Should I buy an absolutely run down property or avoid it?

user1168934

I saw a property (south east) that has a lot of potential and it has the features that I am looking for like a big garden, parking space (on the side) and a good location. The thing is that it is really really run down. It has all the potential but nothing has been done on it ever. It has no gas connection or central heating plus electric wiring is out of date. At the moment it will require electric rewiring, new gas connection, new central heating, new kitchen and a new bathroom - basically a complete refurbishment. It also has space for a front driveway (which I would like) but will need permission and a driveway made. I should have funds to get the work done.

The problem is that despite its condition I am not getting it any cheaper. There are hardly any properties on the market and even less with the feature that I am looking for. In the normal market it would probably sell for around 25K less than what I think I will have to pay for it right now - and then I will have to spend money on top of it plus the time and the hassle. After doing all of these things it would probably be worth more or less what I have spent on it - i.e. I am getting all the hassle, spending time and my own cash and not really saving anything. So I am getting double minded now. I heard that generally people buy run down properties because they can get it at a reduced price - is this assumption correct?

Is it worth it or shall I wait for another one. Would you buy it or wait for another one to come around?

AdrianC

Never underestimate what a renovation project will cost you. £25k won't touch the sides of what you mentioned, even before we consider what you might not have found... yet.

user1168934

AdrianC said:

Never underestimate what a renovation project will cost you. £25k won't touch the sides of what you mentioned, even before we consider what you might not have found... yet.

You misunderstood the £25K figure.

I said that it would go for 25K less in a normal market than what I will have to pay right now. My renovations are costing upward of 40K.

i.e. I am paying 25K extra in mortgage + 40K of my cash in renovations.

Ditzy_Mitzy

Have you checked, assuming you aren't a cash buyer, that you can get a mortgage?  Certain things you've written suggest the house might not be inhabitable in its present condition; if it is uninhabitable then you will find it difficult, if not impossible, to get a mortgage.  

Jeepers_Creepers

Really, the only reason you are considering it is that it's a potentially good house in a desirable area - and there are no alternatives?

Normally you'd be insane to pay around the same for a house that requires major work as one already in good order.

Are you sure they will get the seemingly inflated price they are asking? What sort of price range is it in?

I'd suggest you do the sensible thing and offer a fair price, and be ready to walk away if they say 'no' - leaving your offer on the table.

Meanwhile, keep looking.

FreeBear

If the shell is watertight and in good order (i.e. roof, walls, windows/doors), then your estimated costs may not be too far off the mark. Also depends on the condition inside - If the plaster is coming off the walls and the ceilings collapsing, you'll need to take a long hard look at why the plaster is failing. If it is solid brick wall, then you should be using a lime plaster to replaster, which is going to be expensive. The alternative is to fit internal wall insulation, but care and attention is needed to avoid trapping moisture in the walls.. Period properties are a real money pit.

RamBro

I'm going to view one tomorrow. It's a lovely old 6 bed detached property, with space for a large garage, good sized garden and well located. The road is not tree lined like I'd like, but the rest makes up for it.
It'll require what you're planning plus new ceilings, insulated walls, small kitchen extension, some internal reconfig, triple glazing etc. I estimate it'll cost around £115K when fully completed.

Properties like this one rarely come about in that area and a similar sized and condition one a road away sold recently for over £200K more. I'll be offering 5% over the guide price as we plan on living here for a long time and in the scheme of things that amount doesn't really matter.

user1168934

Jeepers_Creepers said:

Really, the only reason you are considering it is that it's a potentially good house in a desirable area - and there are no alternatives?

Normally you'd be insane to pay around the same for a house that requires major work as one already in good order.

Are you sure they will get the seemingly inflated price they are asking? What sort of price range is it in?

I'd suggest you do the sensible thing and offer a fair price, and be ready to walk away if they say 'no' - leaving your offer on the table.

Meanwhile, keep looking.

At the moment there are no alternatives on the market. I am not renting at the moment so I am perfectly fine to stay in my current property albeit its quite small for my family.

So this is south east, the property is on the market for £300K. Based on my (limited ~1yr) experience in the area this will probably go over the asking price to around £305K. Looking thorough recently sold prices run down properties have gone for around £280K and immaculate modern ones go for around £340K.

In this stupid market, I really struggle with calculating a fair price. Please tell me how to calculate a fair price if you know.

Ditzy_Mitzy said:

Have you checked, assuming you aren't a cash buyer, that you can get a mortgage?  Certain things you've written suggest the house might not be inhabitable in its present condition; if it is uninhabitable then you will find it difficult, if not impossible, to get a mortgage.  

I had not considered that. I am not a cash buyer (I wish I had this much cash). The EA said that house is not habitable (although some elderly person was living there until recently).

Unicorn_cottage

@user1168934 - I assume you have made an offer but it has been rejected? You have to remember that it is a competitive market and someone may offer full price and think nothing of spending £40k+. Are you in a good position i.e. nothing to sell, dip & large deposit etc? All of this matters when a vendor selects who to sell to.

RamBro

If it's not habitable, then an alternative could be a renovation mortgage from the likes of Ecology and Buildstore (I think) - but their rates will be higher.
I'm unsure what the criteria is, but I do know it needs to have some form of kitchen (sink and units) and a working WC...as I was concerned with the one I'm looking at.

user1168934

Unicorn_cottage said:

@user1168934 - I assume you have made an offer but it has been rejected? You have to remember that it is a competitive market and someone may offer full price and think nothing of spending £40k+. Are you in a good position i.e. nothing to sell, dip & large deposit etc? All of this matters when a vendor selects who to sell to.

I am all those things and I have heard that a vendor take this into account but I have experienced quite the opposite. I lost one property simply because the other person who had a chain offered £500  more on a property worth £320K - long story, won't go into it.