Are you looking for a huge renovation project or a fixer-upper? Properties in need of renovation can be an economical option, but they can be difficult for DIY beginners. Here are some benefits and drawbacks to think about before you buy.
Advantages
Lower cost of purchase:
The cost is one of the main benefits. According to property experts including Brackley letting agents potential homeowners have the opportunity to purchase a home they might not otherwise be able to afford thanks to fixer-uppers. Due to the work that needs to be done, the asking price is typically far lower than the potential market worth. This is advantageous for first-time purchasers looking to start on the housing ladder or for those upgrading, such as from a one-bedroom apartment to a terraced house.
Tax reduction:
Stamp Duty is a type of property tax based on the sale price of the home. This means that a fixer-upper costs less to tax than a more expensive move-in ready property. Since first-time buyers no longer pay Stamp Duty on properties up to £300,000 in value, there is no additional benefit for them. They pay no stamp duty on the first £300,000 of the property’s £450,000 value and 5% on the remaining £150,000. However, some customers can save a lot of money. Additionally, Value-Added-Tax (VAT) can be claimed when a building is transformed into a home or when a run-down property that hasn’t been occupied in 10 years is renovated.
Greatly raises the value of a property:
A property that needs work has considerably more potential to increase in value than one that is already fully equipped. The projects with the highest ROI are those that renovate kitchens and bathrooms. Any kerb appeal upgrades, like a new front door, might increase the value. Swimming pools and decking, however, should be avoided because a refund is unlikely.
Improved neighbourhood:
A fixer-upper at a discount can be your ticket in if you really want to live in a more expensive neighbourhood but can’t afford the properties on the market. But make sure your remodelling job is done well and complements the other houses on the street. Otherwise, when it comes time to sell, you can have trouble making back your investment expenditures.
Ideal house:
Fixer-uppers offer the ideal chance to design your ideal house to fit your lifestyle rather of having to put up with someone else’s choice in decor. You might decide to make investments in the areas that are most important to you, whether that is a family-style kitchen-diner or a luxurious hotel-style bathroom. On a property that has undergone refurbishment, homeowners can stamp their unique style.
Disadvantages
Exceeding the budget:
Budget for the purchase price plus repairs and renovations when buying fixer-uppers. Modern plumbing, replastering, and electrical rewiring can raise the cost by tens of thousands. There can also be undiscovered issues, including dry rot. And that’s before you consider new carpets, painting, or decorating. Renovation projects often run over budget since there are bound to be delays and unforeseen surprises. Get price quotes from the professionals, such as electricians, plumbers, roofers, and damp specialists. It’s also a good idea to include a contingency fund in your budget of at least 15%.
Difficult to finance:
For properties in need of repair, getting a mortgage may be more challenging. According to several lenders, like HSBC, a home must be habitable with a functional kitchen and bathroom in order to apply for a mortgage for renovation purposes. In some cases, mortgage lenders will withhold money if you’re purchasing a house in bad shape. The term “mortgage retention” refers to this. The lender withholds a portion of the money until you have finished all necessary tasks. A surveyor might estimate the worth of a home at £200,000 but advise the lender to hold onto £4,000 for an electrical rewire. The homeowner might need to borrow money to make up the difference. When the project is complete, the lender releases the money held back and the loan becomes a regular mortgage.
Faulty DIY:
Even if there is a tonne of potential to increase the value of a dilapidated house, the project needs to be handled carefully. Be honest with yourself about your DIY abilities, the amount of time you have to devote to the project, and your financial situation. Leave the large projects, including plumbing, electrical work, and replastering, to the experts. A poor job can be expensive to fix and reduce a property’s value. A radical remodelling proposal may be thwarted by limited covenants, access rights, listing status, and conservation area designation. For older homes in need of renovation, a survey is always advised to obtain a complete understanding of the property’s structural state and the work that needs to be done.
Mortgage payment:
You could need to find temporary housing elsewhere if the house needs so much renovation that it isn’t inhabitable. This entails paying for a rented property or staying with friends or relatives, both of which can be stressful. Some people may not be able to afford a fixer-upper due to having to pay rent, a mortgage, and possibly a loan for necessary renovations. Even if you continue to live there, there can be additional costs associated with not being able to use some aspects of the house, such as laundry and eating out.
Don’t rush into buying a fixer-upper; thoroughly weigh the advantages and disadvantages. You could polish a rough diamond into a jewel if you’re up for the challenge.