Despite property values finally starting to head south, for many, the price you have to pay is still too high. But there is a solution, particularly if you are handy: buy a wreck.
Martin Roberts, presenter of BBC’s Homes Under the Hammer, is an expert in this type of property. Below he gives his keys dos and don’ts to purchasing a fixer-upper.
Why consider a wreck?
A property wreck will often be cheaper than a recently refurbished home, and you may find fewer people bidding against you. It will best suit someone who can do a fair amount of work themselves. “While some jobs, like the electrics, need to be done by experts, if you can do a fair amount of work yourself, you will make more money as labour is one of the most expensive elements of doing a home up.”
The gain, provided you don’t spend too much on builders, is instant equity.
“If you buy a perfectly done-up house for £200,000, unless house prices go up significantly, in a year’s time that house is still going to be worth £200,000.”
But if you buy a wreck, you can add instant value, and you can make the home completely your own.
Do check what lenders require
If you need a mortgage, find out from a prospective lender what their requirements are. Some lenders won’t offer a mortgage unless a property is deemed “habitable” – this could mean there is a working kitchen and bathroom. It’s possible to work round this if this is a problem: Martin says you can install a temporary single sink unit, toilet and wash basin or whatever else is required. These don’t need to be costly; they simply need to meet the lender’s requirements. He adds: “Buyers can also look to specialist lenders who focus on providing finance for properties that need renovating.”
Know what you are taking on
Taking on a property wreck is not for the faint-hearted and it’s vital to know how much it will all cost to put right in advance.
Martin says: “It’s no good buying a house that’s worth, when it’s finished, £200,000, and paying £180,000 for it and forking out £50,000-plus for renovation works. You need to know how much the property will be worth once it’s finished, and then take off the cost of any renovation works. Then you’ll have the right cost price for the property.
“Realistically, if you are buying a property at the right price, then no property is off limits. Even if a house has no floorboards, for example, it’s still worth considering so long as you can pay the right price for it.”
Get a full survey done
Getting a full structural survey done is a must.
He says: “It’s vital to get a full survey done on a property which is in a poor state of repair. This will give you a detailed indication of exactly what it will take to sort the property out and renovate. Major defects like subsidence or Japanese knotweed will all be flagged. After getting a survey completed, a prospective buyer will know what they are taking on and be able to work out the right price to pay for the property.”
How much a house survey costs can vary. Full structural surveys start at £630 and go up to £1,500 according to the HomeOwners Alliance. Damp survey, drains or dry rot surveys may also be a good idea. The surveyor can advise, if so,which will cost extra.
Look for the worst house on the best street
Location is crucial, and according to Martin, the worst state of repair on the best street is the best investment. Buy a wreck in an areas that may otherwise be unaffordable.
“You’ll then have the best chance of creating something you can really add value to. You can’t change a neighbourhood easily, but you can convert a rundown property in a good location into a great property.”
Avoid homes with subsidence and nightmare neighbours
Be alert to issues like damp, cracks, subsidence, dry rot, wet rot, a dodgy roof, woodworm and nightmare neighbours. The main giveaway signs of damp, for instance, are a mouldy smell, cold walls, flaky plaster and watermarked walls or ceilings. While examining a property, watch out for big cracks and make sure you check around bay windows, end-of-terrace walls, and where extensions join.
Look carefully at the Property Information Form, also known as the TA6 form, particularly the section which asks for information about any existing disputes or complaints. It’s also worthwhile, if you can, to introduce yourself to any prospective neighbours and ask them what it’s like to live in the area and if there is anything you should be aware of.
Don’t assume you’ll get a bargain at auction
Martin remembers an auction where a wreck of a property, with holes in the ceiling and rotten floorboards, ended up being sold for a significant sum, yet the next lot, which was a property in good condition in the same area, sold for the same price.
“People sometimes get wrongly blinded into thinking that because it’s a wreck they’ll be getting a bargain, even though this is not always the case”, he warns.
Don’t bite off more than you can chew
Anyone considering buying and doing up a property wreck needs to be realistic about their budget and capabilities. If you are inexperienced, you either need to get a good team of people behind you or, quite simply, don’t start off buying the worst wreck possible, but build up to it over time”.
Don’t just get one builder quote
Get at least three quotes, and get recommendations. Unless you have family and friends working in the trades, it can be difficult to find the right builder. Be aware you could be working a year-plus together so you need to have a good relationship.
Try and get recommendations from people you know and have a look at reviews online if available. Also be aware that you could be working with the builder for a lengthy period of time, so make sure you have a decent initial rapport with them before signing on any dotted lines.
Don’t buy unless you’ve done your sums
“I cannot stress enough how important it is to know how much the property will be worth when it is finished and you need to know how much it is going to cost you to get to that point. And you need to know how long the entire renovation project is going to take because time is money.
“For instance, if your ultimate goal is to rent the property out, if it’s going to take six months to do it up, that’s six months of potential income you have already missed out on.”
Don’t underestimate the budget
Anyone who has required work on their property in the last year or so will be aware that prices for materials and labour are sky-high. As a result, it’s prudent to build in leeway in your budget.
Martin suggests anyone considering buying a wreck should, as a guide, add about 20 per cent on top of their initial budget to ensure they can shoulder unexpected costs and rising prices.
He adds: “Don’t, whatever you do, start a job, and then run out of the money you need to do it all. Because in reality, a half-finished wreck is not worth more than a wreck, even if – for example – you’ve already ploughed £20,000 into sorting out damp. You won’t get that £20,000 back if the renovation remains incomplete in some way.”
To read more about Martin Roberts. visit his website. And if you’d like to know more about some of his renovation projects, which are now Airbnbs, including Tynewydd Farm in the Rhonda valley, check out Cottages with Character.