Buying a house to renovate means seeing past its flaws to its potential. Do so, and it presents an opportunity to create the home you want, or one that’s more energy efficient, or that you can make money on.
However, there are issues additional to those that come up when you’re buying a house that doesn’t need extensive work. A doer-upper requires careful assessment from a financial and practical point of view so you can be sure it’s a viable project for you.
To help you weigh up the issues involved in buying to renovate, we‘ve put together a guide with the details you need.
Where to look for renovation opportunities
If you’re looking for a home to renovate, it can be easier to start off with a specialist site like Plotfinder.net. You can also browse the major property portals like Rightmove or Zoopla. Think about what type and size of property you want to renovate as well as where it should be to narrow down the search. You might find a renovation project through buying a house at auction – but in this case bear the differences in the buying process in mind.
It’s also worth visiting estate agents where you want to buy to let them know what type of project you’re looking for.
Why buy to renovate?
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There are a number of reasons why you might buy a house to renovate. First, it allows you to make your own choices among kitchens, bathrooms and more without the concern that comes with a renovated home of not getting your money back if you change things.
Alternatively, if the plot allows, it means you can buy a smaller home and expand it to the size you need. Equally, it’s an opportunity to create a home that’s energy efficient. You might also buy in order to sell at a profit, although this depends on careful management of the project from start to finish.
In many cases, it's the allure of a lower price bracket that draws many purchasers in as you can expect to see substantial differences between the price of a potential renovation and a finished home.
However, that does depend on where you live and if your 'guestimates' as to the cost of the work involved are accurate. Plus, there's the risk of prices falling in the future or you uncovering more work once you start renovations. All of which need to be taken into account and why a contingency budget is essential.
Assessing a house to renovate
There are plenty of advantages to buying a house in need or renovation, but it’s not a project to be taken on lightly. Below are the factors you need to think about.
Price and potential costs for renovation
The price you should pay for a house in need of renovation needs careful calculation.
“Start by researching the area to determine the ceiling price for fully renovated homes on the same road or nearby,” says Robin Edwards, partner at Curetons. “Tools like Rightmove, Zoopla and the Land Registry can provide recent sold prices. It’s also important to understand property trends in the area, such as whether prices are rising, static or declining, and consider factors like upcoming developments or improved transport links.
“Next, evaluate the property’s current asking price by comparing it with recent sales of similar unrenovated properties,” he advises. “Look at how long the property has been on the market, as a longer duration could signal an opportunity to negotiate. Calculate an acceptable offer, ensuring you leave room in your budget for unexpected renovation costs.”
Don’t forget to factor in the hidden costs of buying a house, plus rent if you’ll need to do so while renovating.
“To determine the potential profit, subtract your total costs (the purchase price, renovation cost and fees) from the estimated resale value,” explains Robin. “A professional property developer would typically aim for a profit of at least 20 per cent, as this accounts for the time, risk and effort involved. For example, if the ceiling price is £500,000, and your total costs amount to £90,000, you would aim for a purchase price no higher than £330,000 to ensure an adequate profit.”
Calculating the cost of work
Assessing the likely costs is crucial to your calculations. Be thorough when viewing and don’t forget to count in the big-ticket items that bump up costs such as windows, boiler and radiators and electrics.
While you should get a survey, look for structural issues when you view such as big cracks in the walls inside or outside, gaps around windows or doors, and look and smell for signs of damp.
If in doubt, or you are looking for a big project, it's usually worth taking a builder with you to a second viewing. They will have an expert eye that can spot issues you may not recognise. Plus, they'll be able to give you ballpark figures for fixing the problem.
The searches and reports carried out by your conveyancer can also alert you to other costs. Drainage surveys for example may identify the need to replace an old septic tank, or highlight drainage runs that could be problematic if you're considering building an extension.
Electrics may be substandard adding rewiring into the mix, and if you're considering renovating a listed building or buying in a protected are such as a national park or conservation area, this will add in extra restrictions and potential additional costs for traditional materials.
Other costs to consider, “include professional fees for architects or planning permissions, and account for VAT if applicable,” says Robin Edwards. “It’s wise to set aside an additional 10 to 20 per cent of the renovation budget as a contingency fund for unforeseen costs.”
Robin Edwards is a partner at property buying agents Curetons and has been working in prime residential property for nearly 20 years. He regularly advises clients on the purchase and development of properties, including on the potential of renovating and extending their homes.
Feasibility and funding
Calling in pros for quotations as well as getting a survey (see below) will allow you to see if your plans are feasible. However, if you will need a mortgage when buying a house to renovate, note that it might be more complicated than for a property that doesn’t need extensive work.
“Most high-street lenders will only lend on properties that are habitable, which usually means having a kitchen and bathroom,” says Amadeus Wilson, head of short-term finance at mortgage broker SPF Private Clients. “With any kind of renovation project, it is almost always the case that you will require specialist funding, such as a self-build mortgage if you are starting from scratch with a plot or site with a derelict building that you plan to knock down, or bridging finance.
“Some specialist mortgage lenders offer renovation mortgages,” he says. “These mortgages work in a similar way to a self-build mortgage with funds released in stages as the work is done and the property increases in value.
“Bridging finance is another option; this is arranged via a specialist broker and you will need a defined exit strategy to repay the sum borrowed. This may be selling the property once it is renovated or remortgaging onto a standard home loan if you plan to live there yourself, or a buy-to-let if you are going to rent it out.”
Amadeus Wilson is head of short-term finance at mortgage broker SPF Private Clients. He has been helping clients buy property at auction since 2018. Before that, he worked as a mortgage broker for the previous five years.
DIY vs professionals
DIYing is possible if you have the skills but unless renovating is your occupation then it will have to be fitted in around work, slowing the project down and adding to the cost of renting if you need to do so while the work is carried out.
Otherwise you will need to find a builder with the right experience and skills for the project. A building contract is important and should include a date for completion.
Mistakes people make when buying a house to renovate
There are some common mistakes that come up when people buy a house to renovate, including not getting a survey, and taking on too big a project in financial terms but also duration.
Failing to calculate costs carefully can lead to being unable to complete the project and not having a contingency fund is a common error.
Rushing into the renovation can also be a mistake. If the house is habitable, then living in it for a while will really help you to determine how best you can improve the layout and function to meet your needs. What looks good on paper isn't always the same in reality, so take your time before finalising your renovation plans.
FAQ
Why do I still need a survey if I'm renovating?
It’s prudent to get a survey when you’re buying to renovate despite the fact that the property will undergo work. “Assuming that the building work you’re planning will press the reset button on your home’s current condition is risky,” says Charlotte Whincup, a director of Bloom Building Consultancy. “Even if you intend to replace much of the existing fabric with new materials, it’s important to know exactly what state the property is in before you start.”
The most detailed type of survey is worth the cost, according to Charlotte. “A building survey will flag up any issues that a less detailed inspection might miss, but which could impact both your renovation plans and your financial position,” she says.
Charlotte Whincup is a director of Bloom Building Consultancy, and a chartered building surveyor with a background in architectural environment engineering. Charlotte has extensive experience of working with properties in the high-end residential, industrial, commercial and retail sectors.
Understanding the house renovation costs you might face will help you assess whether you want to buy to renovate, and take a look at these expert tips on how to renovate for profit, so you can avoid investing in a money pit.
EDITOR’S NOTE: An earlier version of this article included a quote from a purported expert whose credentials we have not been able to verify. The quote has been removed. We regret this lapse in our verification process and have updated our internal protocols to reduce the risk of recurrence.
