Every additional month that a renovation takes will cost approximately £600 per £100,000 borrowed (assuming a 7% interest rate). Speed is of the essence.
Focus on the items that have the greatest impact and develop them swiftly. Take on projects that can be completed in a short space of time (4-8 weeks). Leave the larger projects to more experienced developers or tackle them on your third or fourth property.
The exception to this would be if you are developing your own home, and can afford to take more time over the project. If this is the case, you might consider:
- Loft conversion
Even if you intend to sell the property right away, you should always have rental at the back of your mind too. That way, if the market dies by the time your property is ready, you can still successfully let it out.
As a landlord, however, you would be bound by statutory obligations. The main points are:
- Furniture and furnishings must meet the fire safety regulations;
- All gas appliances, boilers and fires must be inspected annually by a CORGI registered engineer, and issued with a gas safety certificate. This shouldn’t cost more than about £60 for a two-bed house, and would be worthwhile even if you are certain that you want to sell rather than rent.
- Electrical appliances must have fitted plugs.
- You are responsible for repairs – so create a low maintenance property (new plumbing and heating tend to break down and cause problems less often).
- Smoke and/or carbon monoxide detectors are expected in both developed properties and rental ones.
Conversions typically consist of taking a larger property and dividing it into separate flats. On the simplest level, you might take a small/ medium terrace house and convert it into two flats – one upstairs and one downstairs.
Conversions are more complicated than refurbishments, as they will require you to rewire each flat separately and to create independent central heating and plumbing systems. You may also need to change the layout of rooms and staircases, and will need to bring in additional bathrooms and at least one new kitchen.
Conversions can make substantial amounts of money – if a £200,000 town house converts to two £150,000 flats then you’ve made £100,000. As you can see, though, the work and time involved can be considerable, and is probably best as a second or third development property.
Refurbishment offers plenty of opportunities for new (and experienced) property developers without having to start complex conversion projects. Smart, well-presented properties command a premium and tend to sell quickly. Most buyers are very busy people with full-time jobs and careers (that’s why they can afford to buy!). They simply do not have time or perhaps the inclination to renovate their home.
As this scenario has become more common, so the success of the refurbishment-driven property development has grown.