Property prices are falling and are still expected to fall further. If the property needs renovating then selling it in the current times will be even harder simply because there are fewer buyers and fewer mortgages. Sellers are worried about the extent of how much they still have to fall and therefore are very keen to sell and accept a very low offer. However, with the US government’s bail out plan ($700 billion if agreed) and new support from the Central Bank and Bank of England the financial markets are expected to stabilise. In turn confidence will return and banks will gradually increase their lending to each other. When this filters through to the high street, mortgages should begin to be more readily available and there will be more buyers and property prices will start to rise. Buying before this happens is your opportunity.
Firstly you need to know how to find a property to renovate. At the current time more homeowners are defaulting on their mortgages and as a result repossessions are on the increase. The unfortunate homeowner wants to get back as much money as they can and generally sell or take everything they can from the property – sometimes whole kitchens and bathroom suites are removed before the bank takes back the property. More properties are being sold at auction yet there are fewer buyers and as a result the property is sold very cheaply. Remember to gather as much information as you can prior to the auction and do your homework on the auctioning process.
Another way to buy property is to use a company who do the searching for you. Instead of checking what’s on the agent’s books subscribers receive an email containing properties that require renovating that are being advertised by estate agents all over the UK.
Throughout the project, have a budget and equally important, stick to it. When buying any item, shop around, use the internet to find the best deals. Do not choose bespoke fittings; always remember that you are renovating to make money from it. You are not doing it to your own personal taste; you are doing it to sell in the future. It needs therefore to be simple and neutral. Of course, it may be more fun to decorate and fit the property out in your own taste – but beware, set limits.
Renovation should not be costly. A budget renovation could be priced around £15,000 to cover redecoration, a new bathroom suite and a new kitchen. If you are buying carpets, buy it “from the roll” – this means using the same carpet throughout the house which is cheaper. If you are planning to rent out your house until the market picks up buy a washable, stain-resistant carpet which can easily be freshened up with a carpet cleaner. The only exception to this is to laminate the downstairs, which, if bought wisely, is a cheap option.
To make the most of this your opportunity you need to have a mortgage in principle to show the seller that you are serious (or even better, be a cash buyer) and then offer a very low price. Once you have reached a deal, start planning your renovations so that you are ready to start as soon as you have the keys. Aim to turn the property around in a matter of weeks and rent it out (or live in it yourself). When banks start lending to each other again mortgages will be easier to get and buyers will want to snap up the cheap property. As soon as this happens prices will start to rise. Plus, by 2012 there is expected to be a shortage of property as builders have greatly reduced their building programs and demand will therefore outstrip supply. These factors could in fact lead to another property boom.
Then you can sit back and judge when to sell.
Disclaimer: All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986. The article is based on the writer’s personal view and you are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.