Sonia Pash, co-founder of Temza, an Interior Design and Construction Studio https://temza.co.uk/ shares her best advice on how to buy property for investment if you are wanting to refurbish, and what to watch out for before committing to the purchase.
Do your home work
When buying property of any kind for investment you need to consider and research many factors including:
- general area
- micro location
- the current property market situation
- the type of tenant who is likely to rent or the type of potential buyer
- your own finance options
The aim of an investment property is always to maximize yield and/or capital gain. Whether you are planning to rent it out for long term or refurbishing and selling on, the principles are the same and, in both cases, and you need to know your numbers very well, review your costs and risks and analyse various potential scenarios. I specialise in spotting potential and adding value through interior design and renovation, and here are my tips.
The single most important thing is to do your numbers, review your numbers, review again and add contingency. Depending on the project and your experience add between 10 and 20% for contingency. When doing your appraisal don’t forget to include fees for numerous consultants, such as planning consultants, architects and interior designers, party wall surveyors, agents fees, mortgage fees. It's a good idea to use a spreadsheet with formulas to enable you to quickly plug in all the potential costs and resale price to establish the level of your offer, and above which amount the investment stops making sense. If the numbers don’t add up, move on to the next project. Keep focused and make no emotional attachments.
In the most simplistic terms, value can be added in three different ways:
1. Structural alternations, as in adding actual space, through creating an extension, doing a loft or a basement conversion or even by turning a garage into living space.
2. Full renovation, including change of layout, optimising the space or adding bedrooms.
3. Interior design, as in updating the finishes, flooring, kitchens or bathrooms to more practical and stylish design.
When choosing the property, be open-minded and consider all three above! The first option is the most complex and risky and it in most cases involves appointing an architect and obtaining a planning permission (which you might have to apply for multiple times if the council is reluctant), but it does provide the biggest uplift in the value of the property. It's also a lengthy process, so if you are considering it you might want to get the property tenanted while you are sorting out the necessary permissions and complete the design package.
Sometimes you can buy property with planning permission already secured, which is always a great bonus if you are looking to extend. It's also worth digging around a little if the previous owners did try to secure planning permission previously and if it failed for whatever reason. Check Planning Portal, speak to estate agent and the vendor to get as much information as possible.
Renovation and interior design are easier options which can be done within a couple of months and you only need to apply for license to alter the property if it's a leasehold which is a much easier and simpler process than planning permission. If you are buying a leasehold property you do need to check your lease very carefully as it might have clauses forbidding you from creating additional rooms or even to change the carpet to wooden floor.
Keep an eye on properties with lay-outs that can be modified. Adding a room or an extra bathroom will increase potential sale and rent. For example, by moving a kitchen into a reception room, there can be an opportunity not only to create a modern open plan living space, but also to add an extra bedroom to the property. Big bathrooms can be split into two by creating desired en-suite bathroom for one of the bedrooms. Under stairs space can be converted into shower room or WC. There are many options for improvement, which will depend on space available, baring walls location, plumbing lay-out and window positions.
Before you buy
Needless to say, you have to inspect the property well inside and out before you committing and visit it more than once, preferably at different times of the day so you might see it in a different light. If you can speak with the neighbours, definitely have a chat and try to get an idea of the area and anything they might flag up.
For your piece of mind, depending on the size of the project, consider getting specialists to take a look at the project before you buy: a builder, interior designer, engineer, maybe even plumber and electrician. They will give you more accurate costs estimate and see what you might not see. For example, here at Temza, we offer property assessment service for our future clients to make sure they know what they are getting into.