Before you think about what sort of price you should pay for a property as a potential “Renovation or Conversion” project, it is important that you give some thought to “anything and everything” that could potentially have a financial effect on the project, in either a positive or negative way.

By doing this you will be “forcing” yourself to look at the project in detail, and by so doing, you may realise that all the potential “negatives” actually outweigh the “positives”. – If that happens, you will at least be in a good position to make a “sound judgement” as to whether the project “as a whole” is a “goer” or not.

Once you have been through this process, if you decide that you still want to go ahead with it, you can then start to think about the price you should offer, knowing that you have done your best to “cover all the bases” before committing yourself, either to any substantial financial outlay, or to the project “as a whole”.

Once you have had a good look round, realised that you like the place and decided that this is a property you would like to “have a go for”, then is the time to start putting some time, energy (and possibly money) into making sure you are “doing the right thing”.

If there are other people who appear to be interested in the property, you may feel that you need to make an offer quickly. - That “in itself” is ok. - As long as you “start low” and don’t commit yourself with anything in writing (or even a handshake).

You could be a “negotiation process”, settling on a price for anything from a few days to a few weeks. – So that will give you chance to work out if the price you have offered is actually too high.

Just be wary about going to the “legal” stage and appointing a Solicitor or Conveyancer too quickly, before you have given some thought to the following:

If it looks like it’s a simple “cosmetic” job, then likely costs are fairly easy to compile:

You may just be intending getting someone into decorate throughout, put in a new bathroom, change the kitchen worktops, and tidy the garden etc.

If so, and if the owner will allow you to do so, get a decorator to meet you at the property. - Have a walk round, and see if he can and give you a written “estimate”, - even if it’s only a “ball park figure”.

Get prices from Kitchen suppliers for worktops, and bathroom suppliers for a bathroom that you like. – Make a couple of phone calls to Bathroom fitters and Joiners (use the Trade Directory on this site to find plenty of each). – If possibly send them the “print out” drawings you can now usually get from kitchen / bathroom suppliers, so they can also give you “quick “ball park” estimates of their likely cost.

Then add a “sensible amount” for the work in the garden. – Visit a couple of Garden Centres / DIY stores and price up the items you would want to buy.

 

When you have completed your list of prices, add to it “a good margin for error”, - a couple of thousand pounds for a small job and maybe 15% - 20% of your “basic cost estimates” for bigger jobs, - and you shouldn’t be far off having a reasonable figure to work with - for this section of the costing process.

Armed with these figures, you will then be in a better position to decide whether or not the project as a whole is “cost effective”:

 

If  you do all the “research” and “homework” and you find that “the sums just don’t add up”, and if you think that WHOEVER came along to buy the house, WHATEVER type of project they planned for it, they would encounter the same sort of problems, you may then have a strong case for approaching the owners and negotiating a lower price.

If you can get them to understand that NO ONE is likely to pay the price they are asking, given the “problems” that are inherent in the property ( which you may now be able to show them “on paper”, then you are more likely to manage to get them to reduce the price

These “final” negotiations may bring you to a situation where think you will either be able to “break even” or hopefully even make a profit. – If they don’t, there are usually plenty of other properties around. AND, if you do pull out of the sale:

a) You will be saving yourself from a lot of work for possibly no financial gain, and

b) The seller may come back to you some time later when they realize that what you said was right.

If you put a lot of effort into a project you deserve to make a profit. – I would always be looking at making at least 20% - 30% profit before I would consider taking any new project on. – If you start out with, say, a target of 30% profit, then you can still afford to come across a few unforeseen problems and still come out at the end of it all thinking “Well, over all it was worth it”. – If you start out just hoping to “break even” AND THEN hit problems, you could end up in trouble!

1) Will it make sense financially once it is finished, based on the asking price, plus what it will cost to make it how we want it to be?

2) If you do decide that you want to “go for it”, start by “offering low” and then “work up” to a price level that you are happy with, that also gives you a “buffer” to cope with any unforeseen problems that may occur. - The bigger the project the bigger the buffer should be. Remember that if your start with a low offer, you can always increase it until you agree on a price. If you start “too high” it is a lot harder to then start to negotiate “down”.

3) If the project does not seem to be making sense financially, then step back, re – asses, and by making then owner aware why the figures don’t stack up, try to get the price down to a level which “covers all the bases”, AND which gives you that financial “buffer”. - If they won’t budge, then seriously consider pulling out before you make any commitment. - The last thing you want is to run out of money before the house becomes habitable.