We're forever seeing mistakes being made by property investors and developers - even the so-called experienced ones - so we wanted to share the top 10 worst mistakes we see constantly being made in the hope that it will save others from doing the same!
We’re all tempted by the idea of buying a house, doing it up and selling it for a huge profit. Sadly it’s not as easy as it appears. It can be very easy to underestimate the cost of the build and the time it will take to complete. Please have a read of our our top 10 and if there's anything you want to add please comment below...!
Buying in the wrong area (suicide)
This is one of the most basic errors some investors and developers make. They believe it will be the next up-and-coming area but if it’s not a nice place to live, why will anyone want to spend a fortune buying there? Houses on or off busy main roads and those in areas with poor transport links, for example, are always going to sell for a discount. When we evaluate a project we analyze it against the S.T.A.R - Schools, Transportation Links, Amenities and Revenue (surrounding shops and businesses). When a property matches all four, it's a safe bet it will always possess strong rental demand.
Paying expensive rates for finance
Don’t be tempted to borrow more than you can afford, no matter how much money you think you’re going to make. Always shop around for the best possible deal and be realistic about how much the whole renovation project is going to cost you and the time it is going to take.
Getting fleeced by Bob the builder
Your renovation project is only as good as your builder – so scope out their work first and get references from past clients. We tend to use trusted trader and my builder websites when looking for contractors as both sites give you their previous reviews. Before giving them the go ahead, make sure they've signed a fixed price contract with a delivery deadline and clear penalties to them should they delay the completion beyond the deadline – without this it is easy to get ripped off if the build continues for longer than expected. It's a necessity to obtain their company number, CIS number, insurance documents, and make sure they're VAT registered because dependent upon the project, you'll be able to pay 0% to 5% VAT.
Yes, there are cheaper, faux versions of all the handmade tiles, oak floors and composite work surfaces used in the most expensive developments, but they are to be avoided. As tempting it is to buy the cheapest of everything, potential buyers will notice immediately if you cut corners. Even if your budget is small, choose appliances, fixtures and fittings because you know they will last, not because they resemble something more expensive. And don’t scrimp on the exterior – the majority of buyers will decide if they want the property before they’ve stepped through the front door.
Getting carried away
It’s equally unforgiveable to over-design and specify. Buyers often get put off by lavish marble bathrooms with crystal taps and silk carpets accompanied by red walls. Keep your feet on the ground and go for a clean, neutral fresh finish rather than anything too fancy. White walls, oakwood floors etc... You get the drift. WE recommend that you set yourself up a Pinterest page, create a mood-board for each project and pin all the clean neutral fresh finishes you can find so the next time you're putting together the schedule of works and finishes, you simply share it with your contractor.
Getting too personal
Inflicting your taste on a project alienates buyers. Aim to keep rooms as bright and light as possible, giving buyers a blank canvas on which to project their own ideas. Some developers like to stage a property in order to set the scene for any potential buyer to be able to imagine what their lifestyle would be like should they live there and this is a great way to potentially increase the asking price.
Cramming a house with bedrooms
Contrary to what many developers think, more bedrooms don’t necessarily make for a more valuable house. Buyers want quality space rather than cramped living conditions – bedroom wardrobes and dressing areas should be prioritized over irrelevant box rooms. It's important to focus on the layout of the project, ensuring that the rooms flow together and there is a balance of entertaining space, living space and bedrooms.
Allowing emotion to kick in and rushing in
So keen are newbies to make a quick buck that they often start work without proper plans – or planning permission. It's important to make sure you have all the necessary paperwork before you start work and don't rely on other people's word - call the local authority yourself; they're more than helpful. You don’t want there to be any problems when you come to sell.
You might think your house is a million times better than when you bought it but this doesn’t necessarily mean it’s worth a million times more. If your house is on the market for too much money it will sit there and go stale in today’s market - a house gets its most exposure in the first 30 days of putting on the market so it's vital that you achieve a sale during this time hence why pricing it right is essential to achieve your exit. It’s a good idea before buying any property to get a verbal valuation by at least three estate agents – and ignore the one who comes up with the highest asking price. Always base your numbers on the lowest possible price.
Picking the wrong time to sell
Your bank manager might be breathing down your neck but it’s a bad idea to launch your house on the market outside the optimal selling seasons of spring and autumn. In winter everyone is busy with Christmas and in summer they’re on holiday so you’ve got to time it right.
Any other common mistakes you'd like to add to the list? If so, please comment below!
Thanks for reading,
The Estateducation Team.