Landlords: The Doer-Upper Dilemma

Landlords: The Doer-Upper Dilemma
Doer-upper: the DIY dad’s dream. Find a property, diagnose the problems, fix ‘em, then live in it, let it, or sell it on for a healthy profit. No brainer, right? Well, not really. In spite of the relative ‘doability’ of doer-uppers, many people avoid them. But for experienced or current landlords, there are properties out there that are in a never-ending void period. One that could be ended by you. It’s just a case of finding the confidence, time and money to turn that empty shell into a functioning home. Today’s article will hopefully give you the push to see doer-uppers as part of any future investment plans, especially going into 2016. diy It is also worth remembering that landlords who are buying second properties will be subject to a 3pc surcharge on Stamp Duty from April of next year – so you might want to get your skates on to avoid any extra costs.

What’s Your End Goal?

Do you want a home to live in? To sell? To let out? If you want to let the property, will it be a summer home? Student digs? Only by knowing what you want to get out of this investment will you be able to plan for what you can be expected to put into it. If you plan on letting the property, also consider when you will need the property ready by – new students need to start looking in August, and current students will start looking in April. Starting your project in June isn’t going to work.

How Deep Are Your Pockets?

Only you will know if you have the funds to back a project like a doer-upper, especially given the varying degrees of renovation that properties need to be put back on the market. If you do, the trick is finding how far you can stretch your savings without putting your life as a landlord at risk. Once you know that, you can start budgeting for all the likely costs – initial outlay (including a mortgage if you need one), cost of renovation and contractor quotes. Consider, too, your opportunity cost. What else could the money be spent on? Is the rest of your portfolio stable? Do you have children about to go to university? Does your car need to be replaced? By getting a picture of all your finances before making any concrete plans, you’ll soon find what you can afford to invest in. Remember, also, that you won’t be able to claim back your costs as tax relief – getting a property ready for habitation is capital expenditure, not general maintenance.

Time is of the Essence

After finding out if you have the money, next is the time. Funding a project isn’t the same as seeing it through to completion. To plan the project, buy the property, survey it, organise your contractors, find and move in furniture all take significant amounts of time. Furthermore, you will be doing one of three things with the property: moving into it, letting it, or selling it on for a profit. This part of the process will also cost more than just money. Do you have the time and energy to schedule this in? Fortunately, as a landlord and/or home-owner you will know how time-consuming property can be if it is left to fester. However, being on top of your deadlines means being on top of all the stress of a large-scale renovation. If you are a portfolio landlord, you may consider changing your current roster of properties to a fully managed service, so you can focus your time on the doer-upper on a daily basis. Ask yourself the following questions: What’s your deadline for each room of the property? What’s your deadline for the final project? How many days or evenings a week can you afford to spend on the doer-upper? Will you spend weekends on it?

Location – the UK is Getting Smallerwood

30% of landlords are now looking at investing properties outside their immediate region. The UK is an increasingly small place, which brings benefits and drawbacks. The advantage is more properties to choose from – the disadvantage is that it is less feasible to oversee a property like you would with one that was round the corner. Portfolio landlords can enjoy using their fully managed status to look elsewhere, while busier landlords may prefer to stay within driving distance of the doer-upper. Also, do you know enough about the local area, neighbours, amenities and yield, to justify looking elsewhere? Do your research! It’s a project to you, but a home to someone else.

Don’t Pull Your Hair Out

You may have your hands full as it is. Do you need the stress of this project? If you’re a DIY genius, can you face cutting wood and stripping paint for the next few months? Do you have a business partner – is he or she likely to want to go ahead with this project? Maybe you’ll be moving into the property while the renovations take place? Do you want to sleep on a saw-dust sofa? Or wash in half a shower? Are you uncomfortable with all the questions we’re asking? If you are, maybe put a doer-upper on the ‘maybe’ list. Doer-uppers aren’t just about finding an empty shell and turning it into a palace. Meaningful projects mean more than time and money, and planning is essential. Doer-uppers are a great way of expanding a saturated portfolio, and they’re under-utilised by many landlords. So, if you want to, start looking. You may find a diamond in the rough. And Martin & Co will help you get it ready. For any information about building and maintaining portfolios, please contact your local Martin & Co office today.