Sean Bates’ renovation company stands to make a profit of over £78,000 on his latest property.
The project has come in pretty much on budget and on time.
And no, we’re not talking multi-million pound houses, here.
This is a four bedroom Victorian semi in West Berkshire bought initially for £275,000 just three months ago.
How did he do it?
Sean agreed to give us an insight into his world.
The property looked promising from the start.
It has good access to Newbury town centre, is five minutes walk to the train station (on a main commuter line to London) and is surrounded by good schools.
It ticked all the boxes and was on the market for £299,500 among houses which tend to fetch prices in the very high £300,000s.
It was run down and had a history of subsidence, but it was nothing Sean’s team hadn’t seen before.
An offer was made of £285,000 and accepted. Then began the planning process – in Sean’s developments nothing is left to chance.
Nothing left to chance
A massive team (the three company directors, their wives, various advisors and estate agents) are invited to thrash out ideas and calculate numbers at a very early stage.
In this particular development plans were outlined for major structural changes – a loft extension, an ensuite and the opening out of the kitchen. Plumbing and rewiring would be needed, too.
But Sean’s company goes further than most – fireplaces were chosen, wall colours picked out and even light switches selected, before anyone had lifted so much as a wallpaper scraper.
“I don’t budget contingencies,” he declares.
Isn’t that a mistake made by amateur developers the world over? Doesn’t ANYBODY listen to Sarah Beeney?
“I’m very arrogant,” he smiles. “I present a high-level plan from the start and when it comes to budget I am always right, within a few percent.”
Just a month before completion date, Sean’s company withdrew their offer of £285k and resubmitted one of £275,000, on the basis that subsidence would prove too expensive.
Sean had done his research and knew that the property had languished on the market for a year already. A previous buyer had pulled out at the last minute.
And Sean also know from the estate agent that the seller was set to make over £80,000 from the sale, just by virtue of having lived in the property for a while.
With the mechanics of the purchase over with, work began with a materials / labour budget of £36,000.
Sean’s company usually renovates anything up to three properties at any one time and it employs five multi-skilled tradespeople on a full-time basis as well as a variety of sub-contractors.
Even so, Sean maintains that it’s hard to make a profit if you sub everything out entirely and he spends several hours a week getting his own hands dirty.
Professionals do the decorating!
Interestingly, unlike many amateur developers, it’s the painting and decorating for which he will always, always get in the professionals.
The money saved by DIY is simply not worth a poor finish, he says. And the completed property is indeed a transformation. Where once there was a warren containing a kitchen / pantry / utility room / cloakroom, there is now a spacious kitchen with a full length window along the back.
The floors have been stripped and reproduction fireplaces installed. Upstairs, the tiny fourth bedroom has been divided into access for the new loft bedroom and an ensuite for the master.
The details matter
“People who buy period properties are usually tuned into detail,” observes Sean and this house has offered him plenty of scope.
The “detail” doesn’t have to be authentic Victorian to work. The large modern kitchen is a million miles from the boxy network of rooms favoured by people a hundred years ago. What matters is that thought has clearly gone into every
aspect of the project. Inexpensive kitchen units (£2,000 trade price from Jewson) have been tarted up with good quality handles, for instance.
The decoration, though, has proved to bit of a headache simply because its not clear who will buy this property.
The golden rule, of course, is to identify your target market and decorate specifically for that. But this house could be bought by a professional young couple, eager for the latest gizmos and gadgets. And it could equally appeal
to a family, needing practicality above all else.
If Sean’s crystal ball was working properly he could have dressed the property with the buyer in mind.
But in reality he has to make it attractive to a broad section of the market. Magnolia walls might not lead to maximum profit but at least he won’t be alienating anyone either.
Curiously, the speed at which the house sells is not an issue here.
Early estate agency valuations have come in at the £375 – £380k mark but Sean’s own research leads him to a price ticket of £410,000.
“I would rather keep the house on the market for two years or more, than to allow an agent sell it for a reduced price.”
With loan repayments of £800 a month, it could be an expensive viewpoint.
The fact is, though, that Sean has made very few bad judgment calls so far on this development.
There was the heart-stopping moment when his team found that some of the foundation underpinning had previously been bodged – a discovery not made until AFTER they’d completed on the sale.
But other than that, it seems that Sean really is as good as he says he is.
Of the original meticulous “high-level plan” outlining every single nut, bolt, paint shade and floor stain, only one thing was changed: the kitchen worktop morphed from melamine to cherry wood. At a cost of £600, it’s what’s technically known as a “drop in the ocean.”
- Property cost: £275,000
- Materials and labour: £37,995
- Buying,selling, professional fees etc: £18,950
- Total costs: £331,905
- Selling price: £410,000
- Gross profit (assuming a quick sale): £78,095