At Orchards of London we are often asked whether someone should consider renovating a property, either for their own occupation or for profit. The key is to ensure that the property and your renovation plans fit closely with your objectives in undertaking the work.
Planning is crucial. We have all seen those episodes of Grand Designs or Restoration Man when, two-thirds of the way through the project, the owners are running out of cash and maxing out the credit cards because they failed to plan ahead.
Buying a run-down or tired property and renovating and refurbishing it to live in is far more subjective, and the return on investment is possibly less crucial, as both the joy of completing a successful project and then the enjoyment of living in it can often outweigh any pure commercial imperatives. However, one thing people often fail to consider when contemplating a renovation project for their own use is the amount of their own time that will need to be expended to complete the project. For many, of course, this time is actually part of the enjoyment, but it does all cost. No one has yet managed to be in two places at the same time!
When considering a renovation as an investment project, one needs to start with a clear view of the end result. Is it a property to be renovated and then let for income, or is it to be sold for capital gain? If a project is not one’s only UK residence, then income will attract income tax and capital gains will attract capital gains tax. Knowing one’s position before one starts is vital.
TV renovation programmes often talk about the difference between the acquisition and the selling price as “profit”, but they often fail to take into consideration the costs of acquisition (survey fees, lawyers, stamp duty, etc.) and disposal costs (agents fees, lawyers, etc.). These can have a significant impact on the true “profit” from a project.
For investors, research and knowledge of the market is vital—what types of property are in high demand, and what level of specification will be needed? Produce too high a specification and you won’t get a return on your expenditure, too low and you won’t maximise your return and may find a property difficult to dispose of.
In west London, space is always of value; adding accommodation by way of a loft conversion or even installing a basement can produce an excellent return. Kitchens and bathrooms are key feature rooms and off-street parking is much sought after.
The rental market varies in different locations due to factors such as employment and transport, and just because a location is highly sought after by buyers doesn’t automatically make it ideal for rental investment; yields may be disappointing compared with other, supposedly less highly rated locations.
There is undoubtedly money to be made from renovating property, but it does require knowledge and skill—as well as a positive attitude to deal with the undoubted hurdles that come along.
This article is brought to you by Orchards of London. Our experienced sales and lettings teams work closely together to provide you with the right information and advice to help you plan and implement your renovation project and make it the success you require.
