Property renovations or as some people say flips are an exciting proposition for many property investors. As it is a lot more hands on, the execution of the deal particularly if you are going to auction and purchasing. In addition to the actual timescale of property renovation projects which generally is 2-3 months on average to flip. It is exciting right! Even experienced landlords find it difficult to do their first renovation project because it is a different skill set but well worth doing. It is time intensive and requires the skill to anticipate and handle issues that arise during the course of the project. There are costs and points you should always take into account for instance stamp duty, legal costs, mortgage costs, renovation costs (with a 5% contingency) for any unforeseen costs that occur, length of time for the project and selling costs. If buying at auction then you need to take into account auction costs associated with the auction house (although I believe there are lots more cost effective ways of sourcing properties than auction). The objective with flips is to always buy at Below Market Value in order for you to be able to add value and sell on or refinance and extract your money back out for the next project.  However please do keep in mind that although it looks great when you see TV programmes showing ordinary people doing renovation projects it is not as easy as it looks! Additionally with renovation projects here are a few points you should consider prior to purchasing your renovation project:

 

1.  Do you due diligence

If you have a property you are considering to renovate and sell on the market always undertake a hefty amount of due diligence. I cannot stress this enough. Look at the street and its surrounding areas the values of how much the properties are going for and have sold for. Speak with estate agents in the local area (not just one but several). Understand the types of people living on that street and the crime rates etc. Assess whether there are any schools and hospitals nearby as this will assist in you selling the property at a later stage. Always spend a lot of time researching the area and gain knowledge about the area you are looking to invest in.

 

2. Employ Professionals

It may sound absurd that you think what is the point of employing professionals when I have gone on a course and learnt knowledge and know how to do electrics and plumbing. However actually doing it in the house you are renovating is a whole different game! You may take a lot longer and as a consequence you will be prolonging your stringent time period for flipping the property and the quality may not be as good as you liked. Whereas with experienced tradesmen they can do it a lot quicker and better. Therefore although you may have the knowledge through courses etc you do not have the experience as of yet and shouldn’t risk your project by doing this. However be there with the tradesman and learn because then in 5-6 flips time you can then potentially do it yourself. Therefore always consider the labour costs of contracting tradesmen to undertake the work into your expenses prior to purchasing a flip.

 

3. Consider all factors about your buyer

As an investor when you specify that it will take 3 months to renovate and flip a property have you considered the timescale for selling the property. Particularly where there is a chain involved. Therefore if you purchase a bungalow for instance you are likely to be getting an old couple who are looking to downscale so as a consequence there will be a chain involved of potentially four or five people. Consequently this increase in timescale will then increase your mortgage costs. Hence when choosing your property remember always look at your audience because if you are in an area where first time buyers are likely to purchase then there would be no chain and the selling times significantly reduce. This goes back to making sure you do your due diligence effectively!

 

4. Giving the property a basic finish

This again has to be reflective of your target audience i.e. potential buyer. When selling the property you cannot give a property a basic finish as your intention is not just to rent it out for an average income per calendar month.  You would want someone to buy the home and have that vision that this will be where they live in the future. In order to wow the potential buyer always try to provide a good quality finish with the colours of the walls, carpets as well as the kitchen. However this does not mean you spend above your budget but make sure you are cost efficient in your expenses whilst adding the most value! That is effectively the skill to master…

 

Best of Luck!