How much to pay for a house in need of renovation?

[Thromdimbulator]

I'm looking at buying a house in need of renovation. I think (though don't know) that it's structurally sound. However, I can't think that any improvements/mordernisation have taken place in the 60 odd years since it was built. It's also extremely grotty internally and has had some rodents in. So, if I work out the cost of bringing it up to a decent standard, and work out how much it would be worth in its renovated condition, how does that inform the maximum price I should pay for it? Is there a magic formula or percentage? It's to live in btw, but I don't want to take on this level of work for love alone! Any tips for negotiating with the EA also appreciated. I would really have thought it would have gone straight to auction the state it's in. Guess they're hoping to find some idiot who thinks a lick of paint will sort it out!

[bibbitybobbityhat]

How does the asking price compare to similar properties in a renovated condition?

[MoreBeta]

IME the owner will never knock enough money off to allow you to do the house up and sell it on at a profit. I went to see one a few weeks ago. it was on at the price it would be selling it at if it had already been done up. It needed 25% off the asking price. Yes they are looking for an idiot. Also be aware some EA's put real wrecks on a prohibitve price to put potential buyers like you off then drop the price quickly when a local friendly developer bids because they have a little agreement the developr will put it back on the market through them oncedone up so they get double commission.

Do also remember your time and effort is worth something so the 'cost' of doing it up include a nice bit or your wages too.

[bibbitybobbityhat]

Also remember that an awful lot of people like doing complete renovations so there is quite a market for them.

[Thromdimbulator]

Thanks. MoreBeta that's pretty much what I suspected. And yes, this one is also priced as if it was ready to move in so I'm not expecting them to jump at any offer I make any time soon. However, as the market is so totally stuck here, the house is in too bad a condition to rent out, and its probate, I thought I should at least try and put myself in the game. There's no easy money for developers at the moment that I can see, even if the EA pretty much gives it to them (though I'm rather annoyed that they might!). Prices here are at an all time high, transactions are at an all time low - funny that!

[noddyholder]

It depends how far you go with it. If you are not talking structural work it can be brought in on a tight budget if you source all materials yourself and haggle with the builders!There is still a biggish margin for profit on refurbs though and people like me love them! I have just finished one and the buyers are paying a lot more than it cost to do. So it is a good way of getting a house you couldn't normally afford.

[Thromdimbulator]

Yes, there's the work, but also there's the opportunity to get it the way I want it rather than living with someone else's taste and standards. The second part of that is appealing, and I guess the first leaves a good sense of achievement if you survive to the end!

So, just as a buy to let landlord would aim for a certain yield, is there a percentage return that a developer would expect to achieve to make the job worthwhile? I guess I'd be willing to go a little above that, but not as high as if someone else had done all the work!

[MoreBeta]

Thromdimbulator - same story with the house I looked round. A probate sale with a 1970s kitchen and serious serious refurb required and a lot of unauthorised bodging up on a Listed building that needed to be ripped out and restored at huge expense.

[noddyholder]

You never know for sure when you take on a refurb as the market moves and prices fluctuate plus you sometimes spend more than you think. We paid 240k for a wreck. This was accepted because we had cash otherwise they wanted 270. We spent 25k on it because I project managed and sourced etc plus am experience so I would say it would have cost someone else about 50k to do up. This means their total spend would be 325k and I have spent 265k. I have sold today for 350k. So still some profit for a normal buyer but more for a developer. So even if it is a family home and you want to stay in it it can be a good investment. I would only take it on if you are comfortable with the level of work. I usually go round with a builder and get a rough idea plus they usually spot things which surveys don't. The sense of achievement is huge though really satisfying and you get a one off house

[Thromdimbulator]

Thanks Noddy. Those figures are really useful to give me a bit of perspective. Of course, I don't have the experience or the contacts - so need to factor in costly mistakes. Still, sounds like it may be worth pursuing if only I can break through the EA's jobs for the boys network. Congratulations on the sale! That's great news.

[noddyholder]

Thanks throm. I think you have to blag it a bit make it sound like you know what you are talking about. I did for the first few. It is very sexist actually they often ask me if I want to bring my husband to look even though he has no interest at all..

[GnomeDePlume]

We have bought, renovated and resold a couple of houses and made a profit each time. DH does all trades except gas (he is an electrician). He does all the work and I do the planning, sourcing and project management.

Some things to look out for in a 60 year old house - it WILL need a full rewire. Houses built before central heating are prone to wood worm and rot. Look at the roof line (and the condition of the roof). None of these are disastrous necessarily but are excellent for negotiating with the estate agent.

One of the houses we bought was subject to probate. In that case there was no money left in the estate once care home fees and mortgages were paid so everyone really just wanted a quick sale rather than fight over the last thousand pounds.

There isnt a magic formula really. Look at what the modernised versions sell for. Make an estimate of the costs (including a generous contingency) and deduct that from the selling price. Do not pay more than that balance if you dont want to lose money.

Estimating costs isnt difficult but you do need to be exhaustive. You need to allow for every possible thing. Do as much work yourself as possible and be creative in sourcing materials.

It is incredibly satisfying.

[Thromdimbulator]

Thanks Gnome - shall look for woodworm!. Encouraging that you both find it satisfying (at least at the end). Guess it should be even more so if we're actually planning to keep it. Shall get the calculator out over the weekend before going back for a second viewing.

Regarding builders, roofers and others experts - who if anyone would you take round before submitting an offer? Guessing a trusted builder for a quick once-over would be the favourite? (Obviously we'd be looking for a good surveyor if we had an offer accepted).

[GnomeDePlume]

IMO a good builder is your best bet as company on a visit but an awful lot is really common sense.

I guess it depends what condition the place is in. Are the carpets still down? Is there furniture in place? If not then your job is a lot easier.

Externally you will be looking at the roof line (should be straight not bowed) and the general condition of the roof. Moss/lichen all over the roof indicates a lack of loft insulation. As soon as the loft is insulated it will get cold and start to die off. Look at chimneys, what condition is the flashing in? Look at the lintels over the doors and windows (broken is bad!). Look at the brickwork, broken bricks indicate structural problems.

Internally - look for blown plaster. Damage to the flashing on the chimney externally will let water in down the chimney breast leading to damp on the chimney breast. Damp elsewhere may be explained by damage to the roof or problems with plumbing. Woodworm will be in soft wood normally (floor boards, joists, skirting boards. The surface will look like someone has attacked the wood with a dart. Internally the wood will be spongy.

Things to take with you for a second viewing:

• a step ladder
  
• a torch
  
• a camera
  
  Check with the estate agent first and let them know you want a close look. Stick your head into the loft and look at the state of the joists (if they are visible) and also the state of the roof. Ask the estate agent and if okay take lots (and lots and lots) of photographs. These are great for your own records of the project and also to discuss with others.
  
  Both the renovations we did were of uninhabitable houses which we brought back into the housing stock as warm, welcoming homes.

[Thromdimbulator]

Sob. Sold before I even got to the second viewing (booked for Mon). EA didn't even bother to phone and tell me this. So much for working up costings. (Only thing that's sold in last two weeks too). Thanks all for you help.

[GnomeDePlume]

Oh, I am sorry! What a disappointment!