There are a lot of international buyers looking for properties in Spain to invest money, especially on the coast, and one of the option is to buy a home to renovate that can be a good investment, but there are some tips and suggestion we would like to give.
Buying a property is a very important decision, first of all you should determine your end goal and it can help to identify which of the thousands of possibilities would fit better.
- Is it an investment property or your own home?
- If you are planning to hold the property and add value?
- If you are planning to sell or leverage against the added value to buy another property?
Whether the property is your own home in Spain or an investment property, the most common goal is to make a profit from the exercise, whether that be now or in the future. Knowing what to spend on home renovation, or rather what not to spend, is one of the keys to successful property investing.
Lets see what are the main advantages and tips of buying a property to renovation.
Price of a home to renovate
The properties that require a comprehensive reform can be divided into three categories: properties which are more than 25 years old, and therefore doesn’t live up to the standards of today, abandoned houses of any age, and bank repossessed houses which have been in legal disputes for many years
The most usual thing is that their previous owners have not made a lot of changes since their purchase and, as a consequence, after a while it is necessary to do a large-scale work so that home is back in good condition. In many cases the owners are not interested, either because they have other flats and this property was used for renting, or the house is the result of an inheritance, or because they simply prefer to sell it directly.
Generally, this means that the owner has to offer it at a lower price than other properties in the area which are in better conditions and don’t need a home renovation, especially if they are in a hurry to sell. In this way, buyers who do not mind staying with a property to refurbish, can find real bargains.
So, there is a first advantage: to buy a home to renovate is usually much cheaper than to purchase a brand new or pre-owned property in an excellent condition.
Budget for a home renovation
Seasoned investors and renovators tend to suggest keeping your renovation budget to around 10-20% of the current market value of the home. The money you spend on the home renovation can be divided into different categories; money that are necessary to spend, money that will make your property stand out on the market, and money that will speed up the sale of your property. The money which are necessary to spend should be clear from the beginning, and as a rule of thumb add 10% to any estimate you receive or do yourself, because there will always be some extra expenses.
For the two last categories it is important to do a proper research, since what you might find attractive, might not necessarily have any positive effect on the actual profit. Buying elegant and expensive wallpaper will make the room look good, but will rarely have any effect in profit or selling time. Using high quality materials will convince more buyers, but will not increase the final price. If you decide to sell the property furnished with a complete new set of furniture, be aware that the furniture will be a part of the negotiation tactic, and its far from always that people are ready to pay full price for the furniture. Home staging in general can be a very effective tool to sell a property, especially if its a special property with an unusual distribution, obvious downsides or in a market with many similar properties. And don’t forget to check for hidden costs.
Home renovation – what you need to know
To start, you have to analyze the available meters of the home you intend to renovate. As much as the seller of the property tells you that the floor has an X number of square meters or that the writing says it has certain dimensions, it is better to make sure. The reason? Many times, what the seller speaks and the writing is of the meters built, not of the tools, and generally those meters can include even a part of the common staircase. The actual meters can also be reduced by the presence of built-in wardrobes or false walls.
We would recommend you to ask the property owner for permission to measure the entire home for renovation before making any decision, thus avoiding unpleasant surprises. It is also convenient to draw a plan of the house to help you get an idea of its distribution. In addition to knowing the actual square meters of the home to renovate, it is also advisable to make an idea as approximate as possible of its distribution.
Would be better to choose properties that need mainly cosmetic work and do not take on structural alterations. Is better to avoid properties with structural damage, as this is often when expensive problems occurs.
In view of the reform, it is also necessary to find the elements that can not be undone or moved, like the load-bearing walls. These elements are also marked on the plans of the house, and do not forget them, especially if you have a reform with change of a distribution. Apart of that, some old properties in historical parts of cities have some strict requirements of facades that you should keep in mind.
Even if you are not planning on renovating to sell, it is still important to think ahead about long-term resale value. Some older properties have severe limitations on what you can do to the place and how you can do it.
Construction defects of a property to renovation
Even if you really like a home to renovation that is on sale and that apparently seems to be in good condition, it is very important that you check if it has serious defects before making any decision, either in the property or in the block where is located.
One of the worst damages you could find, according to Fotocasa.es, is the humidity (quite common in homes that are near the beech or penthouses) should also take into account if there are defects related to stability or the possible poor placement of downspouts and pipes. This type of defects are not usually visible at first sight, so it is advisable to talk with other neighbours of the building about it.
In case the structural defects of the house or the building in general are obvious and evident, it is advisable not to buy it. No matter how low its price, the works that can derive from them would entail a lot of inconvenience and economic disbursements.
Once analyzed the previous points, if you see that the property meets your needs and you have the necessary budget, you would only let yourself be advised by an expert in reforms.
The purchase of a home to renovation allows you to directly involve yourself in a property design and change of distribution. Of course, keep in mind that the price of a reform may be somewhat high. In spite of that, the price of purchasing will be cheaper and more attractive then of a brand new o similar semi-new home.