How Renovating Residential Properties Can Set You Up For Life
Renovating residential properties has emerged as a thriving business, and it is an incredibly exciting and dynamic market to tap into. The demand for liveable and quality homes is only going to increase, and for the average person renovating a dilapidated or damaged property is not worth the hassle. A house that has been just renovated and is ready to move into, on the other hand, is a highly desirable and coveted asset in an increasingly competitive market.
For the aspiring entrepreneur, a property renovation project is the perfect opportunity to invest in an asset and dramatically increase its value. When you know what you are doing, it is a brilliant way to yield significant profits within a relatively short period of time. Entering the property business can be a daunting prospect, however, especially because there are so many things to consider.
In the following guide, we’re going to be looking into the process of renovating residential properties, what you should keep in mind, as well as how you can protect your investment and ensure that you extract the maximum possible benefits from this venture.
- Up And Coming Areas In The UK
- Budgeting And Planning
- Renovations And Project Management
- Taxes On Property Sold For Profit
- Unoccupied Property Insurance
Up And Coming Areas In The UK
When purchasing or selling a property, its location is probably the single most important consideration. An attractive and appealing location creates desirability, and desirability cultivates demand, and demand inevitably leads to a thriving market and rising prices.
Before choosing a property to renovate, you should research which cities, areas and neighbourhoods are in the highest demand, and make a decision accordingly. Your target demographic will probably be concentrated in these locations as well. For example, residential properties will usually appeal to growing families, couples and young professionals, so you should ensure that you invest in areas that they are most likely to buy into.
Within the United Kingdom, some of the most lucrative areas to renovate residential properties include Liverpool, Manchester, Birmingham, Glasgow and Edinburgh. The economic growth and excellent transport links offered by these areas means that their real estate markets have been flourishing in recent years.
Budgeting And Planning
Navigating the property market, and renovating residential homes in particular, is not necessarily straightforward. As rewarding as it has the potential to be, you have to be prepared for every possible situation throughout every stage of the process. One stage that should never be overlooked is budgeting and planning.
Your budget will determine the trajectory of your entire project, whether it is the type of property you invest in, the location of the property as well as the amount of work you are willing to have done. In order to be successful, you will have to be certain that you will make a profit by calculating the property’s projected value once you have finished with it and placed it on the market again.
Of course, your profits will be offset by the price you purchased the property for, as well as the costs of the labour and materials that you required to renovate it. In your plans, it will also be necessary to factor in such considerations as the amount of time you can devote to the project, your distance from the property as well as problems and obstacles that may come your way. Everything in your plan will have a direct effect on the budget, and ultimately the profits you make.
Generally, a good rule of thumb is that you should buy low and sell high. The initial price of the property itself will be your biggest expenditure, so the lower you can purchase it for the better. Auctions, for example, are a popular way to find cheaper properties. With some quality craftsmanship and due diligence, you can then sell your renovated property for as high a price as possible, generating the maximum possible returns.
Renovations And Project Management
There is no denying that renovations are expensive and lengthy affairs. If you are intending to renovate and sell residential properties for a profit, however, then it is essential that you plan accordingly so that you do not exceed your budget or your schedule. The importance of project management cannot be emphasised enough, especially when it comes to ensuring that nothing is overlooked and everything is completed to the highest of standards.
It is also the perfect opportunity for you to make arrangements for any unexpected problems or issues that may arise. When you are renovating an older property, it is almost inevitable that you will come across something that you hadn’t anticipated, but that will be necessary to address. By factoring these ‘unknowns’ into your plans, however, you can make sure that they don’t disrupt your workflow.
First and foremost, you should write a list of everything that needs to be done as well as in what order. For example, the plumbing and electrics should be taken care of before you start replacing the flooring and/or ceilings. This is also the time to recruit reputable and reliable tradesmen, and communicate with them throughout the project so that they understand the deadlines. All the while, from structural changes to finishes and decorations, you have to comply with Building Regulations.
Taxes On Property Sold For Profit
When it comes to budgeting and planning for your latest renovation project, tax implications should definitely be factored into your calculations from the outset. Capital Gains Tax is a tax on the profit when you sell something that has increased in value. Inevitably, when you are renovating a property it will increase in value considerably, and you will have to pay Capital Gains Tax once you sell it.
It is worth keeping in mind that this particular tax is only due on the profit you make, and not on the entire value of the asset that you have sold. It is subject to an annual tax-free allowance of £12,300, applying only to any profits that you have made from that asset. The amount of Capital Gains Tax you will pay depends on the tax bracket you are in when selling the property. A basic rate taxpayer will pay 18% on their profits, whilst a higher rate and additional rate taxpayer will pay 28%.
Of course, there are several allowable deductions which can be claimed to reduce your tax, such as stamp duty, estate agent fees and solicitor fees. For a detailed explanation of Capital Gains Tax and how it pertains to selling properties for profit, this is a valuable resource.
Unoccupied Property Insurance
An unoccupied property is always regarded as being more at risk than an occupied property. The reason for this is because a building which is not inhabited is more susceptible to vandalism, theft and criminal damage. Any property damage such as boiler breakdowns, broken pipes or mould may also go unnoticed since there is nobody living there. It is for these reasons that a comprehensive insurance cover is essential.
This is especially important because standard property insurance becomes invalid once the property is unoccupied for more than thirty days. If anything happens beyond this period, you will no longer be protected. With unoccupied property insurance, however, you can protect your property from accidental damage, vandalism and theft whilst also covering legal expenses, liability insurance and fixtures and fittings protection.
Whilst you are waiting for your property to be renovated, a made-to-measure insurance cover will give you the assurance and confidence that your property will always be protected, even in the most unexpected of scenarios.