Property investment

Chris Ennis
Chris Ennis, Property Doctor

Over the years I have been involved with numerous refurbishment projects throughout Sussex. Clients maybe looking to create an investment package, some are looking to buy for their own occupation, whilst others are endeavouring to resell on completion and make a profit. The rules are invariably the same whichever path is taken. There is no certainty of success, and the problems can be daunting, but on occasions the rewards may become compensation.

Finding a property with potential for improvement and profit may not be easy. There are occasions when property with ‘potential’ does not come to the open market. A prospective purchaser should keep an eye on the press, and research values through the internet. Look for a property where there is some latent value that can be unlocked eg. scope for an extension, conversion to flats, rooms in the roof voids. Examine properties for sale by auction.

Estimate the likely realistic value of the refurbished property. Endeavour to estimate all refurbishment costs including materials, labour, rubbish disposal, purchase / sale, legal costs/planning charges, stamp duty, finance and sales agent’s cost all including VAT. Then add a sum (10%?) for contingencies. With these figures a theoretical surplus (profit) can be estimated, and this may then attract the tax man’s attention. In some instances, the purchase of a second property may attract additional stamp duty above the ‘normal’ rates.

The investor is looking to better the very low interest rates currently available through banks and building societies. By buying a property, preparing it to be suitable for rental and installing tenants yield rates can be improved substantially. Don’t underestimate the aggravation of managing the property on a day to day basis or the cost of employing an agent to undertake this task. Whilst most tenancies are relatively trouble free; you periodically hear horror stories of rogue tenant behaviour.

Over the years property values have increased but there have been periods of decline in values Over the last several months values have fluctuated but have not increased significantly. What may happen when the uncertainty of Brexit is finally resolved?

By Chris Ennis FRICS Chartered Surveyor 01903 261 217
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