Refurbishing and renovating a house as a property developer is all part and parcel of the job. However, the cost and ROI (return on investment) play a key fact into how much time and money developers put into properties. Property refurbishment is the key to your success in property developing and helping to expand your portfolio. Whether you are an experience property developer or a buy-to-let landlord looking for your way into the market, refurbishment management is something you need to have a key insight into for successful ROI and profit.
With any property, holding back on refurbishment needs and maintaining repairs is not a cost-effective strategy. By tackling the refurbishment projects first will most likely bring those maintenance bills down. To start off your refurbishment project you need to plan well and know exactly how to refurbish the house to your budget. By being strict with the budget you set on the refurbishment, that is the first step to managing the costs that renovation introduce.
Know Your Target Buyers
Before starting any refurbishment plans you must know your target buyers. This is important as knowing who you are trying to attract to buy the property will help you make your plans for the designing and spaces within the property. If you miss some important USPs (unique selling points) within the house, your target tenants may not be displaying as much interest as you had initially hoped for. You don’t want to be spending money on elements to a home that won’t be attracted to your target tenant, as ultimately, that is money badly spent.
If you’re renovating with first-time buyers in mind, this will indicate the work you need to do. However, in comparison, renovating a house if your target tenant is a family of four will see you doing very different work. By knowing your target buyers and their overall selling points in a property, you can work towards developing the property to the standard and want of the target buyer.
Know All the Costs
When planning for a refurbishment project on a development property it is key to know all the costs that are applicable to make sure you are within your budget set. Elements to take into consideration is planning permission, tax implications (stamp duty land tax), construction costs, professional fees (engineers, plumbers etc.) and any development lending fees or repayments.
Setting a budget and knowing what the key selling points are for your target buyer will keep you in line with what refurbishment ventures you should take on. Another element to take into consideration is the added value that will be put onto the property from the renovations that you do throughout the property. A loft renovation can increase the value of a property by 10.8%, and a kitchen refurbishment can add 8.2% to the overall value. Modernising the bathroom can increase the value by 4.2% and new roofing will most likely increase a property by 3.1%. So, the correct renovations will ultimately give you ROI and attract the right buyer.
Managing the Cost
Ultimately it is down to you as the property developer to tie everything together and making sure you have enough money in the bank for any unexpected collateral. The most important rooms within a property for most buyers is the kitchen area and living areas, getting the essentials right first is most important, but as a fore warning do not get carried away! Property development is for profit, and although it is fun, remember the finish line is selling the property to the right buyer with good profit made for yourself. Another factor of managing the cost is to keep in mind the maximum value that a property can achieve, the ceiling value. You don’t want to be spending a fortune on renovating a property that won’t reach much more value due to other elements such as the location.
Taking everything into consideration the best way for a developer to manage refurbishment costs is to plan properly and budget wisely. Preparation is everything when it comes to refurbishing a property. By planning for each and every obstacle that you could encounter and sticking to a budget will make refurbishment costs manageable for any property developer.