sufficient profit to make it worth taking on.
Don't buy any property unless you’re confident that you will make a profit. Let’s face it, unless there are good investment reasons for doing otherwise, there is no point in taking on a project that does not result in a profit.
If there are no similar properties, or if the project you are considering is an unusual one-off, then you might have to use the residual method, which we’ll look at in more detail later.
Budgeting
Notional time and interest
The Successful Property Renovator’s Workshop
Also, don't forget to allow for a notional charge for your own time when you’re calculating or estimating the cost of the works. If you don't cost out your time, you will be robbing Peter to pay Paul. Your time is a valuable resource and should be accounted for.
Let me just make a quick point here about what I consider a profit to be. To me a true profit is the excess left after you have paid all costs, including your “salary” if you are doing the work yourself. Therefore, if you do the works, or some of the works, you should have a profit as well as being able to pay yourself an amount for your time. If you only have the latter then I would argue that you haven’t made a true profit. Of course, if you are not doing any of the work yourself, then any excess should be a true profit, as the salary of the contractor will be included within their charges.
The same is true with interest. Even if you buy the property for cash and fund the building works, you must allow for notional interest payments, otherwise you're really cooking the books. You have to allow for the opportunity cost of using your own money. After all, if you didn’t use it to fund your project, it would be invested somewhere else, for example in the bank, earning interest.
When a newbie accounts for interest on a project, and that’s either real interest on a loan for the property or the cost of the building works, or notional interest if they are able to finance the project using their own cash, they’ll often find that what they have
62 saved by not paying out on contractors has been eaten away by interest. If they haven’t accounted for this properly, they’ll often find when they come to sell the property that they haven’t actually made a profit, or it is much less than they were expecting.
Budgeting
False economies
The Successful Property Renovator’s Workshop
It might seem cheaper doing all the work yourself but in reality a professional builder will do it a lot quicker and usually to a higher standard than you. Conversely they might do it to a lower but still adequate standard, in fact one of the big mistakes a lot of new renovators make is they spend a disproportionate amount of time trying to do work to a quality that is much, much higher than is required by the market that they are aiming for, either tenants or owner-occupiers. And although the work’s to a high standard it doesn’t enhance the value or the rental value. There is no point in being a perfectionist – it doesn’t pay.
Also many new renovators spend a lot of time learning new trades on the job. Before they start for example, they don’t know how to plaster or to plumb, certainly I didn’t when I started, and so they have to research and they learn by trial and error. Those bits that don’t work have to be done over again, and often they have to get a builder in, after a few weeks of struggling, to undo it and to do it all again.
The point is it’s nearly always quicker to get the professionals in from the start, and it’s almost always cheaper in the long-run to get the job sorted quickly and just get it out of the way. You see, one thing that a lot of “newbies” don’t actually account for is their time. Their time is valuable. They might be saving themselves from receiving a bill from a plumber or builder at the end of the project, and on paper that might make it look they’ve cut costs and enhanced their profit. But to assess the true profitability of the project they need to account for their time.
Otherwise it’s just false accounting.
So, as I say, in reality many renovators find they’d be much better off financially, and emotionally, if they’d bitten the bullet and had got the builders and contractors in from the start. Yes, they charge and they need to be paid in real currency, but they get the job done quicker.
63 Budgeting Valuation
•Remember the local ceiling value
The Successful Property Renovator’s Workshop
As I said earlier, incorrectly identifying the end value through being overly optimistic is a common reason for failure. Often this will come down to exuberance – an unrealistic belief that the property will be so good that buyers won’t be able to help but pay top whack. Or it can be down to sloppy research.
Even if a renovator is sensible and asks for help from professionals, for example by asking a number of estate agents for their views on the end value they can come to grief if they are tempted to adopt the highest and possibly the most unrealistic estimate of value in their calculations. Or they might adopt a suggested asking price as being the end value even though the estate agent has factored in that this might have to be reduced in a slow market, as it is expected that a potential purchaser will want to negotiate a keen price and won’t offer the “full asking” price.
Also, be aware of what advice you are receiving. If you are taking out finance the lender will send a valuer to inspect the property but he will not be doing a “survey”. This can seem confusing – surely any items of disrepair will have an effect on value and therefore the valuer should note them and reflect them in his valuation figure? Well, yes and no. This isn’t really the time to go into the theory and practice of valuation, but just remember that on a valuation report a valuer will not list every defect requiring attention, nor necessarily every item requiring replacement and modernisation.
The role of the valuer is really to make sure that the lender’s money will be “safe” if they lend to you. In other words, if they need to repossess your property, they’ll be able to sell it and get all of their money back out again. If there are any major structural problems that will affect the potential resale price, then the valuer should note these.
But the point is that just because a valuer doesn’t list any item of disrepair doesn’t mean that it isn’t there.
Also, even if he or she does list items as requiring attention he or she won’t necessarily give an indication of the cost of doing them. If there are major repairs to do, a valuer may suggest that the lender hold back a “retention”, in other words they only advance part of the loan with the remainder following only on completion of the repairs. However, a “retention figure” can be fairly arbitrary and needn’t in any way relate to the actual cost of doing the work.
64 The only way to get a realistic indication of what is needed and how much it will cost is to instruct a surveyor to undertake a structural survey with the specific instruction to include estimates of the likely cost involved.
Going back a stage, when I found my first refurb property, I surveyed it myself. And I came up with my own schedule of works and my own schedule of costs. Don’t forget that I am a Chartered Surveyor and this used to be bread and butter for me. I wouldn’t recommend any unqualified investors do their own surveys, you must always get professional advice. In fact, actually, although I’m a Chartered Surveyor and at that time had something like fifteen years’ experience, I found it quite nerve racking doing it for myself in case I missed something.
Obviously there was a lot of self-interest here, this was my business, I had only one redundancy cheque and I had to provide for my family and I really didn’t want to mess this up. So it was actually quite difficult for me, but I felt it was something I could and should do and so I did. But if you are not an architect, or a surveyor, or a builder, then I strongly recommend you get professional advice first.
I’ve heard it suggested by other professional renovators that when doing the budget one should estimate the “ceiling value” for that location. This is sound advice. There will always be a maximum value that a property can achieve in a certain location and there will be a point where, no matter how much you spend and no matter what you do, you will not be able to increase the “value” any further.
So do look and see what the maximum value is likely to be before you commit to your project.
Similarly, I’ve also heard it said that you should be aiming to create the best property in that street or location, or whatever, and so obtain the highest price that has been achieved there. I’m not so sure of that. What you want is a project that will make you a decent profit, and if you want to release your profit by selling on, a property that will sell quickly.
Depending on market conditions you might be better served by creating a property that can be sold at a profit at a competitive price. After all, there might not be much point getting the highest price for that area if, whilst waiting for a buyer, your profit has been eroded by your interest charges.
65 Budgeting
How much value will an improvement add?
The Successful Property Renovator’s Workshop
One question I'm often asked by investors and developers is, “Is there a formula or a scale I can use to work out how much an improvement will add to the value of a property?” I always nod sympathetically but the answer is always the same.
It would be really handy if, for example, a new conservatory of 100 ft.² added £7,500 in value, whereas one of 150 ft.² added £12,500 in value. But property is not that simple. There are too many factors to account for to draw up a simple formula or scale.
First, there's the quality and value of the raw material, in other words the property you are renovating. The old saying about not being able to make a silk purse out of a sow's ear is true of property. For low value property in particular, you can reach a point where spending more money just will not increase the value.
Second, there's the cost and quality of the amenities, fixtures and fittings that you intend to install. A kitchen costing £5,000 can add disproportionately more value to a low value property than say a £40,000 kitchen would to a property of a much higher value. Similarly, it's too simplistic to ask how much value a kitchen will add to a property, if you haven't defined the quality of the kitchen you will be installing.
Then the there's the demand for the amenities, fixtures and fittings. In a cheaper rental property you will find that there will be little, if any, extra demand from tenants for a property with a £2000 kitchen over a property with a £1000 kitchen.
Here’s a list of the top improvements that you can make to your property while you are renovating, refurbishing, modernising and improving it.
Adding central heating
I’ve heard it said that adding or updating the central heating system will always add more to the value of a property than it costs, and some banks and buy to let lenders won’t lend on a property unless it has proper heating installed.
In the location where I buy, gas central heating is always preferred to electric night storage heaters and I’d always take the storage heaters out and replace them. Not only does this increase value but it also increases rent-ability and let-ability because generally speaking tenants prefer gas central heating to electric storage heaters.
66 One slight adaptation I have made recently is to take advantage of a government scheme which replaces old inefficient boilers. Broadly speaking this scheme allows tenants on benefits, specifically tenants on benefits with children, or tenants on benefits of pensionable age, to apply for a new boiler, which is fitted free of charge to me.
Adding a loft room/loft conversions
Converting the loft can be an effective way of adding value to your property.
You will need to check that the roof space can be converted cost effectively. If you have modern factory formed roof trusses the loft space would need to be converted using a specialist contractor and can be extremely expensive.
The best loft conversions are in older properties, like Victorian and Edwardian properties with old-style Purlin braced roofs.
The roof will need to be around 2.4 metres high to allow for steel beams and a suspended floor.
Generally speaking a loft conversion does not require planning permission as it uses existing space within the property. However, if you use dormer windows and change the roof line you may need planning consent.
Regardless as to whether you need planning consent or not you will certainly need Building Regulation consent.
I remember as a young valuer inspecting a property where the owner had undertaken a loft conversion without getting property consents from the Building Control Department at the Local Authority. The property owner was applying to remortgage the property to release the extra value that they thought they had created. Because they didn’t have the proper consents, their Building Society and the Local Authority were within their rights to enforce, in other words have the roof converted back to its previous state. Needless to say, the owner didn’t get the extra mortgage and found themselves in hot water with the Local Authority.
A loft conversion can add as much as 30% of the total floor area of a property but do be aware that you are going to have to take room elsewhere in order to provide a staircase.
The typical cost of a loft conversion is around about £600 a square metre and it could add around 10% of the value of the property.
Replace windows
New uPVC windows are one of the few improvements that are guaranteed to add value to a property, particularly lower value property.
Do be careful to consider installing new lintels when you change the windows. In older properties especially, the timber casement within the window often acted as a supporting brace to the brickwork above. When new double glazing became popular
67 many double-glazing companies installed windows but without thinking about the structural implications and without adding lintels to compensate for the lack of support by removing the timber casements.
That is why you can often see cracking over the windows.
You will also need to make sure that you comply with Building Regulations for things like allowing access within upper floor windows for the Fire Brigade and providing toughened glass where appropriate, for example to French windows.
In theory your windows should be installed by a FENSA registered contractor, or should be checked by the Building Control Officer once they are installed, if they are not installed by a FENSA registered contractor.
I have my windows made by a local window firm and they are then installed by my builder. Doing it this way means that I can save roughly 50% of the cost that it would otherwise have cost me using a typical window installer.
Renovating or replacing kitchens
Other than the bathroom the kitchen is probably the most important room in the house when it comes to making a property saleable or rentable.
In a cheaper, lower-end property, particularly one that is for rental, it is possible to install a good quality, functional kitchen for around £1,000. A lot will depend upon the size of the kitchen, but my experience is that in lower-value properties there is only limited space in which to house the kitchen and so I’m restricted in the number of kitchen units I can install in any case.
Firms like Ikea, Howdens, Wickes and B&Q do perfectly good, very functional kitchens which can look very attractive, but at a very good price. Again, by using my builder rather than a specialist kitchen fitter, I can usually get a kitchen installed for far less than most people would imagine.
Sometimes, you may not need to install a new kitchen. It could be that the doors are hanging off and/or the worktops are damaged, but the carcases are still functional. If the carcases are still sound, and if it makes sense to do so, then a change of doors and worktops may be sufficient.
A lot will depend on the size of the kitchen and the value of the property because, for a cheaper lower-priced property, it is probably just as quick and cheap to replace the whole kitchen.
Improve or replace the bathroom
The bathroom is the second most important room in the house when it comes to improving sale-ability and rent-ability.
Coloured bathroom suites are definitely very 1980s and nowadays most buyers and tenants will expect a clean looking white bathroom suite.
68 Where possible, always install a shower. And always have a vinyl or tiled floor and never a carpet.
If you shop around the various builders’ merchants it is entirely possible to buy a complete bathroom set, with taps and accessories, for £300 or less, and £500 will buy an extremely good bathroom, possibly beyond the standard that would be required for a cheap-rental property.
Re-arranging existing accommodation
One of the peculiarities of the UK property market is that we tend to think of value in terms of the number of bedrooms.
Therefore, paradoxically, a small house with four bedrooms could be worth more than a slightly larger house which only has three bedrooms.
So if you can divide the existing space to add extra accommodation, you could add more value.
This would require re-arranging internal partitions. You will need to be careful that you are not removing structural walls, and if you do want to change the structural elements of the property to accommodate a different arrangement, you will probably need Building Regulation approval.
Having said that, getting proper consents isn’t hard, and a good builder who knows what he is doing should be able to assist in showing you what you can and can’t do.
But it doesn’t necessarily have to be that complicated. I know somebody who specialises in buying large one-bedroom flats. He then removes the kitchen and repositions it within the living room, to make a big open-plan living area, and the kitchen is then turned into a second bedroom.
By doing this he is able to add considerably to the value of the property and then flip it on at a profit.
Adding a bathroom or a shower room
Similar to the above, if you can re-arrange the accommodation to provide an extra bathroom or shower room, particularly if it’s an en-suite to the main bedroom, you could add value to the property as a whole.
Ideally there should be WC facilities on every floor that has a bedroom, and you should work on the basis of one bathroom for every three bedrooms.
For higher value properties it may be worth considering adding an en-suite to every bedroom if there is sufficient space.
Traditional two-storey Victorian and Edwardian terraced houses often have downstairs bathrooms, typically in an extension that was built later. The tendency is to move these upstairs and to lose the small third bedroom, which can enhance the amenity value to an occupant, but could detract from the overall value of the property.
69 Adding an extension
This can be one of the most ambitious ways to add value but it can also bring the greatest rewards in terms of extra room and adding value.
The key thing is to look at the overall size of the property and the plot on which it sits. Adding an extension will require taking land from the garden which may or may not detract from the property’s value.
The extension also has to create the right balance when the property is finished. If you have a two-bedroomed house, it would be out of keeping with the property to create a large ground-floor extension.
If the property is a small property, then it may be worthwhile adding a two-storey extension and adding an extra bedroom, or bedrooms, and a bathroom if possible as well as extending the kitchen and living accommodation downstairs.
Also don’t forget the ceiling value of properties in your area. At some point, no matter how much you extend it or what you do to it, you are not going to push the value beyond the maximum that somebody will pay for that type of property in that particular area.
For this reason it is a mistake to assume that an extension will always add value, and even if you have the space to it may not always be worthwhile doing.
The price of an extension is going to vary from area to area but roughly speaking, you are probably looking at £1,000 a square metre, or approximately £100 per square foot.
Adding a conservatory
Depending upon its size and location, adding a conservatory can cost anything from between £10,000 to £75,000, but could add up to 15% of the value of the property.
To add value to the property the conservatory will need to be properly designed, built and integrated into the layout of the house. A poorly planned or conceived conservatory can reduce the value of a property.
A very basic conservatory could cost £3,000 - £5,000 in parts, with a further £2,000 - £3,000 to have it installed.
Depending upon its size it is not likely to require Planning Permission but it will have to comply with Building Regulations.
Create off-street parking
The amount of value off-street parking will add is definitely location driven. For example, creating parking within central London could add enormously to the value of a property, whereas in the suburbs, where there is more room, it may only add a fraction of that amount.
70 I met with somebody recently who had noticed that adding a drop kerb, and paving the front garden to provide parking, could add as much as £10,000 to the average price of a house in his area, which was around the £130,000 to £150,000.
How Much Value do Works Add?
Before doing any works of repair, renovation, modernisation and improvement, we will want to be sure that they will add value. That is, unless there are other good reasons for doing the work, such as, we are obliged by law to undertake them, or the works will increase saleability or rentability even if they don’t add value per se. So how much value do individual items of repair, renovation, modernisation and improvement add?
I often get asked if there’s a list anywhere, or a website, which shows how much value different works of repair, renovation, modernisation and improvement add to the value of a property.
Or if there’s a formula we can use, to work out how much value is added.
Unfortunately it’s not as simple as that.
The amount by which any work of repair, renovation, modernisation or improvement will add value to a property will almost always be market driven and will depend on the demand, requirements and expectations of the market in that area.
Let me illustrate this by using an extreme example. If you put central heating into a terraced house which is located in an area of extremely low demand, and where there’s a glut of terraced houses on the market, you may not add any value at all. The property may be just as hard to sell with the heating as without it. Terraced houses are hard to sell, full stop. As I say, this is only an example, I’m not stating a general rule. In some areas terraced houses are very popular.
In our hypothetical area new central heating might make the property easier to rent out, but it might not make it easier to sell.
Here’s another extreme example. Adding a garage to a property in the suburbs might add a few thousand in value to a property, but if you can squeeze a garage onto a plot in central London it may add many multiples of that in value, possibly even £100,000 or more!
So a £20,000 kitchen installed in a cheap 3 bedroom terraced house in a town in northern England, which would normally sell for £60,000, might add no extra value over and above a cheap kitchen costing £1,500, and it could even reduce the value if it’s overbearing and the next owners are going to have to rip it out and start again.
I’m using this as an example because I once saw a terraced house, worth no more than £60,000, which was on at an asking price of £80,000. The reason it was on at this price? The owner had obviously spent about £20,000 on the kitchen but it was totally out of keeping. In their mind they’d added £20,000 to the value, being the cost of the kitchen (we’ll look at cost does not equal value in a moment) but in truth,
71 it probably hadn’t added a penny to the value. It might even have reduced the value because it was so large and over-bearing.
The same £20,000 kitchen installed in a super-luxury detached house might also add no value, and might reduce the value because buyers of that type of house might expect a fully fitted kitchen costing £60,000 with all the trimmings.
So, in my experience, there are no hard and fast rules, the amount by which any work will add or reduce the value will depend upon market expectations in that area.
But having said all of that I was interested to see that the Nationwide recently published a special report in which they give advice on how much an improvement can add to the value. It’s true that they have a large survey sample of properties which they can research and extrapolate their figures from but, even so, I’d be wary about relying too much upon general guidelines.
In summary, they suggest that: • Adding a bedroom and a bathroom through an extension or loft conversion can add over 20% to a property’s value.
• Extending to accommodate an extra bedroom can add over 10% to house value.
• An extra bathroom adds 5% to the value of the average home.
Specifically, Robert Gardner, their Chief Economist said:
“Having more useable space is generally thought to be consistent with better quality accommodation and people are prepared to pay for it. A 10% increase in floor space, other things equal, adds 5% to the price of a typical house, whilst adding space equivalent to the size of a typical double bedroom to a two-bedroom house can add around 11% to its value. A second bathroom also remains a favourite amongst home owners and our research shows that creating an additional bathroom can add 5% to the value of the average house. Home owners who add a loft conversion or extension incorporating a double bedroom and a bathroom can add about 20% to the value of a three bedroom, one bathroom house. Households appear happy to pay for more space and our analysis suggests that, providing the room is useable, adding an extra bedroom can be a good way to increase the value of a property. The table below shows the value added for different types by increasing floor area to accommodate an extra bedroom:
Terraced house 2 bed to 3 bed plus 10% Terraced house 3 bed to 4 bed plus 9% Semi-detached house 2 bed to 3 bed plus 12% Semi-detached house 3 bed to 4 bed plus 9% Detached house 3 bed to 4 bed plus 9%”
72 Other Ways of Creating Value
As you become more experienced and more sophisticated in your property dealings, you may find other ways to add value which don’t necessarily rely on repair and renovation. For example, I’ve just put an offer in on a pair of flats. The flats look like a terraced house; there’s a one-bedroom flat on the ground floor and a two-bedroom flat on the first floor. Interestingly they are in a self-contained purpose built block and that’s how they were built. Because one flat is over the other it’s possible to actually acquire the freehold of both flats.
The reason why I’m interested in buying them is because I know that, although they don’t require very much work internally, they are both in good condition, and if I can buy them with the freehold I can split the title and sell each flat individually on a long lease. So in that instance I’m going to add value by changing the legal nature of the property by doing what is now called title splitting.
To give you an idea of the figures I have offered £69,950 for the pair but could potentially get £115,000 if I sell them individually to owner occupiers.
But as I say, let’s keep this simple for now and we’ll think about an example where we need to renovate or repair, and/or modernise and improve.
Ideally you should be looking to increase the value by a minimum of £3.00 for every £1.00 spent. That’s a good target to aim for but you will have to do your sums to make sure that this increases the value enough.
When you are first starting out, ideally you should be looking for properties which require mainly cosmetic work and this could, and probably should, include a new bathroom and kitchen. At a stretch it could also include installing central heating which in most properties should be relatively straight forward, and/or perhaps new windows.
What you don’t want to be getting involved with is major works of repair, particularly anything which is going to get the Building Control Officer involved. Not that there’s anything wrong with having the Building Control Officer involved, they are usually very helpful and very quick. But that is like the benchmark as to where you may be taking on a project which is inappropriate for what you are trying to achieve, because it assumes you’ll be doing work which requires Building Regulation consent.
Just to give you an example, I’ve just exchanged contracts on a property that was on the market at £80,000.
I know that a previous purchaser, who had to drop out because they were buying with a mortgage but the property was turned down after the valuation, was looking at spending £30,000 on it and were going to put in a new bathroom and a new kitchen, and probably redecorate it throughout. They were also going to undertake repairs to the back wall where a couple of windows have been fitted without lintels. This is why the property was declined after the mortgage valuation.
73 In my view the existing kitchen is probably alright and I wouldn’t change it, particularly if I was going to rent the property out. The bath is poor and probably needs replacing but the WC and the wash hand basin in the bathroom still look as good as new and so I would leave those. So we’re probably looking at £200 for a bath and maybe £100 - £150 to get the plumber in to fit it.
Other than that I may or may not put in the two lintels that the valuer got excited about, but even that would only probably be about a couple of hundred quid, perhaps £300 at most. And lastly on the list the property needs central heating which I would budget at around about £4,000. So we’re probably looking at about £4,500 - £5,000 altogether for the major works.
After that, it needs decorating throughout. Most of the wallpaper is actually still in good nick so I’d probably just paint over it, especially if I was going to rent the property out. I think that would cost no more than £1,000 and I might even be able to get it done for less than that.
So let’s say this project is going to cost £5,500 - £6,000 in all.
I think that, if and when the property is finished, it will be worth in excess of around £95,000. The Agents I’ve spoken to are of the opinion that if it is done well it would be worth £100,000. So if we assume conservatively it will be worth £95,000 then you can see that this simple exercise has actually added £4.16 for every £1 spent which is pretty good.
If we are able to bump the value from £70,000 to £95,000 by spending around £6,500, we then have options as to what we do with the property.
Most obviously we can sell it and pocket the profit. This may or may not be attractive depending our tax position in this tax year.
The second option is to rent and not sell. This can be short term, say for 6 months, for the reasons already stated. Or it could be for a longer period if you want to ride what looks like an improving market.
Renting doesn’t preclude your taking some of your profit, as the property can be financed, or refinanced to release part of the equity. The Six Month Rule, which has been adopted by most lenders means that you’d probably have to wait until 6 months after purchase to finance or refinance.
74 Budgeting
How much value will an improvement add?
•Cost does not equal value
The Successful Property Renovator’s Workshop
We need to revisit a concept here that is not always easy to understand, and that is that in property “cost does not equal value”. This means that the value of a property will not necessarily be affected in direct proportion to the cost of any repair or improvement.
Depending upon the nature of the work required, in some instances the value of the property can be diminished by less than the cost of a repair. In other circumstances the opposite is also true.
Sometimes the value of a property will be increased by more than the cost of a repair. This makes our role as a renovator worthwhile. The same is true of works of modernisation and renovation. We’ll look at the reasons behind this in more detail later.
Some projects will obviously add more value than the cost, with relatively little work, but this isn’t always the case. You might consider doing the works in any case if, for example, they will greatly enhance the saleability, if not the value over and above the cost, meaning you can realise your profit from other works more quickly. However, some renovators are tempted to do alterations which make no difference to the overall value, and so these end up being a cost but add no tangible benefit.
This is the danger of getting caught up emotionally – it’s easy to be overcome by one’s aesthetic sensibilities. There’s no doubt that it can be very satisfying to take something that looks dark, dingy and awful and make it into something that looks like a palace (or a photo shoot opportunity for a glossy magazine). But personal satisfaction should not be the main goal for a renovator, although undoubtedly, if done properly, this will be a by-product. If you want to be a successful property renovator you need to understand that in property, cost rarely equals value. There are things we can spend our money on which increase the end value by far more than we have spent, or which make no difference to the value at all.
75 Budgeting
1/3rd 1/3rd 1/3rd
The Successful Property Renovator’s Workshop
A good example is new houses. The price you pay is not the same as the cost of building it. When you add the cost of the land to the cost of the materials and the labour you won’t get anywhere near the value of the property.
As a rough rule of thumb, the asking price of a new house can be split as one third land, one third building costs, one third profit.
Budgeting
Forced Appreciation
-“the amount by which works increase the value of a property”
The Successful Property Renovator’s Workshop
On a smaller scale there are things we can do to individual properties to create a profit.
Using “forced appreciation” is one of my favourite techniques to make money in property and is probably the principal technique I have used to grow my equity, other than capital appreciation through market forces.
Be aware that what works in one area might not be so profitable, or even profitable at all, in another area. You must do your improvements with the most likely market in mind.
For example, if you provide a parking space or a garage in central London, you'll make a lot more profit or, put another way, you'll add a lot more value to your property, than if you try to do the same thing in the countryside, where space is not at such a premium.
Also, think about the quality of the works that are appropriate to the property and the use to which you intend to put it.
76
There's absolutely no point in putting a £20,000 kitchen into a low value property. You won't get the cost back in added value, and a much cheaper kitchen would be more in keeping and more appropriate.
This is true even if you are going to sell on and take a profit. In fact, if you spend too much you’ll make a loss when you sell, because the value won’t have increased in line with the cost of the works.
If you are going to Buy and Hold and then let the property, there's even more reason why you shouldn't spend a fortune on a top-quality kitchen in a low value property. You won’t add to the overall value of the property, and you'll be very disappointed when the kitchen is damaged by the tenant.
Budgeting
Forced Appreciation
- carpets and decorations
The Successful Property Renovator’s Workshop
I've often come across the view that the decorative condition makes no difference to value. I can't tell you how many times I've heard people say “don't bother decorating. The purchaser will only do it all again as soon as they move in”.
I totally agree that the purchaser might redecorate, but I don’t agree they’ll pay the same price for a dirty, shabby and tired looking property, even if it is merely cosmetic. That’s not been my experience.
Whether you are going to keep the property to rent out, or to sell on immediately, the decorative state and the condition of the carpets will make a difference.
If you are letting, you'll get a tenant quicker, and you'll probably get a higher rent. Interestingly, the tenant’s more likely to treat the property better as well.
If you need to refinance, I’d be amazed if the valuer didn't come up with a higher valuation figure than if the paint’s peeling and the floorboards are bare. Whether they should or not is a different matter, but in my experience presentation does count.
If you're selling on to owner-occupiers, you'll sell the property quicker and probably at a higher price.
77 Budgeting
Forced Appreciation
- the benefits
The Successful Property Renovator’s Workshop
Let's have a look at the benefits of “Forced Appreciation”.
The first benefit is obvious, the value of the property goes up and if you do the right improvements and repairs the value should go up more than the amount you spend. This means that the equity in the property increases, or in simple terms, your wealth increases. This is a real, tangible and measurable return.
The second benefit, which I find extremely satisfying, is that through the power of compounding, it increases your wealth over time.
We’ll look at compounding later but historical house price growth in the UK has averaged around 8% per annum. As a rough rule of thumb, house prices have doubled every 10 years.
Whether the same rate of growth will be sustained in the future is another matter, but assuming that it is, you will obviously stand to gain more if the rate of increase is applied to a higher starting figure.
So, for example, if you buy a property for £100,000, assuming 8% growth rates per annum, it'll be worth £466,100 after 20 years.
But if you first spend £10,000 on repairing and modernising the property and increase the value to £120,000, in 20 years it will be worth £559,320.
So in the long-term, your improvements will have a significant impact on your potential wealth. In effect, the £10,000 you have spent will have grown to £93,220. That’s equivalent to a return of around 11½ %.
The third benefit is actually very helpful if you are attempting to do “Nothing Down” transactions.
If you refinance after the works, and if you can get a sufficiently high LTV from the bank, you should be able to recoup all the monies you spent on the property, including the cost of the purchase, legal fees and repairs and improvements.
If you've increased the value of the property enough it might, on occasion, be possible to take out more than you put in, so you can effectively pocket a cash
78 surplus to spend as you like. I’ve always used any surplus to gear up, and have rolled it back into the business as a deposit on the next property.
How much will the works of repair, renovation, modernisation and improvement cost?
The amount you pay will depend on where you are located, the size and quality of the property you are working on, the quality of the work you instruct, how many quotes you obtain and how hard you ‘negotiate’ with your contractors, and even where we are in the economic cycle; in downturns builders are more likely to be looking for work and are more likely to discount prices.
Just to give you a rough guide, here are the kind of prices I would expect to pay for my properties in the North East, although you have to bear in mind that prices will vary greatly across the country for the reasons I’ve just given.
So, here’s a very brief list:
• Central heating for a 2 to 3-bedroom property: £3000 - £4000 • New windows and a new front and rear door for a 2-bedroom or 3-bedroom property: £4000, unless I buy the windows direct from a manufacturer and get my builder to fit them, in which case they’d probably be nearer £2,000 to £2,500 • Rewiring a 2 bedroom flat £2,750 to £3,000 • A new kitchen fitted by my builder: £1,500, including built-in cooker and hob • A new bathroom fitted by my builder: £500 - £600 including new 3 piece bathroom suite • Tiling the bathroom: £300 - £500 • Decorating a 2 or 3-bedroom property £2,000 to £3,000 • Cheap carpets for a 2 to 3-bedroom rental property £800 to £1,500
A Case Study
The Successful Property Renovator’s Workshop
Sometimes it’s the simple things that make the big differences. Don’t underestimate the importance of “kerb appeal” when thinking about forced appreciation. Here the owner has changed the fascias, soffits and gutters, and has replaced the old and rotting softwood windows.
79 Total cost just over £6,000 - £1,000 for the fascias, soffits and gutters, and £5,000 for the (new uPVC) windows (front and rear). All the new materials and windows were supplied by local manufacturers and installed by a local builder on an hourly rate. By comparison, a local fascia and gutter firm usually charges £3000 for the same work, and the windows, if supplied by a national “window firm” would have been at least double the price including fitting.
The uplift in value for this property will be much more than the cost of the work.
Budgeting
Tax
The Successful Property Renovator’s Workshop
If you are serious about getting into property renovations you will need to discuss with your accountant, or decide in your own mind if you don't use an accountant, how you will treat the various costs involved. Largely this will depend on whether you intend to hold and let the property after renovation or to sell it on.
Let me stress that I am not an accountant and what follows is purely my understanding of the current position. Before you do anything please take professional advice and don't rely upon my explanation.
The first is that if you regularly buy, renovate and sell a property for a profit, the chances are that HMRC will tax the profit as if it’s income and not as a capital gain. So you can’t assume that you’ll be able to use your CGT allowance. Chances are that you might get away with your first project, but that’ll probably be that. Afterwards they’ll treat future and subsequent profits as ‘trading income’.
If you want to be able to argue that your profit is a capital gain and not income, the best thing you can do is to rent the property out for a period, probably a minimum of 6 months, between the completion of the works and the sale. You’ll then have a much stronger case to argue that the increase in value is capital and not income.
If you plan ahead and buy the property with your spouse, partner or A N Other, you’ll then, potentially, be able to use two (or more) CGT exemptions, taking a sizeable amount of your profit out of tax. But of course, you can only use one CGT allowance each per tax year.
Being taxed as CGT also has the obvious advantage that the current rate is 28%, which is better than 40% or 45% if you are a higher rate tax payer.
80 The rough rule of thumb is that the cost of repairs can be offset against income, if you intend to hold the property and let it out, but improvements are treated as capital expenditure and will be offset against any profit accruing on the sale of the property. So, if you intend to hold and let the property, the cost of repairs can be offset against the annual income to reduce your income tax liability, or your corporation tax liability if you hold your properties within a limited company.
However, if you're keeping the property to let out there is an argument that any works you do to make the property fit for letting when you first purchase can be treated as being improvements, and the cost can then be offset instead against any profit accruing on disposal. This of course, presupposes that you will eventually sell the property. If you do not intend to, you might prefer to treat these repairs as repairs, and offset them against income.
If you're renovating the property to resell for profit you will want to treat all works as improvements to offset against your capital gain.
Budgeting
VAT
The Successful Property Renovator’s Workshop This goes hand in hand with the rate of VAT being 5% for the renovation and conversion of buildings for residential use.
There can also be rates relief for empty commercial properties in some circumstances. For example, an empty property is exempt for the first 3 months, with empty factories being exempt for 6 months. Rate relief can be granted by local authorities who are responsible for assessing rates bills and collecting rates. So a developer taking on a larger conversion project might be able to negotiate relief whilst he or she sorts out the planning and organises the works.
81 Budgeting
Council Tax
Council tax
The Successful Property Renovator’s Workshop
Generally, council tax will be payable even if your property is unoccupied and, under recent changes to the law, even if you are renovating it.
The exception is if you undertake major works such as taking out the kitchen and bathroom, making the property uninhabitable. In these circumstances you should contact the local authority and apply for an exemption.
Budgeting
Stamp Duty Land Tax
The Successful Property Renovator’s Workshop
When looking for your projects, and when considering your budget, don’t forget that properties in some areas are exempt from Stamp Duty Land Tax. Being, in theory, the more deprived areas (I say in theory because I have bought plenty of properties in exempt wards which are perfectly decent locations) there is a good chance of finding properties requiring renovation.
But do be aware that properties in exempt wards tend to be low value and many are, in any case, below the threshold for SDLT.
82 • A Case Study
The Successful Property Renovator’s Workshop
Here’s a property in the North West of England I renovated and sold on.
I purchased it in January 2012 and sold it in June 2012.
Here’s how the figures look:
Sale Price £72,000
Purchase price £39,000
Total costs £18,874
Profit £14,126
Breakdown of costs
Purchasing costs Legal fees to buy £500 Auction admin. charge £600 Auction attendance expenses £250
Development costs As per schedule £15,125
Sales Advertising allowance £750 Legal fees to sell £750 Purchaser's legal fees £350 Valuation fee £299 Mortgage arrangement fee £250
Total costs £18,874
83 My aim is to have a number of small projects like this on the go, and at the moment I have two others nearing completion.
• A Case Study
The Successful Property Renovator’s Workshop
The money from that project went straight into my next purchase which I completed on one week after I received the money form my solicitor from the previous project.
Here’s how the figures look:
Sale Price £62,955
Purchase price £30,000
Total costs £21,599
Profit £11,356
Breakdown of costs
Purchasing costs Legal fees to buy £500 Auction admin. charge £1,200 Auction attendance/purchase expenses £250
Development costs As per schedule £17,350
Sales Advertising allowance £1,000 Legal fees to sell £500 Purchaser's legal fees £500 Valuation fee £299 Mortgage arrangement fee £0
Total costs £21,599
84 These properties were sourced by agents, and were purchased at auction although I will also buy by private treaty through an estate agent.
The agents prepare a very thorough schedule of works to make sure that the property would stack-up so we had no nasty surprises.
Here is a copy of the schedule for this property providing a detailed description of the required works plus an estimate of the cost.
Qty Unit Rate Total GENERALLY
Clearout Remove all floor coverings, kitchen units, bathroom suite, curtain rails, fixtures, fittings, internal doors, tiling and furniture etc as necessary and dispose off site 1 item 1250 1250
New Works
Hack off plaster to 900mm above floor level to walls; drill and inject DPC; cement finish; provide guarantee certificate 1 item 1650 1650
Take off existing & renew internal doors with 6 panel colonial £ throughout complete with ironmongery 7 nr 85.00 595
Strip all walls. Repaper all walls, prepare and paint all walls, ceilings, £ timber, radiators etc throughout to new and existing surfaces 1 item 1,725.00 1725
Electrical upgrade Carry out full electrical rewire. Conduit to exposed cables. Test and £ provide NICEIC certificate 1 item 1,100.00 1100
Heating upgrade £ Fit new central heating system and provide gas safe cert 1 item 2,100.00 2100
EXTERNALLY
Front Elevation
Paint all fascias, heads, sills etc 1 item 165 165 £ Supply and fix bracket and shoe to rainwater pipe 1 nr 30.00 30
Rear Elevation and Extension Clear gulley 1 Item 60 60
85 £ Clear gutters and seal 5 m 85.00 425 Paint all fascias, windows, heads, sills, SVP & RWG etc 1 item 165 165 £ Rake out and repoint stonework 1 m2 250.00 250
Rear Yard £ Clear gulley 1 Item 60.00 60 £ Remove defective manhole cover and replace 1 Nr 115.00 115 £ Supply and fix new back gate and frame 1 Nr 245.00 245
Roof £ Overhaul roof; replace missing/slipped slates and repoint ridges 1 item 350.00 350
INTERNALLY
Ground Floor Front Room £ Supply & fix meter cupboards 1 Nr 120.00 120 Take up existing timber floors, repack, provide new joists and relay boarding 14 m2 45 630 Take out existing gas fire and surround; cap off services; infill opening with masonry; vent brick; plaster finish 1 nr 110 110 Replaster walls 1 item 180 180 Renew length of skirting to match existing 3 m 5 15 Prepare, apply bonding agent and plaster skim to existing ceiling 11 m2 8 88
Ground Floor Rear reception & Kitchen Replaster walls 1 item 160 160 Take off and renew timber skirtings 13 m 5 65 Prepare, apply bonding agent and plaster skim to existing ceiling 11 m2 8 88 Fit new kitchen as per existing layout to include units, oven housing, extractor, sink, worktops etc 1 item 1750 1750 Tile between worktops 1 item 245 245 Box in pipework with MDF 1 item 120 120 Replace light in kitchen with sealed light unit. 1 Nr 65 65 Take up existing timber floors, repack, provide new joists and relay boarding 10 m2 45 450
Bedroom 1 Replaster walls 1 item 125 125 Renew length of skirting to match existing 3 m 5 15 Refix floorboards as necessary 1 item 35 35
86 Remove washbasin, cap off pipes, etc 1 item 45 45
Bedroom 2 Patch plaster allowance; small areas (6m2) 6 m2 12 72 Renew length of skirting to match existing 3 m 5 15 Refix floorboards as necessary 1 item 35 35 Prepare, apply bonding agent and plaster skim to existing ceiling 11 m2 8 88 Remove washbasin, cap off pipes, etc 1 item 45 45
Bedroom 3 Patch plaster allowance; small areas (6m2) 6 m2 12 72 Renew length of skirting to match existing 3 m2 5 15 Refix floorboards as necessary 1 item 35 35 Prepare, apply bonding agent and plaster skim to existing ceiling 11 m2 8 88 Remove washbasin, cap off pipes, etc 1 item 45 45
Bathroom
Renew bathroom suite including all wastes and taps. 1 item 895 895 Fit new complete shower unit 1 nr 165 165 Prepare, apply bonding agent and plaster skim to existing walls 13 m2 8 104 Box in pipework with MDF 1 item 110 110 Tile to bathroom splashback 1 item 150 150
Fit new hardwearing carpets throughout 1 item 825 825
£ TOTAL REFURBISHMENT COST 17,350.00
87 Summary Quick review
So far we’ve: •Decided on what we are trying to achieve •Decided on the type of project •Found a property •Arranged finance •Budgeted for the project
The Successful Property Renovator’s Workshop
Right, let’s quickly sum up where we’ve got to.
We’ve decided on what we are trying to achieve and I hope for most of you that will be to start a business; remember by that I mean you are not necessarily trying to create yourself a job where you spend your time doing the work. Instead you are taking the more profitable option of finding and organising projects, and getting contractors in to do the work for you. In the long run you will find this more rewarding financially (and probably emotionally!). However, in the short-term, particularly when you are starting, I realise you might have to start off in the “job option” and save and accumulate your funds so you can later fund your “business”.
You’ve decided on your type of project – if you are just starting out probably a property requiring minor repairs and some modernisation, but you will probably be looking to work your way up in due course to larger conversion projects, or projects with an element of development. This is where you’ll start to make more profit.
You’ve arranged finance, possibly using a sleeping partner who might offer better, or certainly more flexible, terms than a conventional lender.
And you’ve completed your budget and you have budgeted for a profit. That might sound obvious but you’d be surprised how many beginners don’t.
So now let’s move on to how we should organise our projects.
88 Organising Your Project
Three main steps
•Prepare a schedule of works •Find and appoint your tradesmen and contractors •Get the job done!
The Successful Property Renovator’s Workshop
The first step in organising our project is to carefully plan the order and sequence of the works that are required. There is nothing more frustrating than having to undo a completed task because you have overlooked something else that needed doing first.
For example, there’s no point getting the plasterer in until you're sure that the electrician has finished rewiring. Otherwise he'll be cutting out and chasing through your new plaster.
Another thing I always forget is to get the “chippy” to allow for carpets before hanging the doors. Several times the carpet fitters have arrived and I’ve then found that all the doors had to be taken off and planed down. Very frustrating. On more occasions than I care to admit I’ve had to go off to the local hardware shop to buy yet another plane, because it is quicker and more cost effective to buy another one than to go all the way back home again to fetch one. I now have a cupboard full of planes.
Organising Your Project
Preparation
•Tools
The Successful Property Renovator’s Workshop
If you are creating yourself a job, and intend to do a lot of the work yourself, it is essential that you have the right tools.
This is something I learnt very quickly. Jobs that seemed hard suddenly got a lot easier when I tried doing them with the rights tools, rather than a tool that was the next best thing, or the closest alternative in my tool box.
89 However, if you are just starting out, buying every possible tool you might need is impractical and will be prohibitively expensive.
Until you are sure that you want a “job” for the foreseeable future, you’d be better off borrowing tools, if that’s possible. If not, try to buy decent second hand rather than expensive new tools. After all, you might decide fairly early on that you’d rather create a business and that you don’t want to do the work yourself. That being the case you won’t want to have spent a small fortune on assorted power tools that will only collect dust in your garage.
Organising Your Project
Preparation
•Labour
The Successful Property Renovator’s Workshop
Renovating property can involve a lot of relatively easy but time consuming jobs. This includes clearing rubbish and rubble, tidying gardens etc etc. Because they are relatively easy, many renovators are tempted to take these jobs on themselves. Whether you are creating a job or a business, this is probably a bad idea. There are always other activities you could turn your hand to that will be more financially beneficial, and which you should do instead. This is one reason why I’ve often “employed” students to help me do the mundane jobs. You can safely pay them cash with a clear conscience*. They’ll happily put in a few days casual labour in return for some pocket money.
*(knowing that their annual earnings will be below the tax threshold so you are not complicit in helping them defraud the tax man)
90 Organising Your Project
Preparation
•Know exactly what needs to be done
The Successful Property Renovator’s Workshop
The most successful and profitable renovators are those who are clinical and incisive in their thought processes, and who know exactly why they are doing a particular improvement. They are able to keep a proper sense of perspective about what is and what isn’t a work they should be doing.
This was brought home to me in a very personal way. As you might know if you’ve read my other books, I specialise in renovating lower value properties, which I then hold and let out.
I bought a mid-terraced house, on an estate of similar properties, from an owner- occupier. He hadn’t looked after it that well and it needed a fair bit doing to it. The room that needed the least work was the kitchen, but that was just relative. Compared to the rest of the property it seemed all right, but I was toying with the idea of ripping it out and starting again.
During the renovation I was approached by a young lady who asked if she could rent the property from me when it was finished. At that time she was living in the next street with her father and so she would pop in from time to time to see how the builders were getting on.
One day she turned up unexpectedly with three other girls of similar age who also rented houses on the same estate. The reason for their visit? Because she wanted to show them “her kitchen”. The other girls were, apparently, extremely envious when they saw it and couldn’t believe how “lucky” she was to be renting a house with a kitchen like that.
That really bought home to me that it’s so important to renovate with your potential market in mind, and not to try to create a property to suit your tastes.
Earlier during the renovation I’d had a similar reminder of the need to know when to stop. Another neighbour had looked around to see if the property would be suitable for a friend of hers who wanted to move into the area. She asked if it would be alright if her friend redecorated and if she used a steamer to strip the wall paper. Until then I had assumed that I would have to redecorate throughout to have any chance of letting the property. However, my “potential market” was happy to do this themselves, and this would save me a lot of money.
91 Organising Your Project
Preparation
•Don’t cut costs and produce false economies
The Successful Property Renovator’s Workshop
As we’ve seen, one of the main reasons why properties require renovating is because tastes and fashions, and with them what buyers expect from their properties, change constantly.
This is an obvious but important point to understand when renovating your property. Part of what you are trying to do will be to bring it up to today’s standards.
So there are two things I’d recommend.
First, don’t be tempted to use bargain priced fixtures and fittings, like bathroom suites or kitchen units, just because you can get them at a good price. Even if they are better than what’s already there. For example, your property might have a very old, and badly damaged or stained bathroom suite, or even no bathroom at all. You might think that anything would be better. You might be thrilled if a friend is changing their bathroom and lets you have their old suite for nothing. You’ve saved yourself a few hundred quid. And you know that what you’ve put in is a big improvement on what was there before. The trouble is that your potential buyers, or tenants, won’t know what was there before and might be amazed, or even slightly concerned, at the sight of your avocado bath suite. Very 1980’s and very much a false economy.
I recommend that a good way of keeping up with “what’s new”, and therefore “what’s expected” is to visit show homes on new developments. There you’ll be able to see first-hand the type and quality of kitchen or bathroom fittings a 5 bedroom executive house, or a two bedroom city centre flat, really should have. It’s also a very useful way of picking up ideas on how best to use space. Also what colours are “in” and so on.
92 A Case Study
The Successful Property Renovator’s Workshop
OK, it’s time for another case study. Let’s go back to the story of my first solo property.
Before I completed on my first property I had already put together a project plan showing the order in which the works needed to be undertaken, and how long I estimated each would take. I had also prepared a list of contractors with their contact numbers.
Unfortunately I was not able to negotiate prior access to the property between exchange and completion, otherwise I would have had contractors in to give quotes. Then I could have had the successful contractor ready to come in as soon as possible after the completion date.
As it happened the executors and the estate agents were wary of giving me too much access even though the property was empty. That meant that the earliest I could get contractors in to prepare quotes was the day of completion itself. So I arranged for an electrician and plumber to call to give quotes on the afternoon of the day of completion, having picked up the keys from the estate agent just after two o'clock in the afternoon.
A Case Study
The Successful Property Renovator’s Workshop
Because of this I initially had to base my offer and my budgeting on my own estimates of how much everything would cost. Remember this was an executor’s sale of a 1930s mid terrace council house that needed full modernisation. The walls
93 and roof seemed sound and watertight so I didn’t anticipate any major structural works but it seemed that just about everything else needed doing.
The main costs that I identified were: - new bathroom and kitchen - new windows throughout - rewiring - remove old and probably very dangerous electric fires and replace with new gas central heating - remove dilapidated conservatory and coal bunker - clear garden - new internal doors - new decorations throughout - new front door - paint external rendering
I bought the property in February and, not knowing any different because I’d never done this on my own before, hoped to be finished by Easter.
My first budget, which is on the following page, assumed a sale price of around £72,500. I accounted for the main costs, but there were plenty of things I hadn’t really considered such as utilities bills, the cost of travelling between home and the property (I amassed an amazing 1771 miles on a journey of 6.5 miles each way, plus sundry visits to Wickes and other retailers).
I also only allowed a relatively small amount for interest on the property – remember at that time I naively thought it would only take me three months to complete the work. Even so, with hindsight, I can see my budget should have allowed for a marketing period whilst the property was for sale up to and including completion of the sale.
However, I had allowed £3,000 for contingencies and sundries, which nicely covered a lot of these “un-thought of” costs.
I decided to go ahead, budgeting for what I thought would be a “minimum profit” of just under £6,000. It might not sound a lot, but remember, I thought that this was only going to take me 3 months, and I felt reasonably confident that I had overstated the costs and could do it all cheaper than that.
Notice that I didn’t allow a notional charge for my own time. My urging you to do so is based on my own experience and failure to do so – a case of “do as I say and not as I do”.
94 A Case Study
Sale Price 72500 Less Agents fees 1490.6 VAT on agents 235 fees Legal fees 300 VAT on legal 52.5 fees Land Reg docs 10 Purchase price 52000 Legal fees 462 Insurance 196.37 Bank charges 37.50 Electrical 1000 Windows inc 2000 fitting New Kitchen 1250 New bathroom 280 Skip hire 300 Decorating 1000 Central heating 2000 Contingencies 2000 Sundries 1000 Total refurb and 65613 property costs Less Interest on 1040 property 3 months Total Costs Profit 5846.03
The Successful Property Renovator’s Workshop The Successful Property Renovator’s Workshop
Sale Price 72500 Less Agents fees 1490.6 VAT on agents fees 235 Legal fees 300 VAT on legal fees 52.5 Land Reg docs 10 Purchase price 52000 Legal fees 462 Insurance 196.37 Bank charges 37.50 Electrical 1000 Windows inc fitting 2000 New Kitchen 1250 New bathroom 280 Skip hire 300 Decorating 1000 Central heating 2000 Contingencies 2000 Sundries 1000 Total refurb and property costs 65613 Less Interest on property 3 months 1040 Total Costs Profit 5846.03
Diagram - My preliminary Budget
The first job I wanted out of the way was the rewiring, because I knew this would most affect and disturb the plasterwork. I made sure the quotes included making good to a finish suitable for decorating.
The next job I wanted out of the way was putting in the new bathroom, and then the central heating.
After that the windows, then the last of the major jobs was putting in the kitchen.
In the meantime, while that was all happening, I would remove the conservatory and the coal bunker, clear the badly overgrown garden, strip all wallpaper, take off the old battered internal doors, repaper all walls, repaint all walls and ceilings, and put in new doors. I also wanted to replace the front door.
95 There was no point doing anything other than wallpaper stripping until the electrician had finished as I could then see what making good was necessary, if any.
A Case Study A case study
The Successful Property Renovator’s Workshop
The slide shows a view of the “shed” from one of the back windows. I reckon just taking that away added a couple of thousand to the value of the property.
However, not everything was quite so easy and clear cut. In fact, with hindsight I can see that from the start I made two elementary mistakes:
First I significantly under estimated how long it would take to do all of the work in my schedule; and
Second, I ordered in most of the materials I thought I was going to need, including the kitchen and the new doors. However, these jobs were well down my list, which meant that I had materials in the way of everyone who came to do any work, and I was constantly moving them from room to room to get them out of the way of the contractors.
Ironically, I found I needed a lot of materials that I hadn't anticipated, and at one stage seem to be making daily trips to the DIY warehouse.
Which reminds me, get yourself registered as trade with a supplier as soon as you can. 10% off the price of your materials could be a significant bonus by the time those jobs are finished.
The electrician and the plumber were able to come in quite early on which meant I was able to get the bulk of the big jobs over reasonably quickly. Although I was originally told that the plumber probably needed four days maximum to do the central heating, inevitably he had other jobs on the day, and so he actually took around two weeks to finish it.
The bathroom was also delayed because I wanted the wall next to the bath tiled. I had first assumed I would do this once the bath was in. But the plaster was bulging, nothing serious, probably just some historic settlement and slight bowing of the internal partition. So the plumber wanted the tiler to skim the wall and tile it first so
96 that we could get the bath flush. As the tiler wasn't available for three weeks, this delayed the bathroom significantly.
It then became apparent I wasn't going to finish by Easter. Whilst I was waiting for the tiler and the plumber to finish I continued with the other jobs like removing the conservatory and the coal bunker, stripping paper, and painting the ceilings.
I had also been inviting quotes from double glazing firms. I met five reps in all but all of their quotes came in well over my budget figure. I decided to buy direct from a local factory that advertised in the local newspaper. I visited in person and explained that I was trade and was doing a property renovation, and they agreed to give me a 50% discount off the list price. They also agreed to send their surveyor to measure up, and included fitting in the price. It was agreed that they would fit the windows while I was away the week after Easter, and that the plumber would let them in (he had the key so that he could let the tiler in) and then get on with the bathroom.
When I came back from a few days away I was met by a worried looking plumber who said I needed to contact the window fitter as soon as possible. I did and the fitter called in later that afternoon to give me the bad news. The rear elevation of the property had been constructed without lintels and the original timber framed windows were effectively part of the supporting structure. My new windows weren't strong enough to take the weight for a prolonged period, and I needed lintels installed as soon as possible.
I only needed lintels to the ground floor because the first-floor windows went up to the eaves and were spanned by the wall plate supporting the roof. Unfortunately the window fitter didn't have time to sort the lintels out for me so reluctantly I decided I would have to put them in myself.
But that wasn't the end of the bad news. He also pointed out that large areas of the pebbledash on the rear elevation had blown and was coming away. In fairness, although some had come off when he'd taken the old windows out, I could see that it was already in a poor state and large areas needed doing anyway. So I now had three major extra jobs to add to list: Chip off all pebble dash from the back elevation and clean it down to the bare brick; install lintels to the ground floor windows; and re-render the rear elevation.
Of course, I hadn't budgeted time or money for any of these jobs. Re-rendering and pebble-dashing the whole elevation was not something I was prepared to try and take on myself. But to keep costs down I decided I could chip off the existing pebble dash and put in the lintels.
Chipping off all the existing pebbledash took about a week, and to be honest probably wasn't the wisest thing I’d ever done. Doing the parts under the eaves, up a ladder swinging a club hammer, was at times precarious to say the least. If I had to do anything like that again I'd hire, or even buy, a scaffolding tower. The lintels were surprisingly easy once the window fitter explained to me how to do it, and I managed to get someone to do the pebble dashing at what I considered to be a very reasonable price. By doing most of the work myself none of this added a
97 great deal to the cost, but waiting for the plasterer who was doing the rendering, added to the preparation works of chipping off, cost me another three weeks.
The last major job on my list was re-fitting the kitchen. This was precipitated by finding that the plasterer had taken the packaging of one unit to use as a screen, to stop pebbles going over the fence into next door's garden, whilst he was throwing them at the render.
Apart from asking the plumber to plumb in the sink and connect the built-in gas cooker, I felt comfortable fitting the kitchen myself.
That was all the major jobs done. But I was now a couple of months behind schedule and I still had a number of rooms that needed re-papering.
This highlighted mistake number three. I had stripped all rooms regardless of how good or bad the paper was. The wallpaper in some rooms was in good condition but I had stripped it because I didn't like the pattern. Too late, I realised it would have been quicker and cheaper to have painted over most of the wallpaper, and only to have stripped those areas that were in poor condition.
The one area I didn't strip was the stairwell, entrance hall and landing. This was not deliberate so much as I could see it was a big job, and re-papering would have been even bigger. So I put this to the end of the list.
However, by the time I was ready to start I had realised my mistake in stripping all the other rooms and not just painting over the walls. Ideally I wanted only to paint the hall, lobby and landing, but there was a problem in that one strip near the bottom of the stairs had a tear in it, probably from when the executors or the relatives had been moving furniture. The paper was quite old and I was not sure if that design was still available. However about a mile from where I lived is a decorating shop that had rolls and rolls of different types of wallpaper, and what wasn't on display was in great thick volumes of catalogues. Amazingly I was able to match the exact pattern and buy a single roll. So I managed to get away with replacing just one strip of paper in the stairwell, and a coat of paint made it all look as good as new.
So how did I do compared to my original budget? On the following page are the actual figures and my final calculation of profit.
98 Sale Price 78000 Less Agents fees 1560 VAT on agents fees 273 Legal fees 300 VAT on legal fees 52.5 Land Reg docs 10 Purchase price 52000 Legal fees 462 Insurance 196.37 Bank charges 37.50
Electrical 1168.58 Tiling 215 Windows inc fitting 1977.7 Fence 163.80 Casual labour 1210 Van 52 Clearing rubbish 161 Kitchen 784.8 Water rates 74.76 Rendering 235 Central heating, bathroom and plumbing 2946.9 Carpets inc fitting 357 Gutters 112.8 Electricity 56.8 Doors inc hanging 260 Materials 896.73 Total refurb and property costs 65564.24 Less Milage 1771 miles 708.4 Interest on property 7 months @ 8% 2426.67 Interest on refurb costs at 8% for half 249.03 building period Total Costs 68948.34 Profit 9051.66
The Successful Property Renovator’s Workshop
The final figures
As you can see, I under estimated the true costs by some £2,265.34. I had budgeted for total costs including interest of £14,683 but the total was actually £16,984.34. This would potentially reduce my profit to £3,580.69.
However, I had been cautious when estimating the probable end sale price, and I have to admit that, like a lot of “newbie” property renovators, I was helped by a rising market.
Even then the figures aren’t quite right. Any profit figure should be calculated after allowing for the Renovator’s time.
Technically I would argue that I made no profit, but earned a salary of £5,486, which, allowing 40 hours a week for nine months, means I was earning the equivalent of £3.52 per hour.
99 Today I wouldn’t take on a project like this for such a paltry return – for the same amount of time and effort I could make ten times this amount from a well chosen project.
However, the benefits or otherwise of doing a project like this are not just financial.
At that time it provided:
Confidence – this was the first time I had tried anything like this on my own and this was at a time when I had just been made redundant and I needed to prove to myself that I could take on “something new” and succeed;
Experience - I learned a lot from this little house, especially from my mistakes, about what I can and can’t do myself, how to organise a project efficiently, how to prepare accurate budgets, how to deal with contractors, where to get the best materials at the cheapest prices etc. And, because relatively small amounts of money were at stake, I was able to minimise my risks whilst doing so.
A Case Study A case study
The Successful Property Renovator’s Workshop
This is a renovation project I undertook a few years ago.
It’s a ground floor flat in a “cheapish” residential area in the Northeast that is popular with renters.
After the renovation was finished I kept the property to let out, and I remortgaged it to take out the extra equity resulting from the renovation.
I bought the property about two years prior to the renovation with a tenant in place. Although it was already run-down and need of some TLC the tenant requested that I delay doing any work until they left. At that time they were thinking of moving on, and didn’t want the additional upheaval of having builders in. In the event, they stayed longer than they originally thought they would.
I paid £32,000 for the property after the renovation works it was worth about £55,000.
The majority of the work required fell within the categories of repair and modernisation. After I’d obtained quotes I agreed the following with my builder:
100 Strip out and replace all timber windows and replace with new uPVC £1,310 to current Fensa regulations Kitchen to be replaced with new including new inset sink and mixer £450 taps with outlet for washing machine waste and water feeds Renew rear yard door and frame £120 Renew rear back door £80 Extend waste pipes to yard gully and fit new grate £32 Replace felt canopy to front door £70 Renew front door and repair existing door frame £120 Paint all external timberwork £280 Strip out and replace bathroom suite including making good tiles, £560 boxing in and side panels Box in flue to ceiling/wall in kitchen £90 Total £3,112 VAT at 17.5% £544.6 Total £3656.60
The property also needed to be redecorated prior to re-letting. I took two quotes as follows:
Quote #1 Decorate all internal rooms to front bedroom, rear bedroom, lounge, £1410 hall, kitchen, bathroom and lobby including all necessary stripping of wall coverings and replacement with lining paper. All walls and ceilings to be painted with three coats of emulsion paint and all timberwork to be prepared and finished with gloss finish. Vat at 17.5% £246.75 Total £1656.75
Quote #2 Supply all emulsion and gloss paint, lining paper as required
Front bedroom – Strip front window wall of all wallpaper and replace with lining paper. Emulsion all walls and ceiling and gloss skirting boards, window, door and frame
Living room – strip paper from fire breast area and replace with lining paper. Emulsion all walls and ceiling and gloss skirting boards, window, door and frame.
Back bedroom – emulsion walls, ceiling and gloss paint all skirting boards, window and door frame
Kitchen - emulsion ceiling, walls, gloss paint, doors and frame, window and surrounds
Bathroom – emulsion all walls, ceiling, gloss paint window, door and frame and skirting boards
101
Total £860
There were also other costs:
Strip out carpets and furniture to skip £140 New carpets throughout, including fitting £ 650
The work took three weeks and so I allowed a notional interest charge, based on 6%, of £138 on the property, and £8 on the building works (taken at 6% over half the period of the work).
I can therefore calculate the notional profit as follows:
Sale price/end value £55,000 Less agents fees at 1.5% £825 VAT on agents fees £144.38 Legal fees on sale £400 VAT on legal fees £70
Less Renovation costs £3,112 VAT on renovation £544.60
Less
Decorating £860
Less Clearance £140
Less Carpets £650
Less interest £146
Less Purchase price £32,000 Less legals on purchase* £ 600 Less VAT on legals £ 68.25
Total costs £39,560.23
Gross Profit £15439.77
* includes non-vatable items
102
10 Mistakes I Made
Which you should avoid
The Successful Property Renovator’s Workshop
I promised you that you could learn from everything I did right, and everything I did wrong, and that I would share my mistakes with you so that you can learn from them and avoid them.
Here is my list of the top 10 mistakes I have made when renovating properties.
10 Mistakes I Made Which you should avoid
No 1/. Creating another job
The Successful Property Renovator’s Workshop
The property “gurus” tell us that we should avoid doing do the donkey work ourselves. Otherwise, when we work out how much we’ve have earned on an hourly basis, after we’ve spent days, evenings, nights and weekends slaving away over soggy wallpaper and lumpy plaster or worse, we'll find we've only managed to create ourselves another job. And depending upon how much work there is to do, and how long it takes us to do it, we might find the truth in the view that job stands for “just over broke”.
The trouble is, if you try to do too much on your own, you will inevitably slow the project down and increase costs in the long run. This is because you can only do one job at a time.
Also, unless you are already a skilled craftsman, any job will take longer if you do it, than if you get someone in to do it who knows what they are doing. And there’s the strong possibility that the quality of your work won’t be as high as that of a
103 “professional”, with the ongoing risk that once you’ve finished you might have to get someone in to redo what you spend hours or days attempting.
Instead, decide from the beginning that you’ll get the experts in. Yes, you'll have to pay them, but unless you are in the trade yourself, you'll find they'll do any job far quicker than you and to a much higher quality. In fact, if you plan the project properly, you can have one, two or even three trades on site at the same time and considerably speed up how long the project takes.
Time is money, and while you’re working evenings and weekends to get the job done, bank interest (or the opportunity cost of your funds) is quietly ticking up and your profits are gradually being eroded away.
10 Mistakes I Made Which you should avoid
No 1/. Creating another job No 2/. Decorating before the end
The Successful Property Renovator’s Workshop
I didn't need an expert to tell me that the central heating system required a good overhaul and upgrade. The 1960’s gas fire in the dining-room was coming away from the fireplace. So was the gas fire in the living room and this revealed a back- boiler that had seen better days. Several rooms didn't have radiators but needed them, and some of the existing radiators were under size and needed replacing.
My problem was that the heating engineers weren't able to come for a week and they were due the day before I went off for my summer holiday. As I had nothing meaningful or pressing in my diary for that week, and as I was winding down for my holidays, I thought I'd take a few days off and do the decorating myself.
And so I spent a very satisfying week with a B&Q budget tub of magnolia matt. Of course it was all a waste of time. You can't easily install new steel radiators and reposition a boiler without disturbing the decor. Added to that, replacing the back boiler with a combi boiler meant I could remove the hot tank and airing cupboard from the small bedroom to make more floor space. As the hot tank came out, it split, and green water leaked into the living room below staining a wall and the ceiling.
A lot of my decorating was ruined and I realised I’d wasted a whole week and several gallons of Magnolia.
There’s no point in starting decorating until all the other jobs have finished.
104 10 Mistakes I Made Which you should avoid
No 1/. Creating another job No 2/. Decorating before the end No 3/. Partially redecorating not doing the whole property
The Successful Property Renovator’s Workshop
When I first bought this property, it was obvious that most rooms would need to be redecorated. But in comparison with the rest of the rooms the lounge and the hall, stairway and landing seemed splendid. I decided they were good enough and that they wouldn’t need doing. I budgeted my time and money accordingly.
When the central heating engineers had gone, and I saw my first feeble efforts at decorating trashed, I decided to act on tip number one and to get someone into do the decorating. As it happens, I know someone who is very good, very quick and who charges very reasonable prices.
“Typical gas fitters” he muttered somewhat disparagingly when he saw the damage the heating engineers had done. I started him downstairs in the dining room. It wasn't long before it was stripped, papered and painted. I looked at the living-room through the interconnecting door from the dining room. Somehow what had seemed like one of the better rooms just didn’t seem up to standard. I added it to the list of things to do.
When downstairs was finished, my decorator went upstairs and made a fantastic job of the bedrooms. Viewed from any of these it was now evident that the hall, upstairs and landing were actually poor and shabby.
I added redecorating them to my “to do” list.
I learned that decorating isn’t relative. Rooms either need redecorating or they don’t, and usually they do. So budget accordingly.
105 10 Mistakes I Made Which you should avoid
No 1/. Creating another job No 2/. Decorating before the end No 3/. Partially redecorating not doing the whole property No 4/. Underestimating the work needed
The Successful Property Renovator’s Workshop
When I bought the property, apart from the upgrade to the central heating, and the need for a new kitchen, on the face of it all the work seemed superficial and cosmetic. In fact, mainly redecorating
It was only when we started stripping paper that we could see how bad the plaster was in many areas. It wasn't so bad that you could easily tell through the many layers of wood chip, but it was too poor to stay. Once uncovered, the five layers of wood chip were obviously there to add structural stability to the plaster underneath.
After the heating engineers had gone, the electrician then came in. In theory he had just a couple of hours work to do wiring in the cooker and hob in the new kitchen, and running a new double socket into the utility room. As he chased in the cables, large areas of poor plasterwork came away from kitchen walls. To make matters worse, while trying to wire in the new socket, he dislodged a brick in the partition with the stairwell, which popped out and ripped the wallpaper. Now there was yet another area of replastering required. Still, at least I had already decided to redecorate the stairwell.
As we worked through the property, replastering extensive areas of the walls was added to the “to do” list. Waiting for the plasterer to fit me in to his busy schedule severely held up the decorator and added another two weeks to the job.
106 10 Mistakes I Made Which you should avoid
No 1/. Creating another job No 2/. Decorating before the end No 3/. Partially redecorating not doing the whole property No 4/. Underestimating the work needed No 5/. Buying materials at the wrong time
The Successful Property Renovator’s Workshop
At the first trip to the DIY warehouse it is easy to get carried away and buy all the things you think you'll need, even if you don't need some of them until near the end of the project. If you do that you'll suffer two consequences.
First, you'll be constantly moving materials around because they always seem to be in the way of where you are working.
Secondly, it unnecessarily impacts on your cash flow. Money is much better off in your bank account than in the till at Wickes, Homebase or B&Q. Don't forget, an unprofitable business can keep going with positive cash flow, whereas a profitable business will go broke if cash flow is negative.
There's no point buying materials until you really need them. If you don't sit down and think through the logistics of the whole project in detail from the start, it is easy to overlook materials that you do need now. Because of bad planning I went through a frustrating spell of having to go each morning to B & Q or Wickes all because either I or the decorator needed something which I could have bought yesterday if only I'd thought of it.
10 Mistakes I Made Which you should avoid
No 1/. Creating another job No 2/. Decorating before the end No 3/. Partially redecorating not doing the whole property No 4/. Underestimating the work needed No 5/. Buying materials at the wrong time No 6/. Letting tenants have too much say
The Successful Property Renovator’s Workshop
About two weeks before the house was ready, a lady appeared on the doorstep and asked the builders if the property was to be let. I could tell immediately that she is a sincere and trustworthy lady, and although normally I wouldn't rely on my intuition, I decided I didn't need to take references. She explained that her grand daughter, an
107 unmarried mother and student in the nearby big city, had been burgled on numerous occasions and needed to move.
This property was ideal because granny lives in the next street and can keep an eye on her. She was also willing to guarantee the rent and to pay on behalf of the grand daughter by direct debit. The downside is that because she lives close by, and because I agreed to let the house to her grand daughter before it was finished, she was able to “pop in” and ask for extras which I wouldn't normally have undertaken.
For example, she asked for a fence across the backyard so that her great-grandson can play safely without wandering off into the road. That's fine, but the chances are that future tenants will want to use the yard for parking. So I compromised by providing gates at a not insubstantial cost, and at a time when I was already over budget.
10 Mistakes I Made Which you should avoid
No 1/. Creating another job No 2/. Decorating before the end No 3/. Partially redecorating not doing the whole property No 4/. Underestimating the work needed No 5/. Buying materials at the wrong time No 6/. Letting tenants have too much say No 7/. Not asking tenants what they want The Successful Property Renovator’s Workshop
Yes, I realise its contradictory and something of a paradox, but not asking the tenant what she wanted also increased by costs.
Within a week of moving in she had decorated two entire rooms, papering and painting over my brand new decorations. If I'd known, I would have left them as they were, and would have saved around £350.
108 10 Mistakes I Made
Which you should avoid (cont/…)
No 8/. Under-estimating the time needed
The Successful Property Renovator’s Workshop
In theory, when I first prepared a rough schedule of works, I thought that after about three weeks the property should be finished and available to let. To be on the safe side I budgeted for four weeks.
Of course, it didn't work out that way, there was more work than I had first anticipated, builders disappear halfway through the job for a week or two, and things just take longer than you expect.
As I said earlier, waiting for the plasterer delayed things by at least two weeks, and having to redecorate the living room and the hallway, stairs and landing added at least another five days to the decorator's work.
It turned out that my estimate of 4 weeks was very naïve and it actually took about 6 months! Still, it was my first solo project so that was all part of the learning experience.
10 Mistakes I Made
Which you should avoid (cont/…)
No 8/. Under-estimating the time needed No 9/. Under-estimating the cost
The Successful Property Renovator’s Workshop
As a rough rule of thumb, no matter how carefully you plan your budget and estimate the cost, always add at least 5 to 10% to cover the unforeseen.
I didn't and I was over budget by the time the last layer of paint was applied.
109 10 Mistakes I Made
Which you should avoid (cont/…)
No 8/. Under-estimating the time needed No 9/. Under-estimating the cost No 10/. Over-looking the small things
The Successful Property Renovator’s Workshop
I can tell you that when you are settling down to a day’s work, it is highly irritating to find that you have forgotten to take with you all the little luxuries we take for granted at home. This list will include tea and coffee, milk, sugar, teaspoons, mugs, washing-up liquid, soap, tea towels, a towel, a radio, and last but not least, toilet paper.
Not quite as urgent, but in their time also essential, are cleaning solutions of various types, bleach for the toilet, dusters, rubble sacks, and a decent heavy weight vacuum cleaner. To save a lot of grief, especially with your builders, these should be the first things you take to the site. But they are easy to overlook when your mind is focused on ordering the big stuff like a kitchen, or a bathroom, or a full set of double glazed windows.
So was it really worth it? Yes, despite being over time and over budget, the tenant moved in and paid the first months’ rent upfront along with her deposit. In the meantime, while I was working on the property, values in the area went up significantly in just a short period of time. This means I benefited not just from “forced appreciation”, that is, the increase in value due to the improvements and repairs, but also from market movements.
It turned out that I vaguely knew the valuer and, and although I wouldn't normally expect to be able to discuss values with him there and then, he seemed quite happy to do so. As I already knew, modernised identical houses on this estate were now fetching 25% more than they were just 4 months before, when I bought this property. This means that the increase in value reflects an almost 150% return on the money I spent on repairs and renovation.
110 My Biggest Mistake?
The Successful Property Renovator’s Workshop
Let me confess to what I consider to be a major mistake although, when I look at it objectively, I sometimes think it was more ‘an unfortunate circumstance’.
Initially this wasn’t meant to be a renovation project, but it soon became one of the biggest I have undertaken.
Let me explain.
A few years ago I purchased a portfolio of properties.
Now, being a Chartered Surveyor, I tend to rely on my own experience and knowledge and don’t get another surveyor in to do a survey. To be honest, I rarely do a survey myself but, having had a lot of experience of buying this type of property, I tend to know where the problem areas are likely to be and what to look for.
As a failsafe and back-up, as I always buy with bank finance, I know that I will be getting a valuation report. It’s true that a valuation report is not a survey as such and, arguably, the standard of care and quality of inspection is lower, but I would expect a valuation report to mention something major.
In this particular portfolio was a pair of flats. These are typical ‘Tyneside flats’ which, as the name suggests, are found in the North East of England. At a glance they look like a terraced house but they are actually a pair of flats.
Both flats were a bit tired and I knew they needed a bit of TLC bit I didn’t budget for much more than redecorating and new carpets, and a quick overhaul of the roof. So the builder went in and then came the bad news. They telephoned to say that when they had lifted the carpet in the downstairs bathroom, there was a small hole in floor right in the middle of the room. The floor here was a typical suspended timber floor with floor boards laid on timber floor joists.
The hole was of a size that you wouldn’t notice it when walking across the room but, unfortunately, the size wasn’t the problem. The problem was the cause. The builder discovered that we had an outbreak of dry rot.
Even worse it had spread and had got into the internal walls in places, which had timber uprights built-in and it looked as if had been active for quite some time.
111 It seems that the dry rot had developed in the sub-floor area which was damp, possibly because of an old drainage problem, and not very well ventilated.
If you know anything about dry rot you’ll know how serious this is. It is an extremely aggressive and destructive fungus and its spores can spread widely.
My Biggest Mistake?
The Successful Property Renovator’s Workshop
The only way to deal with this was to strip as much of the timber from the property and to start again with treated timbers. In practice this meant stripping the property back to the bare brick because we were worried that, in places, it might have managed to work its way through the partitions walls and could be lurking behind the plaster.
This might sound extreme but this was a severe outbreak.
My Biggest Mistake?
The Successful Property Renovator’s Workshop
In the end, external walls aside, I pretty well ended up rebuilding these two flats, especially when you take into account recovering the roof.
112 My Biggest Mistake?
The Successful Property Renovator’s Workshop
The total refurb cost was around £50,000 for a pair of flats I had bought for around £50,000 and which, when the works were completed, were only worth around £60,000 each.
So this turned out not to be a great deal for me.
The question is, could I have done better and could I have spotted it if I had done a survey myself or had instructed another surveyor to do a survey for me. Of course, we’ll never know but my suspicion is no, although that doesn’t stop me from hanging my head in shame.
The symptoms were well hidden and only came to light because the bathroom carpet was lifted completely. Were a surveyor to have lifted the edge of the carpet and got a floor board up, would he have seen it?
Not necessarily and many surveyors, in any case, won’t lift fitted carpets. Even if a surveyor did pull the carpet back that’s not to say he would have been able to lift a board at this point anyway.
But however you look at it, there is a lesson to be learned and that’s to err on the side of caution. It wouldn’t have hurt to have a survey, it might have been picked up and, although this might sound cynical, there would always have been the chance of getting the costs of resolving the problem paid for by the surveyors Professional Indemnity Insurance.
113 Some Final Thoughts
I didn’t get to where I am today without…
The Successful Property Renovator’s Workshop
It probably sounds obvious but the reason why a lot of people fail as property renovators is because they never do anything. With the best will in the world, they might start out with loads of good intentions, but unless they actually do something, nothing can happen.
The reason why a lot of potential renovators do nothing is fear – fear of losing money, wasting time, of looking foolish if things don’t work out, or even fear of what “they” might say, whoever “they” are.
Other reasons for inaction are not knowing where to start or how to do it (I hope I’ve covered that now so that shouldn’t be a problem); lack of persistence – its took me several months before I found my first property; and lack of energy (laziness) – confronted with the prospect of putting in long hours many prospective renovators decide they can’t be bothered and look for an easier way to make some cash.
If I did anything right at all it was making the decision to be a property renovator, and then seeing that decision through to completion.
Some Final Thoughts
Plan ahead
The Successful Property Renovator’s Workshop
If you’ve read any of my books you’ll know that having clear property goals, of knowing the best strategy that suits your needs, and having a clear, structured plan by which to achieve those is essential.
Many prospective property renovators do not have clear goals. As the old saying goes “all roads are just as good if you don’t know where you’re going”. It’s like that
114 in property. In my experience, if you don’t have clear goals, chances are you won’t achieve a lot.
Often it’s the same with strategy. There are different strategies an investor can adopt, but often a prospective renovator won’t even think about this, or the different possibilities available to them.
And very few actually prepare a proper plan – not just how to undertake the renovation, but how to find their properties, finance them and what to do with them at the end of the project.
In my opinion planning will allow prospective renovators achieve far more than they could possibly imagine.
Just to put this into perspective, I do not consider myself to be a “details” person. But even so I will make detailed plans of everything I am trying to achieve in property. In a sense this actually helps to compensate for my lack of attention to detail as it keeps me on track at times when I would otherwise become distracted and lose sight of where I am going and what I am trying to achieve.
Some Final Thoughts
Don’t over-specify
The Successful Property Renovator’s Workshop
As said earlier this can be a real mistake. Now I don’t do it. There have been times when I’ve let one of my properties feeling slightly guilty that perhaps I hadn’t done all I could have, only to find sometime later that the tenant has made a change which would have undone any of the extra works I was thinking of. This happens all the time with decorating.
I still decorate to a reasonable standard – there’s nothing quite like a “developers finish” but I can’t tell you the number of times that on moving in, a tenant has asked if they can redecorate throughout, and in a colour I personally would never even have considered!
If I were renovating to sell on, and that implies perhaps a higher quality of property than I buy to let out, I would decorate to a higher standard. But again, I would keep it simple, and I wouldn’t do more than I needed to. The key thing is make sure the property sells, and whilst we can argue all day long about how much decorating affects the end value, I have no doubt that it does affect the speed at which a property will sell.
115 The same comments apply to carpets. I will always carpet before putting a property on the market, and I do believe they add value, as long as they are of a good enough quality. I believe you will get more for a property that looks like a centre-fold for Ideal Home magazine, than a property with bare floor boards and no curtains.
When it comes to other things I don’t believe in being a trendsetter or a “trail blazer”. Leave that for someone else. So there is no point putting an extremely expensive kitchen into one of my rental properties instead of a reasonable priced standard kitchen pack. I won’t get any extra rent for it, and chances are, if I do need to sell on, I won’t get any extra on the price. It’s not that important to my target market, although it might make me feel good at the time.
Before you start your project go and do some research to see what is expected by your potential market. Make some appointments with estate agents to see what is available; go and look at show houses and flats on new developments (if they are trying to appeal to the same market as you).
But make sure that whatever work you do to your property, you know why you are doing it, and whether it is absolutely necessary. Don’t just do it because “that’s what I’d like in my house” or because you saw something on special offer at the local DIY warehouse. Everything a property renovator does should be market driven.
Some Final Thoughts
Consider other ways to release your profit
The Successful Property Renovator’s Workshop
Finally, don’t just think about renovating as being only for selling-on. Of course a lot of property renovators have made a good living selling on, but it’s not the only way.
I have renovated properties and have sold them on, and have then rolled the profits up into the next property. This is a good business model, and if you stick with it, and can afford not to draw out too much of the profits for your own use, a relatively quick way of growing a sizeable chunk of equity or working capital.
However, more and more, I renovate properties and hold them to let out. I prefer this approach because I am still able to take out most of the profit, depending upon the value of the property, up to 80% of the increase in equity, and I also retain ownership of the property. I am able to take out up to 80% of the equity using a mortgage, often a light refurbishment mortgage, and as long as the rent covers the increased mortgage so that I am not incurring a monthly negative cash flow, the position is not much different from selling on.
116 Other than that, of course, I still have a valuable asset which, all things being equal, should appreciate in value over the long run.
If you want to follow this route, don’t forget that the rental market is different from the owner-occupier market; where I rent out the rental market is usually for lower value properties than the owner-occupier market. As a consequence the fit out I do is different to that which would be expected by owner-occupiers.
But that might not be true of all areas and so you must research your market thoroughly before you start.
I hope you have enjoyed reading your copy of The Successful Property Renovator’s Workshop and I look forward to hearing from you with your success stories.
Here’s to successful property investing
Peter Jones
Peter Jones B.Sc FRICS Chartered Surveyor, author and property investor www.ThePropertyTeacher.co.uk
117 Appendices
Construction types and their associated defects
* reproduced from “63 Common Defects in Investment Property and How to Spot Them” – second edition
118 Building Types
Victorian & Edwardian Terraces
The Successful Property Renovator’s Workshop
These were built by the 100,000s during the industrial revolution, particularly during the 19th century. The style and basic construction method was popular well into the early 20th century.
There is a view that some of the earlier properties were built with the use of cheap materials and variable workmanship. Inevitably this will be true of a minority of properties. However, the fact that so many are still standing, especially in the northern industrial cities, is testament to the ability of the Victorians. I own several properties of this age and I have to say they are superbly built.
Typical construction
Roof Pitched roof, slate covered, on a timber frame. Unlined internally. Cast
iron rainwater gutters and downpipes.
Walls solid brick walls. A typical two storey house will have 9” thick
brickwork. Properties with multiple stories may have walls 11” or even
13” thick at the lower levels. Sometimes rendered externally but more
often plain brickwork. Larger, high quality properties of this age can
have ‘stucco’ rendering painted cream or white, and scored with fine
groves, to make it look like the walls are made of stone.
Windows timber frames with sliding sashes
119 Ceilings lath and plaster
Floors suspended timber at both upper floor and ground floor level
Services depending on the age it may have been constructed with mains water
and mains drainage. Electrical, gas and central heating installations
are most likely later additions
Typical characteristics
Many were constructed before hygiene facilities we now take for granted became standard. This means many were built without a bathroom; at best there may have been an outside toilet. Also, in some properties bedrooms can interconnect directly, and not all be accessed from a landing.
Later extensions have often provided a bathroom at ground floor level. Being at the back, this invariably means off the kitchen.
Modern home-owners are now more likely to want an upstairs bathroom. This will usually mean losing a bedroom.
If you are buying to let out, tenants may be more accepting of a ground floor bathroom.
Properties of this age can also have a coal cellar.
Typical defects
Often these reflect the age of the property. Particularly look at: roof coverings spalling, splitting and weathering of the original slates. Splits to
flat roof coverings over more recent extensions. Look for rusting
to joints in the original cast iron rainwater gutters.
120 Details around chimneys and parapet walls etc – weathering
and corrosion to lead and zinc flashings, splitting and crumbling
of mortar fillets
Where the original slates have been replaced with concrete
tiles, problems will occur when the roof timbers have not been
strengthened to take the extra weight
Walls externally look for weathered pointing to external elevations.
Internally, look for tell-tale peeling wallpaper or staining to
ground floor walls up to a height of around 3 to 4 feet which
indicates a break down of the original slate damp–proof course,
resulting in rising damp.
Cracks, either internally or externally, may indicate long-
standing (i.e. no longer active) or on-going settlement.
Windows defects to original sliding sash mechanism are common.
Opening units can be painted shut. Look for rot in the frames
and the window units themselves. Look out for poor quality
paint finishes.
Ceilings Over time the lath and plaster will lose key i.e. become loose.
Look for cracks or ‘bulges’ in the ceilings, especially those
showing through lining paper.
121 Floors watch for rot in the supporting timbers, especially if you suspect
rising damp to the ground floor walls. Extreme signs include
undue bounce or spring as you walk across the floor or jump up
and down. Also, look for areas in floorboards with numerous
small holes which indicate the presence woodworm or other
wood boring insects
Services Watch out for original lead water mains, and the original mains
drains runs. Gas and electrical systems will be more recent, but
may still be outdated and in need of complete replacement.
Cellar Original coal chutes from the pavement allow direct access by
heavy rain. Damp penetration through walls and floors is more
likely, and is difficult to deal with. ‘Tanking out’ a basement or
cellar with a waterproof lining is a big and expensive job.
Sub-floor and other timbers in direct contact with the walls and
floor can often rot.
122 Building Types
1920s & 1930s Semis
The Successful Property Renovator’s Workshop
Typically suburban – look for the tree lined streets. The basic design didn’t change for decades and formed the basis of many of the major post war local authority estates found in London and other major cities.
Often very well built, with good quality workmanship and materials, especially the local authority stock which is often unfairly disparaged and suffers form the poor reputation of the 1960s and 1970s council housing.
Typical construction
Roof Pitched roof, tile covered, on a timber frame. Usually unlined internally.
Cast iron rainwater gutters and downpipes.
Walls cavity brick walls typically measuring 11” thick through window
openings (give or take after allowing for plaster and rendering).
This is the age of pebble-dash rendering.
Windows can be timber frame windows, but equally typical of this era are metal
framed windows, known as ‘Crittals’ after the firm who made them.
Ceilings still mainly lath and plaster but later properties have skimmed
plasterboard
123 Floors suspended timber at both first floor and ground floor level. Possibly
solid to kitchen
Services mains water, mains drainage and electricity. The original would have
solid fuel for heating by way of early central heating systems with old
fashioned looking ‘school’ and ‘hospital’ type radiators
Typical characteristics
These properties are of an age where you’d expect the original to have had an upstairs bathroom and internal WCs.
This building era predates modern mass-production techniques, and so each roof would be individually built, unlike today where the use of factory formed pre-nailed roof trusses is now common place. This means that these properties can be ideally suited for loft extensions if you can provide suitable access to the roof space.
Typical defects
Often these reflect the age of the property. Particularly look at:
roof coverings Splits to flat roof coverings over more recent extensions and
bays. Look for rusting to joints in the original cast iron rainwater
gutters.
Details around chimneys and parapet walls etc – weathering
and corrosion to lead and zinc flashings, splitting and crumbling
of mortar fillets
124 Walls externally look for weathered pointing to external elevations.
Pebbledash and other forms of rendering can ‘blow’ i.e. become
loose.
Internally, look for tell-tale peeling wall paper or staining to
ground floor walls up to a height of around 3 to 4 feet which
indicates a break down of the original felt damp–proof course,
resulting in rising damp.
Cracks, either internally or externally, may indicate long-
standing (i.e. no longer active) or on-going settlement.
Windows metal windows bow and rust, cracking the glass panes. Look
out for poor quality paint finishes.
Ceilings Over time the lath and plaster will lose key i.e. become loose.
Look for cracks or ‘bulges’ in the ceilings, especially those
showing through lining paper.
Floors watch for rot in the supporting timbers, especially if you suspect
rising damp to the ground floor walls. Extreme signs include
undue bounce or spring as you walk across the floor or jump up
and down. Also, look for areas in floorboards with numerous
small holes which indicate the presence woodworm or other
wood boring insects
125 Services Expect problems with any of the original services that have
been retained, with the possible exception of the mains drains.
By now these properties should be requiring their second, if not third, rewire of the electrical system. Expect the plumbing and any heating system to have been renewed. However, don’t assume they comply with modern regulations or requirements.
126 Building Types
1960’s to present day cavity walls
The Successful Property Renovator’s Workshop
Typical estate type houses which can be detached, semi-detached, or in more recent years terraced, but all to the same basic ‘box’ design. The quality of building construction and materials is now more variable than the previous types of properties described earlier.
Typical construction
Roof Pitched roof, tile covered, on a pre-formed timber truss frame. Usually
lined internally with roofing felt. Early versions may have
concrete/asbestos amalgam rainwater gutters and downpipes, later
versions have characteristic PVC.
Walls cavity brick walls typically measuring 11” thick through window
openings (give or take after allowing for plaster) typically unrendered.
The internal skin is usually breeze block.
Windows timber frame windows, often made of poor quality softwood.
Ceilings skimmed plasterboard
127 Floors suspended timber at first floor and typically solid floors to the ground
floor
Services mains water, mains drainage and electricity. Early properties may
have had solid fuel for heating. For example, my parents’ 1963
Wimpey detached had a coke boiler running just two radiators, both of
which were on the ground floor. More recent properties are more likely
to have a traditional central heating system, but in smaller properties
there can be a blown hot-air system, particularly those dating from the
1970s.
Typical characteristics
At the cheaper end of the market room sizes are generally small. Non load-bearing internal walls are now mainly of stud i.e. light-weight timber and skimmed plasterboard construction, which are great transmitters of sound. The quality of internal doors, kitchen fittings and bath suites is variable – at the cheap end of the market - poor.
This is the era of modern mass-production techniques. For example, roofs are now constructed of factory formed pre-nailed roof trusses. This means that these properties do not allow the possibility of loft extensions. What you see is what you get. Flat roofs now have cheap ‘mineralised’ roofing felt which will probably need to be renewed every 10 to 15 years.
A variation on the theme is known as ‘cross wall’ construction. This is where the weight of the structure isn’t borne equally on all external walls, but for example, just on the side walls and an internal partition. So you might find that the front and rear elevations have large picture windows at ground floor level, with tile cladding or pebbledash rendered cladding at first floor level. This suggests that the main structural elements are the side elevations and probably one of the internal walls. So be careful before you start knocking walls about inside. They may be doing more than just dividing one room from another.
Typical defects
Often these reflect the age of the property. Particularly look at:
128
roof coverings Splits to flat roof coverings.
Details around chimneys and along ridge lines.
Walls externally look for weathered pointing to external elevations.
Internally, look for tell-tale peeling wall paper or staining to
ground floor walls up to a height of around 3 to 4 feet which
indicates a break down of the original felt damp–proof course,
resulting in rising damp.
Cracks, either internally or externally, may indicate long-
standing (i.e. no longer active) or on-going settlement.
Windows Soft wood frames are notoriously susceptible to rot. Look out for
poor quality paint finishes.
Ceilings Shrinkage cracks to plasterboard ceilings are common. They
are not in themselves a structural problem (unless they are
evidence of a more sinister problem elsewhere in the structure)
but are unsightly.
Floors Solid floors can settle and become uneven. The damp proof
membrane can also tear or deteriorate, and allow damp to
129 penetrate through to the floor surface, and attack the structural
integrity of the floor itself.
Services Not been rewired yet? Then watch out. Get specialist advice on
all services if in doubt. Many of these properties are at that
awkward ‘in between’ age.
130 Building Types
1980’s to present day timber frame
The Successful Property Renovator’s Workshop
Again, these can be typical estate type houses and can be detached, semi- detached, or in more recent years terraced, but all to the same basic ‘box’ design.
Despite a lot of press scaremongering in the mid 1980’s this is a valid form of construction which has been well proven on the continent. However, the quality of the workmanship, and the storage of the materials on site is crucial. Most problems with timber frame properties can be traced back to inadequacies in one or both of these.
Typical construction
Roof Pitched roof, tile covered, on a pre-formed timber truss frame. Tell-tale
vents often built into the ridge line. Slopes lined internally with roofing
felt. PVC rainwater gutters and downpipes.
Walls cavity walls with a brick outer skin, but with a timber frame load
bearing inner structure, finished in skimmed plasterboard. It sounds
hollow when you tap it, and is often known as dry lining. You can’t see
it but there should be an impermeable membrane in the wall cavity to
protect the timbers from damp penetration through the external skin.
Very often small ventilation holes are left to vent the cavity. Typically
the external skin is left un-rendered.
131 Windows possibly timber frame windows, which might be hardwood, or
alternatively PVC coated aluminium. Recent properties will have
double, or even triple glazed units.
Ceilings skimmed plasterboard
Floors suspended timber at first floor and typically solid floors to the ground
floor
Services mains water, mains drainage, electricity and gas. Heating usually by a
traditional central heating system, but in smaller properties can be by a
blown hot-air system.
Typical characteristics
At the cheaper end of the market room sizes are generally small. Non-load bearing internal walls are now mainly of stud i.e. light-weight timber and skimmed plasterboard construction, which are great transmitters of sound. The quality of internal doors, kitchen fittings and bath suites is variable – at the cheap end of the market poor.
This is the era of modern mass-production techniques. For example, roofs are now constructed of factory formed pre-nailed roof trusses. This means that these properties do not allow the possibility of loft extensions. Flat roofs now have cheap ‘mineralised’ roofing felt which will probably need to be renewed every 10 to 15 years.
Typical defects
Particularly look at: roof coverings Splits to flat roof coverings.
Details around chimneys, weathering and corrosion and
crumbling of mortar fillets
132
Walls externally look for weathered pointing to external elevations.
Windows Soft wood frames are notoriously susceptible to rot. Look out for
poor quality paint finishes.
Ceilings Shrinkage cracks to plasterboard ceilings are common. They
are not in themselves a structural problem (unless they are
evidence of a more sinister problem elsewhere in the structure)
but are unsightly.
Floors Solid floors can settle and become uneven. The damp proof
membrane can also tear or deteriorate, and allow damp to
penetrate through to the floor surface, and attack the structural
integrity of the floor itself.
Services Don’t be complacent about services. In particular, get the
electrical & gas systems checked over by a qualified electrician
and gas engineer.
133 Building Types
Flat conversions from older properties
The Successful Property Renovator’s Workshop
The main structural elements will be the same as described earlier for the typical Victorian terrace house, with the same typical basic defects and weak spots. However, you will also need to look carefully at the quality of the conversion: not just the workmanship and materials, but the design and layout.
And just as importantly nowadays you’ll need to think about whether it complies with modern building regulations. A call to the local authority Building Control Department should tell you whether proper building consents were obtained when the conversion was undertaken.
You’ll also need to talk to the Environmental Health Department (in some local authorities this function may also be overseen by the Building Control Department) to make sure the property complies with the recent regulations for ‘Houses in Multiple Occupation’.
134 Building Types
Mansion Blocks
The Successful Property Renovator’s Workshop
These are very prevalent in London and other large cities. Usually everything about these is large; large flats approached by large stairs and large landings.
Having said that, every bit of space is used to the full, including the roof space where you’ll usually find a flat within what is known as a ‘mansard’. This is where the roof slopes are pitched at a steeper angle than usual to allow the inclusion of this extra accommodation.
The roof itself will usually be flat and asphalt covered, and to make even more floor space the windows may well be ‘dormers’; slightly protruding under a flat roof, and often with zinc or tile cladding to the elevations.
Watch the service charges on these properties. Each flat owner will be required to pay towards the upkeep of the structure of the block as a whole. Are the landings and hallways heated and lit? If so, you’ll be glad of it but you’ll also be paying for it. And all that brickwork will need repointing one day.
An asphalt roof will crack and weather, and will get to an age where it needs ongoing maintenance, or even total replacement.
Also watch out for our old friends, the ‘Crittal’ windows which you’re probably better off without. They need regular painting externally, which will also boost the service charge.
135 Building Types
1960s to present day purpose built flats around a concrete frame
The Successful Property Renovator’s Workshop
These structures could justify a book in their own right, with a considerable section on the differences between the different mixes of concrete that have been used. However, this is not the place to discuss problems with High Alumina Cement. This was used in the 1960s and 1970s because it dried fast; but then over time lost it’s strength with well documented disastrous results.
1960s and 1970s flats will often have concrete internal frames with concrete cladding panels on the outside, under an asphalt or similar flat roof. Typical of the large council blocks built in larger towns and cities, and which investors have been acquiring second hand from the original beneficiaries of the ‘Right to Buy’ Scheme.
Many purchasers have found to their cost that after twenty, thirty or forty years the concrete cladding can require renewing, or re-fixing, or both. Then there’s the roof, which will eventually need renewing, not to mention the lifts, which also require regular maintenance and periodic renewal.
Before buying a ‘bargain’ always check with the freeholder where things stand with the planned maintenance and renewal programme, and what costs will be apportioned out to the various flat owners and when. If the freeholder can’t or won’t answer either of these questions, be very, very careful!
136 Building Types
1980s to present day low-rise purpose built flats
The Successful Property Renovator’s Workshop
Generally these will be of similar construction to the description of the 1960s cavity brick house as described above. A variation on the theme can be a solid floor at first floor level, which is better from a sound insulation viewpoint, and from a fire safety angle.
137 Property Valuation Techniques
Reproduced from “An Insider’s Guide to Successful Property Investing Part
One” - Second Edition
138 Valuation
The ‘Residual’ Method
Is the principle method of valuing: •Development schemes •Redevelopment schemes •Properties for renovation
The Successful Property Renovator’s Workshop
As well as finding the value of land or a building before redevelopment or renovation it’s also a very useful analytical tool for analysing and appraising whether a particular development or renovation scheme is profitable.
As the name suggests, the method involves finding the residual value, in other words the amount left over if you take the costs of construction and other associated costs away from the end value of the scheme. Associated costs include professional fees, marketing and interest. If you are analysing profit you will find the residual after also allowing for the cost of purchasing the land or building subject to the scheme.
This is a very subjective process and changing any one of the many constituent parts can have a disproportionate effect on the end result. So the valuation or analysis will only be as good as your knowledge or research. Like the computer saying, “rubbish in, rubbish out”.
Here is an example template of a classic residual valuation to establish the value of a development plot, or a property for renovation or redevelopment.
Gross Capital Value (once completed) £ Less agents costs of disposal £ Less legals on disposal £ Net Capital Value £A
LESS Building costs £ Building finance £ Professional fees £ Interest on fees £ Promotion/marketing £ Contingency sum £ Agents/letting fees £ Developers profit £ Total costs £B Residual land value £A – B = C
The amount left for the residual land value will include an amount for acquisition costs, and interest on the funds used to purchase the land or property, which is
139 rolled up because it is assumed that the acquisition costs occur at the point of purchase.
To get to the land value, the acquisition costs and the interest can be stripped out algebraically by:
Sum available for land, acquisition costs And interest (residual land value) £ C
Land Price 1x
Fees on land purchase Stamp duty Land Tax 4% Solicitor plus VAT 1.175% Surveyors fees plus Vat 0.5875% 0.0576x
Finance on land and fees for period of development 1.0576x for 1.5 years at 7% 0.111x
Land Value C = 1.1686
Land value = C/1.1686
An example calculation follows.
If the cost of the land is known, by substituting this for developer’s profit, the appraisal can be used to calculate the profitability of a specific project where all costs are known.
Don’t forget that if you are doing a “valuation” a lot of this will be a purely hypothetical exercise as the market value is often based upon “a market average”. However, if you are undertaking an appraisal, for example to determine the profitability of a particular scheme, then you will use figures that are as accurate as possible for that scheme.
A good example is building costs. On a particular plot of land you know that the only likely planning consent will be for a three bedroom house, and that because of prevailing levels of value in the area most developers would construct it to an average specification. On this basis you can determine the value of the land using building costs that reflect the market view.
On the other hand, if you decide that you would like to retain the property and live there once the building is completed, you may decide that you want to build to a higher standard than the market norm. You can then use your estimate of the enhanced building costs to determine whether this project is still viable.
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Example of a Residual Valuation
Let’s assume that I am interested in acquiring a building plot in Surrey, which has detailed planning consent for 5 three-bedroom terraced houses. Mains services are already provided to the site. Each house will be approx 1000 sq ft gross external, and will sell for about £250,000 each once completed. It will take about 1½ years to complete and sell. How much can I afford to pay for the land?
Gross Capital Value GCV (once completed) £ 1,250,000 Less agents costs of disposal @1.5% £ 18,750 Less legals on disposal £ 2,500 Net Capital Value £1,228,750
LESS Building costs @ £70sq ft £ 350,000 Building finance 9 months @7% £ 18,375 Professional fees @12% £ 42,000 Interest on fees 9 months @7% £ 2,205 Promotion/marketing £ nil Contingency sum @ 5% £ 17,500 Agents/letting fees £ nil Developers profit @15% of GCV £ 187,500 Total costs £ 617,580 Residual land value £ 611,178
Sum available for land, acquisition costs And interest (residual land value) £ 611,178
Land Price 1x
Fees on land purchase Stamp Duty Land Tax 4% Solicitor 1% Surveyors fees 0.5% 0.055x
Finance on land and fees for period of Development 1.055x for 1.5 years at 7% 0.110x 1.165x
Land Value 611,178 = 1.165x
Land Value = 611,178/1.165
Land Value = 524,616, but say £525,000
The value of the land for this scheme, allowing me a guaranteed profit of 15% of the end value, is £525,000
141 A word of explanation about the constituent parts of the calculation:
The end value of the project, i.e. the gross capital value, is found by using either the direct comparison method or the investment method. The cost of sales, like estate agent’s and solicitor’s fees, are deducted to get to the net capital value. This is the money you would have left over when you sell the completed project. In the example that follows I’ve assumed we’ve been able to negotiate a special rate with the Estate Agent because we are offering them the marketing of the whole development.
The building costs will already be known if estimates are available. Otherwise you may need professional help from a quantity or building surveyor, or an architect. Because in theory building costs only need to be financed as they occur, i.e. when the building contractor sends in his bill at the end of each completed stage of building, it is usual practice to average out the interest charges on these costs. There are two ways this can be done relatively easily – firstly, apply half the interest rate to the whole of the building cost for the whole of the estimated length of time the building works will take, or secondly, apply the whole interest rate to half the building costs over the estimated length of time for building works.
Building finance is usually calculated on half the project period, so as to reflect that you won’t need to draw all the money down in one go, but you’ll pay the builder through stage payments at different points through the development.
The same is true of professional fees. The bulk of these are for the architect, and you’ll again be paying him by stage payments through the life of the project.
Promotion and marketing. Well once you’ve built it, there’s an assumption that you’ll want to sell it. How much should you allow? For smaller schemes this will probably be wrapped up in estates agent’s fees, and you won’t need to make a separate allowance here. I’ve not allowed for marketing in this example because the development is too small, and in any event I know properties like this will sell with minimal marketing. However, if I were developing a block of 100 dockland apartments, the marketing budget could be immense.
Contingency sum. There’s always a snag, or something will cost more than you expect. I’d say 5% of the building cost is the minimum you should allow.
Agent’s and letting fees are again usually applicable to larger schemes. For smaller schemes this figure will most likely include an allowance for promotion and marketing. In this instance, we are not looking to let the completed scheme, and so I have made no allowance.
Developer’s profit. If you are doing an appraisal this will be whatever return you wish to make on the project. If you are doing a valuation you will use figures that reflect what an average developer in the market will require at the moment. Usually this won’t be less than 15% of the end value of the project, but can be 20% or more. I’ve allowed 15% of the end value of the completed development.
142 Fees on purchase. I’ve allowed for Stamp Duty Land Tax at the current rate as I anticipate the end value will be over the £500,000 threshold. I’ve allowed for solicitor’s and valuer’s fees.
Finance on land and fees. I’ve allowed for finance on the land for the whole period of the project, as the land will be in our ownership for the whole period. Even if I had purchased the land cash, and I had not taken out finance, I would need to allow for notional interest. The fees will be incurred at purchase, and so will also be a cost which is carried throughout the length of the project.
Although a residual can be very complicated, the rationale behind the method is sound and useful. However, you may be wondering whether it can be quickly and easily applied to smaller projects. I’ve set out on the next page a very basic residual valuation template I developed on a spreadsheet, which I have used to appraise the viability of a number of renovation opportunities I have looked at. I must stress that this is only a very rough and ready reckoner and I wouldn’t argue for its infallibility as a valuation tool. However, it has provided me with enough of a guide to be able to assess from my desktop whether a project is worth researching in more detail. I’ve made it fairly adaptable so it is relatively easy to add or delete fields to make it bespoke for each individual situation.
The next example shown is for a relatively small renovation of a low value house. You can see that the end profit was minimal and this opportunity was considered not to be profitable enough to justify the time and effort involved.
If you want to write your own spreadsheet, be careful about how you handle the interest and finance section. It is easy to get dragged into circular arguments and achieve only meaningless mathematical solutions.
As ever I advise that if you use your own residual model, be very cautious about relying upon it. By all means use it as a rough guide, but before you spend thousands or even hundreds of thousands of pounds of your own money, get an independent view and take professional advice. You will probably have to pay for it, but there’s no question that it will be money well spent if it means that you avoid an expensive mistake.
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Gross sale price 77500 Agents inc Vat 1821.25 Legals inc Vat 235 Net sale price 75443.75 LESS Renovationcosts Roof Damp Timber 160 Bathroom 280 Kitchen 1250 Wiring 1128 Plumbing 300 Windows 1950 Cheating 2000 Ceilings Replastering 210 Clear garden Skip hire 300 Decorating 1000 Contingencies 2101.85 Total Development 10679.85 Other costs Insurance 397.37 Survey Valuation Travelling 804.96 Legals 462 Electricity 20.03 Gas 22.53 Water Bank 17.5 1724.39
Purchase Price 54000
Gross profit 9039.51 Finance Development for 3 months 133.49813 Property for 14 months 4410 Arrangement fee Profit on property 10 % Legals on loan Total Finance costs 4543.4981 Stamp duty Net profit 4496.01
144 How I Bought £2m of Property in 4 Short Years
When I started back in year 2000 I bought £2m of property in 4 years, and that was with starting from scratch and using none of my own money. “Why did you use none of your own money”, you may ask, “Is that even possible?” Well, yes, it is possible, I did it. And I did because I had just been made redundant, and I had no savings. Ironically, when I started out as an investor I was broke and barely employed - I was working part time as a consultant doing the dross jobs my peers didn’t want to do, and I was paid a pittance for my troubles. That’s why I literally had to start with no money of my own. I now have property with a combined value of over £5m. Not bad considering I started with nothing, other than the house I live in. But I’m not saying any of this to boast. I just happened to stumble across a system for buying investment and buy to let property that works, a system that has been used probably by every successful property investor. And I’m going to share that system with you. Looking at the market now, there are many similarities to when I first started, and many experts agree that if you want to be financially free using property, now is the best time in years in which to buy. The same techniques and strategies I used then STILL WORK JUST AS WELL TODAY. In fact, I am still using them to buy even more property now. That means that, if the experts are right, this is the perfect opportunity for you to do the same as I did and put together your own multi-million pound property portfolio, should you want to. Or perhaps you’d just like a few buy to lets to supplement your income or to help with your pension? Whatever your reasons for buying and investing in property I can help you to put together your portfolio much more quickly and simply than I did, and I’ll show you how in a moment. But why do you need my help? Surely buying property is easy? Good question, so let me ask you a question in return: “If property investing and buy to let is so easy, why do so many people get it so wrong?” I meet a lot of people who jump into investing but who just don’t get it right. I’m often surprised that so many people will commit to spending such large amounts of money, but spurn the chance of getting help and advice first. In my experience, when things do go wrong it’s often because of one or more of the following three things. Firstly, many people think that buying a buy to let investment is like buying their own home. It isn’t! Buying an investment property isn’t anything like buying your own home, but many investors treat them both the same. Big mistake. Perhaps being a nation of home owners makes us a bit complacent and makes us think we know more than we do? After all, a little bit of knowledge is a dangerous thing, especially when it comes to spending large amounts of money on investment properties.
145 There is a fundamental truth about property investing which I discovered in my role as a consultant and it explains why some investors make it, while the majority don’t. And it’s this: “Anyone can buy a property, but not everyone buys the properties that are right for them”. In my opinion, that is the difference between success and failure, or the difference between doing okay and doing very well indeed. Do you think successful investors buy "the house next door", just because it happens to be the house next door so it’s easy to manage? Do you think they buy a property just because it looked cheap? Do you think they’d buy a property just because they could get a discount from the developer? No, of course they don’t. They have strict buying criteria based on investing fundamentals, and which fit the system I discovered, and which I am going to share with you. They know exactly which properties they need to buy to attain their goals; they know how to find those properties; and they take the necessary steps to acquire them at the right price and on the right terms. Anything less than that and they won’t buy. It’s as simple as that. Unlike the unsuccessful majority, they don’t just happen to stumble into deals. Successful property investors know their strategy, they have a plan, and they take actions that are consistent with their plan. It’s not down to luck that they are successful. They have planned for success. And I will show you how you can plan for YOUR property success. Secondly, many people try their hand at property investing without really knowing what they want to achieve from property. Sure, they may have vague ideas like ‘I want to get into property’ or ‘I want to be a property investor’ or ‘I want to buy a few properties’, but it’s all a bit wishy-washy. They might think, “I know what I want, I want to make some money from property”. But does that mean make some income from cash-flow, or by building up equity, or even by making cash lump-sums from developing and trading? Each answer would require following a different strategy and buying different types of properties, possibly in different locations. Unless you are clear on why you want to buy, the most likely outcome is you won’t get the results you hope for. Third, if you don’t really know what you want to achieve, then how can you choose the right strategy to achieve what you want to achieve? And if you don’t have a strategy, how can you possibly buy the properties that are right for you? The truth is that you can’t! After all, if you don’t really know what you want, then any property will do. And as we’ve already seen, buying any old property is a sure way to fail. Believe me, I’ve seen it happen far too many times. Many investors ignore or don’t understand these basic truths and principles and, far from being financially free in property, they end up stressed and wondering why they can’t make it work.
146 The good news is I'm going to show you how you can use the system I discovered to put together your own cash-flowing portfolio, and avoid all of these mistakes. And if, like me, you are starting with little or none of your own money, you can still do this! Having built my own property portfolio from scratch, and starting with virtually none of my own money, I’ve constructed my very own ‘course in a book’, all in one easy-to-absorb volume (although it is big – 178 pages of A4), so that you can have all the information you need at your fingertips. I’ve called it The Successful Property Investor’s Strategy Workshop and in it I tell the story of how I built my portfolio and I’ll show you exactly how you can do the same. It’s not rocket science. Anyone can do this, but you have to go about it the right way. Indeed, you can copy my model, if you want. That’s why I’ll show you everything I did, right and wrong. Everything I did right, so you can do the same. And everything I did wrong, so you can save time and money and avoid the mistakes and pitfalls. I’ve even included real-life examples of actual properties I’ve bought, so you can see how it all works in practice so that you can do the same. It took me years of trial and error to learn the system (the best part of 4 years, with many sleepless nights and much wasted time and money) so let me save you from all of that by sharing my experience with you. The Successful Property Investor’s Strategy Workshop is available as an eBook to download now and to read on your Mac, PC, ipad or tablet, for only £29.97. Or it’s available in Hard-copy, as a manual in a 4-ring binder, for just £49.97 inc p&p. If you’re serious about property you’ll find this small investment to be invaluable. So to order your copy now, please go to www.ThePropertyTeacher.co.uk/the-successful-property-investors-strategy- workshop
PLUS! Order Now And You’ll Receive These Valuable FREE Bonuses as A Special Gift From Me
As a ‘thank you’ from me for buying, The Successful Property Investor’s Strategy Workshop I’ve put together two special bonuses for you, both worth at least £49.97, and which I know you’ll find extremely helpful.
147 Special FREE Bonus Number One
“How to Always Get The BEST Finance For Your Property Deals” – top tips from a top UK mortgage broker.
First, you’ll receive a free copy of “How to Always Get The BEST Finance For Your Property Deals”.
This an MP3 audio file of an interview I conducted with one of the UK’s top experts on buy to let finance, in which he covers many of issues around buy to let, and gives his top tips for successfully raising ALL of the finance you need.
I have considered selling this as a product in its own right for £49.97 because it contains so much great information but, when you order your copy of The Successful Property Investor’s Strategy Workshop, you will receive it as FREE gift from me.
Special FREE Bonus Number Two
“Your ‘Must Know’ Answers to the Top 14 Most Common Property FAQs” – Audio file download
An audio file download, value £49.97, containing the 14 top Property FAQs, with ‘must know’ tips and information, based on the questions YOU ask me.
Whenever I meet and talk to fellow investors, the same questions always come up, time and again, including:
Where will I find the best property deals?
What if my strategy doesn’t work where I live?
Where should I be buying, and how do I find my properties?
Should I buy at auction?
How much should I gear up, and how much borrowing is safe?
Should I still be using interest only mortgages, especially if tax relief on interest is to be limited?
148 How do I structure my property business, and own or hold my properties?
What if the market crashes in the future?
What is the most tax efficient way to own property?
And many more. In fact, I cover, and answer in detail, the top 14 questions I am always asked.
You’ll receive this Audio Download as a FREE SPECIAL BONUS when you order your copy of The Successful Property Investor’s Strategy Workshop.
So to order your copy of The Successful Property Investor’s Strategy Workshop, and start building your own property portfolio, please click here now: www.ThePropertyTeacher.co.uk/the-successful-property-investors-strategy- workshop
I know that the information in the Successful Property Investors Strategy Workshop is of immense value to all property investors. All I’m ever interested in is value-for-money, and that applies whether I’m buying (especially property), but also whether I’m selling. So, naturally, there’s a full 60-day no-quibble money-back guarantee of complete satisfaction (which I trust you won’t need, but it’s there anyway), so there’s really nothing for you to lose when you order your copy. If for any reason you’re not happy with your copy just email me if you order the ebook version, or return the manual if you order the hard-copy version, within 60 days of receipt, and I'll give you a full, no questions asked, refund. PLUS, you can keep the FREE bonuses as a ‘Thank you’ from me for trying it. So you can order, read and enjoy your copy completely risk-free.
Here’s to successful property investing Peter Jones Peter Jones B.Sc FRICS Chartered Surveyor, author and property investor www.ThePropertyTeacher.co.uk
PS Don’t forget, for your copy of my best selling eBook The Successful Property Investor’s Strategy Workshop, PLUS the special bonuses including the audio file of my interview with one of the UK’s top buy to let finance Experts, please go to www.ThePropertyTeacher.co.uk/the-successful-property-investors-strategy- workshop
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