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The Essential Guide » Initial Stages of a Project » Why Self Build, Property Renovate, Convert or Extend?
Why Self Build, Renovate / Convert or Extend a Property?
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There are many reasons why thousands of people consider taking on a self Build, Renovation or Conversion project each year.
They mainly fall within four categories:
Financial, Personal, Geographical, and Logical.
1) Financial reasons:
“Financial” reasons to Self Build:
The old saying used to go: “When you Self Build, your third one is free”! – I am not sure about using that as a rule these days, but it is possible, given the right circumstances, the right preparation, the right people, the right decisons and a slice of luck!
A safer quote would be: “If you do this right, then once you have finished, you will normally have increased your property equity. Sometimes quite substantially, sometime by a little, but very occasionally not at all (ok its not as catchy, but it's probably more accurate!)
In general it would be fair to say that most people, after taking on a project, if they have planned it properly, and have successfully managed to follow certain guidelines whilst carrying out the work, tend to be in a better position, both financially and as an individual, or as a family, than they were when they started. – This is why the Self Build industry has tended to grow year on year.
For many reasons, the cost to build your own home should be substantially lower than buying an equivalent sized property from a developer, and should give you a product of higher quality. - Which means that you can either get the equivalent house for less money, or something considerably larger for the same money. Most Self Builders tend to go for the second option. – They tend to have a budget to work with, and they come to the decision that spending their money on a Self Build is a better option for them than buying a "standard" developers property. Having made that decision, they usually want to make the most of the opportunity and of the money they have available to get as “big a bang for their buck” as possible!
How successful your project will be "financially" will depend on a number of factors. The main ones being:
1) The land: – How large is it? How much has it cost as a proportion of your budget? How easy is it to build on?
2) The design: - Who designed it? How complicated is it? What materials have you used?
3) The fitting out: - How much was your kitchen? Your bathrooms? Your fitted furniture?
4) The landscaping: Was it designed? How elaborate is it?
5) Problems: How many unforeseen problems did you encounter?
(All these subjects will be dealt with individually in other sections of this guide).
1) The land: – How large is it? How much has it cost as a proportion of your budget? How easy is it to build on?
2) The design: - Who designed it? How complicated is it? What materials have you used?
3) The fitting out: - How much was your kitchen? Your bathrooms? Your fitted furniture?
4) The landscaping: Was it designed? How elaborate is it?
5) Problems: How many unforeseen problems did you encounter?
(All these subjects will be dealt with individually in other sections of this guide).
“Financial” reasons to Property Renovate / Convert:.jpg)
Generally you won’t make the same levels of profits by renovating or refurbishing. One of the main reasons for that is that to "improve" what you already have, you usually have to take out or change something that is already there. This can sometimes double or treble the cost of simply “installing new”.
The value that each part of the renovation or conversion will add to your property (if you have chosen wisely), will normally be higher than the cost of buying and installing the item itself, - BUT, when you add on the cost of "stripping out the old", "repairing", and "preparing" for the "new" - and THEN actually fitting the new, it is bound to have a financial implication on your costs, and therefore your profit margins.
The value that each part of the renovation or conversion will add to your property (if you have chosen wisely), will normally be higher than the cost of buying and installing the item itself, - BUT, when you add on the cost of "stripping out the old", "repairing", and "preparing" for the "new" - and THEN actually fitting the new, it is bound to have a financial implication on your costs, and therefore your profit margins.
If you want to make money on a renovation, the trick is to keep it simple. Change or upgrade the things you need to, but in as simple a way as possible. Anything that does not NEED changing, consider just “smartening up”. You will get ideas on how to renovate "on a budget" as you read the pages of this guide, but also use the “Networking” section to talk to and learn from others.
“Financial” reasons to Extend Your Home:
This is the only type of project which I would be hesitant to say will give you any major financial benefit. The cost of building an extension tends to be high when measured on a “price per sq ft” basis, compared to any of the other options. If you are not careful, the costs to build an extension can actually quite easily outstrip the increase in value of the property once all the work is finished.
One way to try to maximize the potential value of the project is to try to build a smaller number of larger rooms. Extra work in foundations can be very costly (especially if you hit problems underground). Internal walls also cost money. So, if you can plan your use of the whole of the building to allow you to simplify the design of the extension, you will stand a better chance of at least “breaking even” and possibly making a small profit.
There is, however one particular set of circumstances where an extension may make excellent sense: ( This is a bit complicated, BUT STICK WITH ME!)
You may need more room for a growing family. BUT, I, for whatever reason, you need or want to stay in the local area, you may actually find that when you “Do the sums” you are better off considering an extension.
This could happen in areas where land, or suitable properties are scarce, and / or are over priced. You may find that you could end up having to pay 10 – 15% “over the odds” to be able to buy plot of land or a property to renovate or convert.
If, for example you are presently living in a property which is a “3 bed detached”, with room for a substantial extension, normally valued at 200,000, but due to demand, worth (say) £230,000. - You find that your growing family means that you now need to think about having 5 bedrooms. For a 5 bed property in your area, maybe you are looking at £350,000 at normal values, and £400,000 because of the “high demand".
You want to stay in the same area (for whatever reason)
Because of the "high demand" adding £15,000 to every £100,000 to the "asking price" of any property in your area, the higher you go up the "property ladder", the more you are going to be penalized in the cost to buy a suitable property if you are determined to stay in that particular area.
Ok, it means you will get £30,000 extra on the sale of your own house, should you decide to sell it, BUT if (again due to demand) you end up paying an extra £50,000 "over the odds" for a suitably sized house "up the road", you could end up £20,000 out of pocket "like for like". Add to that the legal costs (maybe £5000), and the moving costs (maybe £3,000), and you suddenly find that you in fact are getting on for £30,000 “physically” better off, "like for like", staying where you are than you are by moving.
You want to stay in the same area (for whatever reason)
Because of the "high demand" adding £15,000 to every £100,000 to the "asking price" of any property in your area, the higher you go up the "property ladder", the more you are going to be penalized in the cost to buy a suitable property if you are determined to stay in that particular area.
Ok, it means you will get £30,000 extra on the sale of your own house, should you decide to sell it, BUT if (again due to demand) you end up paying an extra £50,000 "over the odds" for a suitably sized house "up the road", you could end up £20,000 out of pocket "like for like". Add to that the legal costs (maybe £5000), and the moving costs (maybe £3,000), and you suddenly find that you in fact are getting on for £30,000 “physically” better off, "like for like", staying where you are than you are by moving.
If you decide to stay in your present home and you opt to build the extension which costs, say £90,000, if you do it sensibly and follow a few guidelines that you will pick up reading various sections of this document, you will probably find that you actaully increase the value of your property by more than the cost of the work.
So, now you could end up with a property which WAS worth £200,000 (but, which due to demand would have sold for £230,000) and which has had £90,000 spent on it, having a finished value of around £320,000. BUT, which due to high demand, would actually sell for around £380,000
You will then have the house worth £380,000 (only £20,000 less than the other house you were going to buy for £400,000). BUT you have turned down the possibility of making £230,000 and spent £90,000 on it, giving at total "real cost" of £320,000.
In other words, you have increased your “equity”, or “net worth” by £60,000 by staying where you are and extending.
Did you follow all that?
So, now you could end up with a property which WAS worth £200,000 (but, which due to demand would have sold for £230,000) and which has had £90,000 spent on it, having a finished value of around £320,000. BUT, which due to high demand, would actually sell for around £380,000
You will then have the house worth £380,000 (only £20,000 less than the other house you were going to buy for £400,000). BUT you have turned down the possibility of making £230,000 and spent £90,000 on it, giving at total "real cost" of £320,000.
In other words, you have increased your “equity”, or “net worth” by £60,000 by staying where you are and extending.
Did you follow all that?
If you did, it’s worth considering how your individual circumstances work in that formula, but overall the example I have just given you is seen pretty rarely in practice, and financially you will not usually be able to make "a packet" by extending.
2) Personal reasons:
(Note: Some of the “personal” reasons given below will actually be partly “financially” driven, but I have listed them separately as they often "come about" by the “personal choices” we make, and the “goals” that we set for ourselves as individuals and families)
There are many "personal" reasons can make people consider "having a go" at any of the “Amateur Building options (Self Build, Renovation or Conversion). - Each individual or family will have a different set of reasons for making their final choice. - However the final decisons all tend to be "brought about" by the same group of "driving forces":
“We need more space for the growing family”.
“We need or want to relocate, and want to make the most of the opportunity to move ourselves “up the housing ladder”.
“We want to live in a better area, or be in a certain “Catchment area” for schools, but can’t afford to buy anything new in that area that will give us everything that we need”.
“We want something with a good sized garden, or in the countryside, or with views, or some feature that would usually make the property too expensive for us, but by Self Building or Renovating, we could afford”.
“We want to get rid of our mortgage within 10 years”.
“Mum and Dad need to be able to come and live with us”.
“The kids have left home, and we want to downsize for retirement, so we can free up some money to enjoy ourselves”.
"One or both of us work in the building Industry and we want to use our skills and contacts to move us up the property ladder".
So, Say, for example your parents are a fair distance away, and are starting to struggle on their own for one reason or another. - You decide that it would be a good idea for them to be living with you.
All of a sudden, the thought of taking on a Self Build project becomes "quite a good idea"! Just think, - If you "start from scratch" you can design an ideal house that will accommodate your own growing family, and, at the same time create room for your parents to be able to live with. If you design your own place, you can make sure that both parts of the family have privacy and are able to lead their own independent lives, whilst also having them close enough to be able to help out when necessary. - You may struggle to find a suitable property in the area you live, or want to live, UNLESS you do a self build.
Then the financial aspects start to "add extra weight" to the equation:
1) The fact that you could "increase your equity" at the same time as solving a problem makes the idea even more appealing
2) Your parents have a house with no mortgage, and they are more than happy to "chip in" towards the cost of the new home, (whilst maybe keeping some of the proceeds from the sale of their present home to "enjoy themselves" and bit).
The more you look into how your "lot" as a family could be improved by taking on a Self Build project, the more appealing it becomes.
This tends to be how the "personal" reasons for considering taking on a project start to manifest themselves. - A "need" of one sort or another arises (it could be anything). - The realization occurs, that by taking on a "building project" of some sort, you could not only solve the immediate problem (or problems), but could improve things "all round" for the family as a whole. - So you start to think more seriously about it. - And the “snow ball” starts to roll!
3) Geographical reasons:
So, Say, for example your parents are a fair distance away, and are starting to struggle on their own for one reason or another. - You decide that it would be a good idea for them to be living with you.
All of a sudden, the thought of taking on a Self Build project becomes "quite a good idea"! Just think, - If you "start from scratch" you can design an ideal house that will accommodate your own growing family, and, at the same time create room for your parents to be able to live with. If you design your own place, you can make sure that both parts of the family have privacy and are able to lead their own independent lives, whilst also having them close enough to be able to help out when necessary. - You may struggle to find a suitable property in the area you live, or want to live, UNLESS you do a self build.
Then the financial aspects start to "add extra weight" to the equation:
1) The fact that you could "increase your equity" at the same time as solving a problem makes the idea even more appealing
2) Your parents have a house with no mortgage, and they are more than happy to "chip in" towards the cost of the new home, (whilst maybe keeping some of the proceeds from the sale of their present home to "enjoy themselves" and bit).
The more you look into how your "lot" as a family could be improved by taking on a Self Build project, the more appealing it becomes.
This tends to be how the "personal" reasons for considering taking on a project start to manifest themselves. - A "need" of one sort or another arises (it could be anything). - The realization occurs, that by taking on a "building project" of some sort, you could not only solve the immediate problem (or problems), but could improve things "all round" for the family as a whole. - So you start to think more seriously about it. - And the “snow ball” starts to roll!
3) Geographical reasons:
1) Geographical reasons for moving and Self Building or Renovating / Converting :
If you need or want to move to another geographical area of the Town, City, or Country, - for whatever reason, you may also decide that you want to make the most of the opportunity that comes along with moving home, by improving your quality of your life and the lives of your family at the same time.
Once you have the initial “seed” of a thought in your head, you will often then come to the swift conclusion that you will stand more chance of achieving the goal of “improving your lot” by either Self Building or finding a property to renovate in the area you want to live.
By combining the two things “The move” and “The project”, you could gain three benefits from one period of upheaval:
1) Living where you need or want to live.
2) Living in a nicer, better quality property.
3) Increasing your equity.
2) Geographical reasons for “staying where you are” and Renovating or Extending:
If you love the area in which you presently live, and the family are all happy there, but the property you are living in doesn’t give you what you need as a family, then you will, at some time have to make a decision whether to “uproot” and move, or to improve your present home.
If you can practically and economically increase the size of your present house without “over developing” the plot it sits on (i.e. not leaving yourself with no garden and no driveway – which could actually devalue the house), and if you think that you could relatively easily get Planning Permission to extend it so that it does actually fulfill the needs of your family, AND, if you are not too concerned with making a “hefty profit” then you may that staying where you are is the best option.
If you decide to go down that route, although you will still have to do all the planning and you will still have to cope whilst the building work is done:
1) You will save all the upheaval of packing up and moving to another area.
2) You won’t have the kids moaning about leaving all their friends behind.
3) You will be able to keep the kids in the same schools.
4) Your own social life will not have to “start over”
5) The project can usually be completed in a shorter time than if you have to find a new place / buy it / design your new home / apply for Planning Permission & Building Regs / plan the project / complete the project / move in
6) You (usually) won’t have to consider renting somewhere or living in a caravan for a few months whilst the work is underway
7) Once all the work has completed, knowing already that you are happy living in that location, you will probably be happy to stay there for at least another few years.
Deciding between the “moving” or “staying put” options can be difficult. You don’t know how successful each option could be for you and your family, and both options can be “a bit of a gamble”. - In the end, the final decision often comes down to a “gut feeling”.
You will often just “feel” that one option is right.- It might be that “making the move” could give you the “new start” that you think the family needs. Or, it could be that “Everyone is happy where we are, so why change everything, and possibly risk “upsetting the apple cart” just to possibly make a bit more of a profit?”
4) Logical reasons:
Sometimes a thing is simply “just the best option”.
If you are not happy with the property you are presently living in, - for whatever reason. – It’s too small / in the wrong place / you don’t like the neighbours / it’s falling down / work is too far away etc. Then the logical thing to do is to “make things better”! – One way or the other! - It’s often just a case of “getting your act together” to start the process off.
If you weigh up all the alternatives, over time, you will often find that one particular answer to your problems keeps “coming to the forefront”. - It just seems to be the “logical answer”. - It may turn out to be that a Self Build appears to be the best idea. – Or, it may be and extension, or a renovation. - Whichever it is, no matter what angle you look at it from, and however much you try to persuade yourself that “it’s not the right answer” (because you have another “favourite” option in mind!), - it just seems to keep “ticking all of the boxes”!
If you are lucky, you will find that when you sit down to talk about the idea, with your family, the option that “ticks all the boxes”, actually turns out to be the most practical thing to do, - and what’s more, if you are REALLY LUCKY, you may even find that it is universally given the “theoretical thumbs up” by everyone!
If and when that sort of thing happens, and you DON’T decide to have a go at it you could actually end up fighting the rest of the family for years to come! (Mum / Dad, - When are we going to get a bigger house? When are we going to get a garden? When am I going to get my own room? Why didn’t we build the house when you said we could? - Etc).
In those circumstances, it’s usually a good idea to at least look into the possibility with a clear head, and using common sense. Weigh up its benefits and costs, and decide if the improvement that it would make to your lifestyle makes it worth considering more seriously.
If something appears to be the best option, it often is. If you ignore it because you “haven’t got time” to look into it properly, you may end up kicking yourselves in a couple of years time.
Summary:
If you find yourselves in a position where, for whatever reason, you come to a decision that you are going to have to move home (whether that is to “scale up” “scale down” or “relocate”), you basically have 2 main options:
1) You can accept a new home that the major developers “want you to have”.
2) You can decide that you want something better, bigger, and better value.
When you take all of the factors into consideration, Self Building will usually give you “the biggest bang for your buck” and will usually be a better option financially. It will also be the most likely route for you to be able to achieve everything that you and your family want and need in a practical and personal sense. Renovation and Conversion projects can still “tick all the boxes”, but won’t usually make as large a profit at completion.
However, sometimes “practically”, and “personally” there are other considerations which can be as important, if not more important than the financial ones.
Before you decide whether to “stay as you are”, or to consider taking on ANY project, just take some “time out” to sit down and consider ALL the aspects, from all angles. – If you Do decide to have a go at some sort of major project, it could be one of the biggest things you ever do. – You need to make sure that before you make your final decision that you have “covered all the bases”.
If you do that, and the whole idea still sounds like a good one, - it probably is!
So why not get on with it?
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