A Cautionary Tale

1st August 2005

T. Wyn Jones

Property researchers may not agree the precise figures, but one thing is for certain: the property market has cooled considerably with it being positively flat in some areas.

According to the Office of the Deputy Prime Minister values of homes in Britain have risen by approximately 6 per cent since June 2004, however in the view of the property web site Hometrack they have dropped by 2·3%.

But why is it there are people out there who appear to have the “Midas” touch, buck the trend and continue to buy homes "in need of modernisation" carry out the work, and sell on for a fat profit.

I am told however it is not like it used to be. Nowadays you have to stick to your budget and bring the job in at cost whereas previously, if you ran over budget the rising property market compensated for it.

So how do you make that profit? Here are a few tips given by people well versed in the property development game.

Consider buying a half-finished project sold off by a disheartened developer.
Avoid listed houses or those in conservation areas
Ask a surveyor or estate agent the likely value of the finished project, but remember that the market can fall
Avoid quirky designs and interiors, as these will limit your sales market
Keep your project in context – a street of three-bedroom homes at £200,000 each will not be where buyers look for a five-bedroom house at £350,000!
Small elements of structural work rather than just cosmetic changes should be looked for. Loft conversions, digging out cellars and building extensions are real value adding winners.
Don’t over-specify, e.g. taps from builders’ merchants are cheaper than designer ones, but don’t cut corners either. Pick the best bathroom suite and kitchen that you can afford – within reason that is.
Buyers prefer neat, well-maintained gardens that they can change when they move in - not over-elaborate and landscaped areas.
Finally, some people advocate that you should start marketing before completion - as potential buyers may wish to finish the property in their own style. If however the finished product must be seen to fully appreciate the quality then wait until all is done.

So there we have it. You’re step by step guide on the profitable business of house renovation and sale.

My advice?

Stick to what you know, only invest if you can afford to lose, and buy only when you can visualise the end product and only if that end product is somewhere that you would be happy to live.

Best of luck.