There’s good money in bungalow refurbishment

by Mark Alexander

15:09 PM, 28th June 2012
About 6 years ago

There’s good money in bungalow refurbishment

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There’s good money in bungalow refurbishment

Whilst a bungalow isn’t likely to provide you with the highest possible rental yield, bungalows should not be overlooked as property investment opportunities, especially by investors with with good refurbishment skills or a good team of tradesmen.

The development of bungalows has slowed massively over the last 40 years or so due to the rising costs of land. Developers can build at least double the number of townhouses on a street compared to detached bungalows and that’s the reason they are not so keen to build them. However, the baby-boomers are now reaching retirement age and as their bones and muscles start to creak, due to the onset of old age, a bungalow is often a consideration for them. They may well be looking to downsize at this stage of their lives so demand is high and supply isn’t, that’s always a recipe for making money. Rule #1 in economics, according to the legendaty Adam Smith, is scarcity and bungalows certainly fit into that category when it comes to housing supply. As more and more baby boomers decide that a bungalow is what they want, scarcity will increase and you know what that means? Yep, prices will soar. I’ve written this article on the basis of making a quick buck on buying, refurbishing and selling bungalows but you can see why some landlords are happy to trade of low yields against capital growth can’t you?

bungalow

Nice bungalows like this are few and far between when you want to buy one

Where are all the nice bungalows?

Try finding a nice bungalow which is ready to move into, they are few and far between. One of the main reason they are sold is that the owners have died. The residents of bungalows are generally much older and don’t tend to move around too often so whereas the average house changes hands every seven years, bungalows are owned for a lot longer. As bungalows are generally occupied by older people the maintenance can be a bit hit and miss too., not to mention their taste in wallpaper! What would the DIY shops do without DIY pensioners? They even have a marketing phrase for them now “the grey market”. This also keeps garden centres in business but as time goes by, and people get older the properties and the gardens often become neglected.

Bungalows and development opportunities

As I explained above, when a bungalow comes on the market, more often than not it’s because somebody has died or has been taken into long term care. The next generation (now the baby boomers) want something nice and for the reasons described above there are very few. Therefore, these tired bungalow properties tend to stay on the market for a long time and the new owners (the beneficiaries of probate) eventually want to get them off their hands. In steps the developer. I’ve refurbished a few bungalows myself, OK, I confess, I didn’t lift a finger as I’m useless at real work, but I do have a good team who know what they are doing. I prefer the properties which are structurally sound but need all of the following;

  • New electrics
  • New boiler and heating system
  • New windows
  • Removal of artex/wallpaper and re-plastering
  • New skirting boards and coving
  • New kitchen and bathroom
  • Decorating
  • New carpets
  • New fences
  • Tidy garden
The cost of these works is typically £20,000 to £30,000. Do consider opportunities to extend and to move internal walls around to make the place modern too. Open plan living is becoming increasingly popular. If you get your figures right it’s possible to make a 20% – 30% mark up on costs. For example, purchase price £140,000 + refurbishment say £25,000 = £165,000. Sale price £210,000. Profit £55,000 (NICE!). End to end (the date you agree to purchase through to sale) these deals take around 6 to 12 months to complete

Crunching the numbers and arranging finance

The two most popular ways of financing projects such as this, assuming you don’t have 100% cash,  are either via a buy to let mortgage (some lenders such as TMW specialise in refurbishment mortgages) or by using bridging finance. The latter appears more expensive at face value but actually can work out cheaper so do take advice.

If you would like further guidance on raising finance please call my business partner, Neil Patterson, on 01603 489118 or email info@property118.com

Please leave comments and questions below and if you’ve enjoted reading this article please share it.

For details of more articles and useful calculators for Property Refurbishment please



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Mark Alexander

16:53 PM, 20th November 2014
About 4 years ago

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