When you’ve found a property you’re interested in to source for investors, let out or to include in your portfolio, being able to estimate refurbishment costs before you buy that property is vital as you’re going to need to factor those costs into your purchase so you can make a profit.
Refurbishment is the process of making a building like new again through repairs, decoration, cleaning, or any other additional work. It can sometimes include the addition of new facilities, such as adding in a new bathroom or remodeling interior walls.
One of the main reasons why investors like you would choose to refurbish a property is that it’s the quickest and easiest way to add value to that property. Here are some other key benefits of refurbishment that you may not have considered before:
When you’re looking to purchase a property to renovate, you’ll undoubtedly already have a figure in your head that you’re willing to pay. However, you also need to consider refurbishment costs in that figure.
After all, you don’t want to buy a property that fits your budget, only to find later that you’ll make a very small ROI after renovation.
However, you’re not going to be able to have that figure unless you know how to estimate refurbishment costs yourself. And, if you can’t do this, you’ll likely be at a disadvantage when viewing cheaper properties that other investors are interested in.
Being able to estimate these costs on the fly means that you’ll be able to snap up a bargain when you see one. You’ll also know when to pass on something that doesn’t fit your budget. This makes viewing properties for renovation significantly quicker and easier so you’re not wasting your time.
Not only that, but you can’t expect to have a builder or other professional on hand for every property viewing. If you’re viewing multiple properties a week, expecting a builder to be there to estimate for work they might not get isn’t fair on them. So, you need to be able to at least come up with a ballpark estimate for each property you want to renovate before you call around for quotes.
Finally, having an estimated refurbishment cost is also a good bargaining chip when you put in an offer on a property. Depending on the extent of the work, you may even be able to barter a reduction in the asking price. If the seller isn’t able to budge on price, you could even get them to do some of the work themselves.
Before you start looking for properties to renovate, you need to understand the average cost to refurbish certain rooms in a property. While an average figure may not represent the extent of work that needs to be done, it’s a helpful figure to know when you’re estimating costs.
As an example, the average cost of a kitchen refurbishment is £7,000. However, this can range anywhere from £4,000-10,000 depending on the size of the refurbishment.
You’ll be able to find these averages with a quick Google search or by calling around trusted contractors.
This is a document where you’ll write down or check off any work that needs to be done on that property while you’re viewing it. Required works like new carpets or windows should be fairly obvious as you’re walking around. However, for things that aren’t as apparent, you also need space to write down notes from the estate agent.
We recommend creating a property viewing checklist document that you can print out to carry with you on the day so you don’t forget anything. Adding average prices of jobs is a good idea, as it’ll help you keep focused.
Once you’ve viewed a property, then it’s time to calculate how much the refurbishment would cost you in total.
Your first option is using the average figures you noted before, which is a good way to get a ballpark figure. Or, you can find refurbishment cost calculators online which can give you estimated figures from a contractor.
We always recommend adding 10% to the total cost you find as a buffer in case you’ve missed anything out.
Now that you’ve got your estimated figure, it’s up to you to decide whether that refurbishment will work for you.