I'm inheriting a property which needs a lot of work done to it. I can either sell as it is or develop it myself and then sell. If I develop it myself I will need to borrow money.
Anyone any experience of a similar situation? The questions I have particularly are; where is the best place to borrow from for such a project and to what extent should the property be developed (i.e. how to maximise the profit)?
Any pointers to information sources would also be useful as I haven't been able to find much that applies particularly to my situation.
Work backwards. Find out what would bring in the most return on the property in that area. Cost it up, and then find how you get the finances if it is worth it.
You perhaps need to do what is known as a "residual valuation" - ie calculate all your costs and outgoings in getting the work done, then factoring in cost of borrowing etc, then you will get an idea of the potential profit.
It's a reasonably complex calculation and sould only be done by someone with experience. If you get your costs wrong, then you are stuffed.
You really need to know how much work needs doing and what this will cost, before you do anything. Its a waste of time borrowing money and wasting time for a maginal profit. You may be better off just selling it now and let someone else take the risk
Most lenders will not borrow without a viable proposal from you, and if they do, then the intrest rates will reflect their risk.
I would suggest you spend a few hundred £s now on a proper survey and work schedule, and then get your quotes for the work.
With regards to finance, then a mortgage or buy to let mortgage would be better than a business or other loan. It just depends if a lender will borrow on the property in its current state.
Also consider a partnership with a local builder or other person with the finance to do the work.
Depends what you mean by 'a lot of work' but you'll almost certainly make more dosh if you do it up before selling. If you sell as is, you'll likely sell to someone who will do the work, and who will then sell on to somebody else at a handsome profit.
If the property is mortgageable, you could mortgage it to raise the money; but it depends on your financial situation - there might be cheaper alternatives.
Get a few valuations as it stands now, and ask what it'd be worth once done up to "magnolia and gloss white" standard. Then work out a rough figure, including your time, and do the math.
"In need of modernisation" houses don't sell as fast as "ready to move into" because obviously the market's smaller for those who can afford to stay elsewhere while it's fixed, but if the location is right then even these can go for silly money. Barns with OPP around here - 150-
250k, and mostly go by auction or sealed bid.
A normal mortgage on the property as it is now ought to bring in enough to fix it, and just hope it sells fairly quickly.
Personally, keen as I am, I'd have to have quite a bit of incentive to consider renovating a house myself even though I'm capable of doing most of it. The financial side is always a worry which I've seen can bring on a whole heap of stress.
Whatever you do, don't secure anything on your current house or risk your own stuff yourself. Costs can escalate out of all worth ("oops, just found a mineshaft, boss!") once you start poking around.
Sorry to be doom and gloom, but gift horses often have woodworm.
And if you consider diying it - don't it takes ages to do stuff that looks simple and if you work full time and are anything like me half the time you can'd be arsed after a full day at work. I'm not in it for profit just a cheap place near to work to live and my "lodgings" while I do it are free. I don't havea budget just what I can afford as I can afford it but costs do mount up for even the basics which you will probably need.
Having said all that if you want any wrecking doing then give me a call coz i'm good at smashing stuff. ;-)
Worth getting a project manager type of assesment as to it's viability. If you are in the Yorkshire region I can highly recommend Lightly & Lightly (lightly.co.uk)
Britanic Money do quite a good 'developer' type mortgage at a slightly higher than residential rate.
Much as it pains me to recommend anything by the woman, Sarah Beenie (?sp) who presents the "Property Ladder" programme on C4 has also released a book called, surprisingly enough, "Property Ladder". It's pink, it's totally patronising, the examples are superficial and it's a bit expensive for what it is, but there *is* some useful basic information in there which you may find helpful if you've never done anything like this before. Oh yes, and there's a new series starting next week.
The best bit of advice *I* can give is to make sure you understand the housing market in the area of the house, and are reasonably confident that you know what it might be like in 3 or 6 months when you've finished the work.
Perhaps your local library has the book or can obtain it for you?
A cautionary tale. A lovely little timber framed hovel near me was inherited earlier this year. The inheritor rewired, put in a basic new bathroom, a nasty cheap new kitchen, covered the inside with emulsion paint and the outside with masonry paint and put it on the market at a price suitable for a good condition chocolate box cottage.
I won't buy it because I don't know what problems have been covered up and I'm not paying for bodge work - damp can get expensive in a timber frame. No one else is buying it either probably cos it has that 'done up to sell' feel.
Hopefully the vendor will accept a more reasonable price in a couple of months when we've had rain and the faults start to show up. You don't want to get caught in that position.
Anna Who is still without her dream chocolate box hovel
-- ~~ Anna Kettle, Suffolk, England |""""| ~ Pargeting, decorative and traditional / ^^ \// lime plasterwork |______|
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