Buying a run down house to renovate
Discussion
Anyone still doing this?
My Mrs has come up with the idea we could buy a cheap house thats in need of a full refit and spend a few months bringing it back up to standard and then selling it for a profit. Maybe look to complete on something around the end of the autumn and then sell it in the spring of next year.
I know it was pretty common to do but perhaps seems less common these days?
What are peoples thoughts who have / are doing it?
Would probably look to buy a 2 up 2 down at auction or an estate sale. Something thats clearly in need of work and that FTB etal would avoid.
My issues are
SDLT and CGT?
Structural issues
Damp and the like
Getting it cheap enough to make a profit after new kitchen / bathroom / floors
My limited DIY skills - I can do simple things but more advanced is prob beyond me
Anything that big needs official creds, i.e electric / gas will add £££.
Would we need to run via LTD?
Insurance?
Maybe going into a period of lowering prices which might trap us?
On the plus side we have:
Contacts with the trades and access to mates rates for a few things.
Access to trade prices still, not that it means much these days!
A cooling market so more stock,
Time (retired) so we could easily work several days a week on it.
Fairly cheap property in the local area
What is currently a strong ish FTB market.
Looking on RM / LR I think there is currently a gap of about £40k between run down stuff and freshly renovated.
It sounds like a lot but my concern is after all the work and fees etc might not be that much left over?
Any experts care to chime in?
My Mrs has come up with the idea we could buy a cheap house thats in need of a full refit and spend a few months bringing it back up to standard and then selling it for a profit. Maybe look to complete on something around the end of the autumn and then sell it in the spring of next year.
I know it was pretty common to do but perhaps seems less common these days?
What are peoples thoughts who have / are doing it?
Would probably look to buy a 2 up 2 down at auction or an estate sale. Something thats clearly in need of work and that FTB etal would avoid.
My issues are
SDLT and CGT?
Structural issues
Damp and the like
Getting it cheap enough to make a profit after new kitchen / bathroom / floors
My limited DIY skills - I can do simple things but more advanced is prob beyond me
Anything that big needs official creds, i.e electric / gas will add £££.
Would we need to run via LTD?
Insurance?
Maybe going into a period of lowering prices which might trap us?
On the plus side we have:
Contacts with the trades and access to mates rates for a few things.
Access to trade prices still, not that it means much these days!
A cooling market so more stock,
Time (retired) so we could easily work several days a week on it.
Fairly cheap property in the local area
What is currently a strong ish FTB market.
Looking on RM / LR I think there is currently a gap of about £40k between run down stuff and freshly renovated.
It sounds like a lot but my concern is after all the work and fees etc might not be that much left over?
Any experts care to chime in?
Your biggest issue as ever will be finding the right house and then getting it cheap enough to cover the refurb, purchase costs, any trades you need to get in and tax on the profit. Unless you are willing to put in a lot of hours or keep the house long term to rent out I think it will be difficult to turn enough profit to make it worthwhile.
gotoPzero said:
Anyone still doing this?
My Mrs has come up with the idea we could buy a cheap house thats in need of a full refit and spend a few months bringing it back up to standard and then selling it for a profit. Maybe look to complete on something around the end of the autumn and then sell it in the spring of next year.
I know it was pretty common to do but perhaps seems less common these days?
What are peoples thoughts who have / are doing it?
Would probably look to buy a 2 up 2 down at auction or an estate sale. Something thats clearly in need of work and that FTB etal would avoid.
My issues are
SDLT and CGT?
Structural issues
Damp and the like
Getting it cheap enough to make a profit after new kitchen / bathroom / floors
My limited DIY skills - I can do simple things but more advanced is prob beyond me
Anything that big needs official creds, i.e electric / gas will add £££.
Would we need to run via LTD?
Insurance?
Maybe going into a period of lowering prices which might trap us?
On the plus side we have:
Contacts with the trades and access to mates rates for a few things.
Access to trade prices still, not that it means much these days!
A cooling market so more stock,
Time (retired) so we could easily work several days a week on it.
Fairly cheap property in the local area
What is currently a strong ish FTB market.
Looking on RM / LR I think there is currently a gap of about £40k between run down stuff and freshly renovated.
It sounds like a lot but my concern is after all the work and fees etc might not be that much left over?
Any experts care to chime in?
I'd hesitate to call myself an expert, but we had a business that did this exact thing. My Mrs has come up with the idea we could buy a cheap house thats in need of a full refit and spend a few months bringing it back up to standard and then selling it for a profit. Maybe look to complete on something around the end of the autumn and then sell it in the spring of next year.
I know it was pretty common to do but perhaps seems less common these days?
What are peoples thoughts who have / are doing it?
Would probably look to buy a 2 up 2 down at auction or an estate sale. Something thats clearly in need of work and that FTB etal would avoid.
My issues are
SDLT and CGT?
Structural issues
Damp and the like
Getting it cheap enough to make a profit after new kitchen / bathroom / floors
My limited DIY skills - I can do simple things but more advanced is prob beyond me
Anything that big needs official creds, i.e electric / gas will add £££.
Would we need to run via LTD?
Insurance?
Maybe going into a period of lowering prices which might trap us?
On the plus side we have:
Contacts with the trades and access to mates rates for a few things.
Access to trade prices still, not that it means much these days!
A cooling market so more stock,
Time (retired) so we could easily work several days a week on it.
Fairly cheap property in the local area
What is currently a strong ish FTB market.
Looking on RM / LR I think there is currently a gap of about £40k between run down stuff and freshly renovated.
It sounds like a lot but my concern is after all the work and fees etc might not be that much left over?
Any experts care to chime in?
Your problem will be finding a property with any money in it, because there are still lots of people looking for them and most of those people are better connected than you.
You're also competing with people who want to live in the property and who are prepared to do the work for love.
When we were doing it, we had people finding deals for us and, even then, there were too few viable deals. The market then was FAR more liquid and yet we still struggled to sell some properties at a profit and often sold them back to the finder.
Also, the properties with meaningful profit in them were rarely those that needed a lot of work.
Tempting though the proposition seems, you are very unlikely to make a success of it long term, but very likely to end up stuck with a property that becomes a millstone around your neck. We're actively looking for investment opportunities and I would personally LOVE to go back to doing this sort of work. But even with the connections, access to the cash and the relationships to do it, we're still not doing it.
Thanks for that its good info.
What was the tax situation?
Do you think there would be money in it when done as a single person enterprise rather than a business?
Did you use trades for all the work or was it 100% out sourced?
For example I would do all the decorating and probably the bathroom myself.
I can do laminate and that sort of stuff.
Kitchen, mmm probably a bit beyond me but I reckon I might be able to do it.
The real issue is stuff like plaster, joinery, CH, electrics thats all not something I can do.
What was the tax situation?
Do you think there would be money in it when done as a single person enterprise rather than a business?
Did you use trades for all the work or was it 100% out sourced?
For example I would do all the decorating and probably the bathroom myself.
I can do laminate and that sort of stuff.
Kitchen, mmm probably a bit beyond me but I reckon I might be able to do it.
The real issue is stuff like plaster, joinery, CH, electrics thats all not something I can do.
I am not an expert but...
Many people are still prepared to buy project houses themselves and do it up to live in, and they are probably prepared to pay more than you as they're not looking for a profit.
Many are done in the nicer parts of town but the renovated properties are not worth what the developers expect, as the renovation was done on a budget and down to a cost, whereas the other properties which come up were done by homeowners and are to a higher standard. There is a large difference in what people are willing to pay for something with a high standard kitchen/bathroom, loved and lived in, and something which has just "been renovated" by replastering and throwing some paint around, with a cheap kitchen fitted.
That said, you're more likely to make a success of it if you're looking to buy flats and rent the property out IMO. Firstly the outlay will be less and also the standard of renovation needs to be lower. You're also less worried about the short term ups and downs of the market.
Many people are still prepared to buy project houses themselves and do it up to live in, and they are probably prepared to pay more than you as they're not looking for a profit.
Many are done in the nicer parts of town but the renovated properties are not worth what the developers expect, as the renovation was done on a budget and down to a cost, whereas the other properties which come up were done by homeowners and are to a higher standard. There is a large difference in what people are willing to pay for something with a high standard kitchen/bathroom, loved and lived in, and something which has just "been renovated" by replastering and throwing some paint around, with a cheap kitchen fitted.
That said, you're more likely to make a success of it if you're looking to buy flats and rent the property out IMO. Firstly the outlay will be less and also the standard of renovation needs to be lower. You're also less worried about the short term ups and downs of the market.
gotoPzero said:
Thanks for that its good info.
What was the tax situation?
Do you think there would be money in it when done as a single person enterprise rather than a business?
Did you use trades for all the work or was it 100% out sourced?
For example I would do all the decorating and probably the bathroom myself.
I can do laminate and that sort of stuff.
Kitchen, mmm probably a bit beyond me but I reckon I might be able to do it.
The real issue is stuff like plaster, joinery, CH, electrics thats all not something I can do.
I am assuming you're asking me.What was the tax situation?
Do you think there would be money in it when done as a single person enterprise rather than a business?
Did you use trades for all the work or was it 100% out sourced?
For example I would do all the decorating and probably the bathroom myself.
I can do laminate and that sort of stuff.
Kitchen, mmm probably a bit beyond me but I reckon I might be able to do it.
The real issue is stuff like plaster, joinery, CH, electrics thats all not something I can do.
gotoPzero said:
What was the tax situation?
We did it in companies mainly, so it was Corporation Tax for the most part. We were VAT registered, which became more complicated when we started renting out some properties, because residential rents aren't subject to VAT.gotoPzero said:
Do you think there would be money in it when done as a single person enterprise rather than a business?
Not really, if I am honest. gotoPzero said:
Did you use trades for all the work or was it 100% out sourced?
We were buying over quite a broad area, so we sourced appropriate trades locally when we needed them.gotoPzero said:
For example I would do all the decorating and probably the bathroom myself. I can do laminate and that sort of stuff.
Ii think a lot of people start like this, but all the time you're pushing a roller around you aren't doing something more profitable - like trying to find the next deal.gotoPzero said:
Kitchen, mmm probably a bit beyond me but I reckon I might be able to do it.
Lots of kitchen fitters about (of varying competence)gotoPzero said:
The real issue is stuff like plaster, joinery, CH, electrics thats all not something I can do.
And you probably don't understand the correct sequence of trades. When you're making wafer thin profits you don't need to be undoing stuff, because you were getting ahead of yourself.There is a lot of mileage in having a main contractor, who subs out the work. You have a contract with that one chap and the funk-ups between trades become his problem.
My view is that we're in a very difficult point in the cycle. EVERYONE is at it, it's a very mature market, the government hates anyone buying houses when it is not to live in, the cost of labour and materials is bonkers, the market is heading downwards, people are struggling to buy... I won't go on.
Thanks LB. Good to know, I think you are right - will give it some thought.
Just for ref I am retired so time is not an issue and re trades my business was similar to a BM so I have access to trades thats not a problem, just good ones..... mmm. I can also get materials cheap enough. I still have a couple of sources. Cheap enough to make a profit... I think thats where your point is a valid one!
I think the only other thing to mention, I would not be doing this for income so to speak. As it would not be a business there is no need to move onto the next project the second this one finishes, or get this one finished as I have 3 others on the go. So that might work to my advantage? Could also possibly rent out for a couple of years to offset the refurb and help with tax.
I think that might be the way to do it, if we do it as I think it might be hard to get something to turn a profit like you say.
I would also be doing this at the "affordable" end of the scale and probably in the slightly less desirable part of town where I do have a lot of old contacts esp EAs who used to have accounts with us via their property maintenance people.
Just for ref I am retired so time is not an issue and re trades my business was similar to a BM so I have access to trades thats not a problem, just good ones..... mmm. I can also get materials cheap enough. I still have a couple of sources. Cheap enough to make a profit... I think thats where your point is a valid one!
I think the only other thing to mention, I would not be doing this for income so to speak. As it would not be a business there is no need to move onto the next project the second this one finishes, or get this one finished as I have 3 others on the go. So that might work to my advantage? Could also possibly rent out for a couple of years to offset the refurb and help with tax.
I think that might be the way to do it, if we do it as I think it might be hard to get something to turn a profit like you say.
I would also be doing this at the "affordable" end of the scale and probably in the slightly less desirable part of town where I do have a lot of old contacts esp EAs who used to have accounts with us via their property maintenance people.
gotoPzero said:
Could also possibly rent out for a couple of years to offset the refurb and help with tax.
Keep an eye on the Renters Reform Bill. The government appears determined that private landlords will become de facto providers of social housing, with no right to evict tenants who pay the rent and behave themselves. You could end up with a permanent rental, whilst having the government imposing ever more outlandish demands upon you.Buying and renovating isn’t what it used to be.
Most projects now are priced at a point where the ‘profit’ is already in the asking price.
Say 3 bed mid terrace is £150k finished, needs £30k spending on it, years gone by this would have been ££90k-£100k with around £20k profit. Now they are priced at £120k-£130k.
That’s not to say there isn't the odd bargain out there but they are few and far between.
Factor in the ever rising material costs and the that labour is the highest it’s ever been, you need to be very experienced to actually turn a profit.
Most projects now are priced at a point where the ‘profit’ is already in the asking price.
Say 3 bed mid terrace is £150k finished, needs £30k spending on it, years gone by this would have been ££90k-£100k with around £20k profit. Now they are priced at £120k-£130k.
That’s not to say there isn't the odd bargain out there but they are few and far between.
Factor in the ever rising material costs and the that labour is the highest it’s ever been, you need to be very experienced to actually turn a profit.
Look up some old episodes of Homes under the hammer. 
It always amazes me as people can completely gut a terraced house and refit a new bathroom, kitchen, full rewire and decorate, new central heating for less than 12k.
Then they flip it, make a profit of 10k and have CGT to pay.
Hardly seems worth the bother, especially if they have done the work themselves.
Different story if they clear 50k.
It always amazes me as people can completely gut a terraced house and refit a new bathroom, kitchen, full rewire and decorate, new central heating for less than 12k.
Then they flip it, make a profit of 10k and have CGT to pay.
Hardly seems worth the bother, especially if they have done the work themselves.
Different story if they clear 50k.
I’d focus on maximising earning money how you do currently, then do up the home for yourself over time, build up skills/knowledge/tools.
So flip up the ladder using primary residence status.
Doing this as a business? Hmmmm. It won’t work unless you have cheap/quality trades on call, or do it all yourself.
So flip up the ladder using primary residence status.
Doing this as a business? Hmmmm. It won’t work unless you have cheap/quality trades on call, or do it all yourself.
The thing to always remember is - could you earn the same or more by just working?
eg, you have access to trades, materials, etc - why not just set up as a jobbing handyman? £20-30kpa would be fairly easy in the current market, you get to pick and choose the jobs you take on, and someone else is carrying (almost) all the risk.
Don't fancy working that week? Just ghost everyone or invent a dying grandma - you'll blend right in.
Rather than having to work 18-hour days because you're mortgaged to the hilt and need it sold, and all your trades have ghosted you because the sun's out and they'd prefer to be playing golf.
eg, you have access to trades, materials, etc - why not just set up as a jobbing handyman? £20-30kpa would be fairly easy in the current market, you get to pick and choose the jobs you take on, and someone else is carrying (almost) all the risk.
Don't fancy working that week? Just ghost everyone or invent a dying grandma - you'll blend right in.
Rather than having to work 18-hour days because you're mortgaged to the hilt and need it sold, and all your trades have ghosted you because the sun's out and they'd prefer to be playing golf.Xcore said:
Every ones a property developer these days. Most don’t realise how much of a nightmare living in one room at a time is. You need to get in with some estate agents to get first dibs on property’s before they hit the market.
I've always had the suspicion most of the ideal property never hits the market and that estate agents have regulars that get first dibs.Not the best time to be speculating, builder I know (owes me a lot of money) but has it tied up by playing spec dev in addition to his regular client work, that hasn't worked as envisaged.
I'm doing this, currently in the final stages.
I was lucky to find a suitable property where the opportunity came disguised as hard work & nobody else wanted to touch it. It's a lot bigger than the typical 2 up, 2 down property and came with various challenges that needed some innovative thinking to overcome.
As I'm living in the place I've had plenty of time to do it & as I have a lot of contacts I've been able to get both materials & labour at reasonable rates. I also have plenty of tools & a decent knowledge of what I'm doing. Nevertheless I've spent a lot of money, time & effort on the place.
I'll have made a decent amount of money if ever I decide to sell, some from the work I've done & some from rising prices generally.
Would I do it on a property such as the OP is suggesting? No chance. The extra SDLT & CGT will take a huge chunk out of any profit; labour & materials costs are currently very high & finance costs are the highest for many years. Unless you're experienced there's a massive potential for heartache & financial loss. Also just because you'll have a refurbed property to sell don't presume that there's an eager buyer deperate to take it off your hands. In the meantime the council will want their pound of flesh for doing nothing except interfering.
I'd add that your wife probably thinks it's a great idea as nothing is difficult to the person not doing the work.
I was lucky to find a suitable property where the opportunity came disguised as hard work & nobody else wanted to touch it. It's a lot bigger than the typical 2 up, 2 down property and came with various challenges that needed some innovative thinking to overcome.
As I'm living in the place I've had plenty of time to do it & as I have a lot of contacts I've been able to get both materials & labour at reasonable rates. I also have plenty of tools & a decent knowledge of what I'm doing. Nevertheless I've spent a lot of money, time & effort on the place.
I'll have made a decent amount of money if ever I decide to sell, some from the work I've done & some from rising prices generally.
Would I do it on a property such as the OP is suggesting? No chance. The extra SDLT & CGT will take a huge chunk out of any profit; labour & materials costs are currently very high & finance costs are the highest for many years. Unless you're experienced there's a massive potential for heartache & financial loss. Also just because you'll have a refurbed property to sell don't presume that there's an eager buyer deperate to take it off your hands. In the meantime the council will want their pound of flesh for doing nothing except interfering.
I'd add that your wife probably thinks it's a great idea as nothing is difficult to the person not doing the work.
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