Discover the pitfalls in property development and make sure that you avoid them
We watch all the TV shows about renovations and self-builds, lapping it up. We critique their interior design ideas and landscaped gardens. We watch people make mistakes and go vastly over budget. But still, the end result is usually marvellous. A labour of love to cherish - a forever home.
Secretly, I think we all harbour a desire to develop properties. Taking something from sub-standard and creating something extraordinary.
We watch all the TV shows about renovations and self-builds, lapping it up. We critique their interior design ideas and landscaped gardens. We watch people make mistakes and go vastly over budget.
But still, the end result is usually marvellous. A labour of love to cherish - a forever home.
Or perhaps you are thinking of getting into property development as a career? Buying a run-down house and turning it into a lovely property to sell on or rent out to a new family.
But as these tv shows often depict, property development can be far from plain sailing.
Problematic issues that were unforeseen need your urgent attention.
Unexpected tasks and challenges.
So, why do people do it?
Because when it's finished, and you look at the property and all of your hard work, you will feel immense pride in what you have achieved. It is the same reason that people run marathons. You did this. What a fantastic experience.
And, of course, there are financial benefits too. Buying a run-down property and renovating it yourself should increase its value. It is a sound investment and an excellent way to build your personal wealth.
But, as previously mentioned, it can be fraught with stress. So, what can be done to reduce these stresses and ensure you get the desired result?
Before you get started, you need to decide what your aim is. What are you hoping to achieve? Are you looking to create your forever home or increase the equity? Buying a property to flip, rent out, or even long term, building a portfolio of investment properties.
The end goal will help you buy the right property from the outset. There would be no point in buying a property to rent out if it is in an area with no rental investment market.
And you need to determine 'who' your end user will be. Students? Young professionals? Families? Or you? This way, you can tailor your interiors to the person that will ultimately be living there - making sure that you select the right finish for the user. This will also help to remove any decision-making issues. Your personal taste is largely irrelevant unless you're going to be living there.
Make a budget - invariably, property developments will go over budget. So much so that a contingency fund is factored into every project.
So, how does this happen? Unforeseen problems appear when you peel back the layers. Things that have been covered up, causing no trouble for years, are suddenly revealed, and you have to repair or replace them. Damp could be lurking or woodworm that you can't see straight away.
You need an idea of what the project is going to cost you. And you need to know if you have that amount available to do the work. It's impossible to plan for unknown things, but you can prepare for how much you will spend on a kitchen or the tiles, for example. What is the budget for wallpaper? Are you even going to use wallpaper? If yes, this could be a choice that costs £5 a roll or £500. Are you looking at tiles for £20 per square meter or £200?
These decisions can be budgeted for, leaving your contingency fund to cover the cost of unexpected things. So it is essential not to get carried away when choosing materials and finishes but to stay within the budget.
And be realistic. Would the end user care or notice that you've used genuine travertine tiles on the floor, or would they have been just as happy with laminate flooring? And would they pay more? Will the investment in this material increase the return?
Remove your own taste-just because you like red floral wallpaper or bright yellow tiles doesn't mean everyone will. Your design needs to be appropriate for the end user of the property. Cater to their likely taste, or follow current fashion trends to appeal to most people.
Of course, this is different if the development is done for yourself, as you will want what you choose. But laminate will be the obvious choice if you're converting a large property into an HMO. The cost of fitting and repairs to the travertine will be very high. You will not be able to charge more rent to the tenants for this.
Fundamentally, you need to make a plan, and then you need to stick to it. Changing your mind halfway through can have costly repercussions, both to the budget and the timescale. The longer the property is being renovated, the more it costs you. You're losing potential income from the investment being rented out or sold on.
And then, when it is all finished and ready to go, have a valuation. Learn exactly what the property is worth to see the fruits of your months of hard labour. The increase in value and equity is the main reason people do this. That uplift is because of you and what you've done to the property. That is your money, your reward for all your risk and hard work.
And to be honest, that's the most exciting part of property development. Otherwise, you'd just redecorate the home you live in, wouldn't you?