The idea of buying an old house that’s fallen into disrepair, and doing it up so it looks as good as new, has a lot of appeal for many people. It’s almost always cheaper than buying a brand new house that’s ready to move into, and in addition, it’s a great way to get exactly what you’re looking for in a house. For people who enjoy such work, the entire renovation project itself can be extremely satisfying.In addition, buying and renovating can also be a great investment, at least as long as it’s done wisely.
However, buying a home for renovation isn’t something to be taken lightly. It’s a long-term project that that will eat up a lot of your time and money, and therefore requires a lot of serious thought and planning. This is probably the most important piece of advice for anyone thinking of buying a home and renovating it. You need to think through every single aspect and plan it in detail, from your budget to the location, and from contractors to building materials. It can (and probably should) take you two or three years of research and preparation before you actually get around to buying your house and starting to renovate it. In addition, remember that a renovation project will almost always run into trouble along the way. It’s important to account for this in your budget and your timeline. If you’re lucky enough to have everything run according to plan, consider it a bonus.
In addition, here are a few more things you need to think about if you’re considering buying a home for renovation.
What’s your financial situation?
This is of course the most obvious consideration – figuring out what you can afford to spend on a house and then on renovation. Many people don’t have the money to either buy a house or renovate it on their own. Some might be able to put their own money into the renovation, but need additional financing for the purchase of the house. Figure out what your options are for financing the purchase and the renovation. Look at loan options, and find one that gives you the best interest rate. You can also take on the renovation as a long term project, doing it bit by bit, as and when you are able to save up a bit of money. Of course, this only applies to renovations that aren’t urgently required – if the wiring is a mess or the roof is leaking, you will need to be able to put together the money and fix these issues right away.
Is it an investment or a home?
A lot depends on whether you’re buying a house as an investment or to live in. If you’re buying a home as an investment, everything needs to be done with the aim of having the widest appeal and giving you the best returns. You need to choose a location that is reasonably popular, so that you don’t have trouble finding buyers. You also need to make décor choices according to what will sell, rather than what you think looks good. Quirky or highly personalized choices will usually find few buyers. People will be unwilling to pay a lot for a house if they need to do a bit of renovation themselves.
Trends are also best avoided – what’s hot today may well be stale and outdated three years from now, which is likely to be when your house is ready to hit the market. The same rules apply if you plan to rent your house, rather than resell it. A house with a lot of character is great if you’re living in it. For everyone else, it could be a problem. It’s best to stick to safe, classic choices like dark wood and light paint. However, if you plan to live in the house yourself, especially long term, you can feel free to express your personality and aesthetic sense through it.
How much will the house cost? How much will the renovation cost? Will the house be worth what you spend on it?
When you’re considering buying a house, get it assessed by a professional, so that you have a clear idea of what it’s worth in its current state, how much it’ll cost to renovate it, and how much the renovation is likely to improve its value. Focus on the renovations that are most essential and practical, rather than renovations that you want for reasons of aesthetics and style. The façade of your house is the one area where aesthetics must be prioritized – the better the façade looks, the more likely you are to find buyers and to get a good price. With everything else aesthetic, either leave things as they are or go with the cheapest option that’s not shabby or of poor quality.
Structural problems and issues with plumbing and electricity absolutely must be addressed. Focus on the bathroom and kitchen, because these two spaces tend to make or break deals. Generally, it’s recommended that renovation costs shouldn’t exceed 10% of the cost of the house itself. If you’re going to spend more than that, you need to have a good reason to do so. You can push this limit a bit if you’re sure that it’s going to increase the value of the house enough, but it usually doesn’t work out so well. For example, if you spend 50% of the cost of the house on renovating it, you’re unlikely to find a buyer to pay 150% of what you paid for the house, which means you may not even cover your costs, let alone make a profit. If you really have your heart set on a house that needs a lot of renovation, try to negotiate for a lower, more suitable price.
What’s the neighborhood like?
Look at how the house you plan to buy compares with the neighborhood it sits in, both in its current state and after renovation. The renovation will of course push the price of the house up, so you should ideally be buying a house that’s cheap for the neighborhood. Once you’re done, the house should be at least on par with the ones around it, if not a bit cheaper. This is especially important if you’re buying a house as an investment – you don’t want to end up with the most expensive house in the neighborhood. People who can afford such a house will usually be able to afford living in a better neighborhood, so there’s no reason for them to choose your house. It’s always easier to sell (or let) the cheapest house in a neighborhood than the most expensive house in the same neighborhood.
Is the renovation going to be visible?
This might seem like a strange question, but it’s particularly important if you’re buying the house as an investment. The price that you’re going to be able to get for your house will depend on what people can see. Invisible improvements, no matter how useful or even crucial they are, don’t usually do much for the value of a house. Buyers typically don’t pay much attention to things they can’t see, and won’t be willing to shell out much money for them. So, for example, if you’ve spent a lot of money on fixing structural problems or redoing the wiring of the entire house, you may find it difficult to recover your money. Of course, this doesn’t mean you should ignore such issues. Although buyers are unwilling to pay much of a premium for such renovations, they’re also unwilling to buy a house that’s badly in need of them. Besides, structural and electrical issues are problematic in themselves, and potentially unsafe too.
Is the renovation going to be legal?
If you’ve hired a professional to assess the house and have discussed your plans with him or her, this aspect will be covered, but it’s still worth pointing out. Renovations can sometimes involve work that requires special permissions from local authorities. For example, changes such as enclosing a balcony space, knocking down a wall, building a mezzanine floor, extending the boundaries of your house, or installing a pump for water may or may not be allowed under local regulations, may require special permissions and paperwork, and may also involve some tariffs. Find out whether what you’re planning is actually possible and permissible, and whether the permissions are already in place or will need to be obtained by you. If you need to apply for permission, find out about the process and the costs, and factor these into your budget and schedule.
How much of the renovation will you be able to do yourself?
Anyone who buys a house with the intention of renovating it is probably doing so at least partly because they’re on a tight budget. Hiring a contractor to do all the work will always strain your budget, and will sometimes send it spiraling out of control. It’s best to consider how much of the renovation work you can manage yourself. Of course it’s also important that you know what you’re doing, or else you could hurt yourself or cause damage to the house that will then need to be fixed professionally. In both cases, you’re not going to end up saving much money at all.
Make sure that you have the right gear and tools, and if possible, rope in some friends and family to help out. In addition to saving a decent amount of money, a DIY renovation is a lot of fun for people who enjoy working with their hands, especially when it’s a collaborative effort. If you do end up getting a contractor for some or all of the work – and most people will, since few have the skill or time to handle every aspect of renovating a house – make sure that you find someone reliable. A recommendation from friends and family is the best way to go, but you can also look online, read reviews, speak to previous clients, and finally, thoroughly discuss every aspect of the renovation with the contractor and have a contract and other paperwork in place. Also remember that you can’t simply leave everything up to the contractor. It’s essential for you, as the homeowner, to supervise the renovation. The more regularly you’re able to check on progress, and the more time you’re able to spend at the site, the higher the chances are of everything proceeding according to budget and schedule.
Is this a project that’s meant for you?
Renovating a house can be an extremely exciting and rewarding project, but it’s not meant for everyone. It takes a large amount of time and effort to do it correctly, from the planning and budgeting to getting your own hands dirty and regularly supervising the contractors. The entire process can take years – three years of planning and research plus at least one year of actual renovation work is the minimum amount of time you’re going to be looking at, and many renovation projects go on for longer. There will be stresses and frustrations along the way, and something or the other will almost certainly go wrong.
If you’re buying a house to live in, you also need to consider where you will live while the house is being renovated. Living for years in a house that’s unfinished and always has work in progress isn’t everyone’s idea of fun. You should think about the extent to which renovating a house fits with your temperament and lifestyle. It may be better for you to spend the extra money on a house that doesn’t need renovation, or a house that requires only a minimal amount of work.
Have you bought a house for renovation? Share your experiences in the comments!