Why buying to renovate and sell is a good idea
Given the booming property prices in India right now, many people are taking to the strategy of buying a property cheaply, doing it up, and selling it up for a tidy profit. TV shows such as “Homes under the hammer” are great for some tips on how to go about this.
If you have the disposable income, then certainly, this is an option worth exploring as the room for profit is substantial. There are however a few tips that that you should follow, which will ultimately help you make the right decision.
1) Do your homework!
Research is of paramount importance. You should check to see how long the property has been on the market for. Typically with this type of “investment” properties, those which have been on the market over three months suggest that it would be a bit of a gamble, and more than likely, the level of profit would be minimal.
2) What type of property should I look for?
Having a look at classified ads websites is more than recommended to have an overview on the market, but avoid a “money-pit” at all costs! Don’t over-invest in a property in which you won’t be able to re-coup your costs. If you’re looking at an older property, be prepared to do some modernisation – upgrading wallpaper, carpets, kitchen, bathroom and perhaps installing a new boiler. Sprucing up the garden will always help you add to your profit margin.
It’s best to make as many visits as possible with different tradesmen to give you a better understanding of what you’re letting yourself in for and what the total investment is likely to be. You’ll soon be able to understand what your profit potential will be, and whether or not this is a project worthy of your investment, both in terms of money and time.
3) Expert opinion matters
Call in builders, pavers, roofers, gardeners, plasterers, damp specialists, plumbers and electricians who will more than likely give you a free consultation and estimates. This is essential to be able to get a proper view on the level of financial investment required. It will also give you a good understanding of how long it is going to take to renovate. You may be under time pressures so if the job is going to be larger than you had initially anticipated, it is probably worth considering another property.
Set yourself a budget and stick to it. Factor in some buffer and typically 20% of the total cost is a good contingency pot, because there’s bound to be things that crop up that will require addressing. Typically these things are picked up once the work has commenced and it is too late to back out.
5) Appointing tradesmen
Decide what work you want done and get your quotes in well in advance. Go through the quotes provided and select your tradesmen. Try to not make price the only deciding factor. It is good practise to go round and see other work that the tradesmen have done and contact references.
It is worth noting that he JCT is an independent body that has produced a standard contract for use between you and the builder. This is a robust legal document that avoids technical and legal jargon.
It confirms the precise arrangements for the work to be done: the price, the payment terms, working hours, insurance and guarantees and how to resolve disputes if they arise. It deals with how to make changes to the work to be carried out and how to deal with a builder who wants to extend the time taken for completing the work. In essence, it sets out clearly what's expected of you and the builder. It's a document that a reputable builder will want to use.
6) Project management
Ideally you should consider doing this yourself to keep costs down. Liaise with the builder and other tradesmen to ensure the project is running to plan and to budget.