Renovation costs

Rachiee

Hi just looking for some broad opinions. I am ten years into a mortgage on a property that is in need of substantial renovation. Loan to value currently about 70%. 24 years remaining on the mortgage.

I have gotten quotes from a couple of builders and if I was to do everything I wanted to renovate the property I'd be looking at a bill (and so a top up loan from the bank ) of around 30% of the current value of the property.

However I believe the renovations should add value to the property , of at least 25% but possibly more.
At that calculation I'm at a loss of of 5% so why would I bother !
Unfortunately the house is in such a state of disrepair that it is practically uninhabitable the roof holds barely any water so the ceilings, walls and floors all substantially damaged and in need of replacing. I still live there but it is uncomfortable. The front part of the house is ok but the two rooms where there is ingress of large volumes of water are basically slums.

I feel I might have difficulty selling it now as is, there would certainly be a lot of room for negotiation from the buyer. Also if I sell it I am not sure I would qualify for a decent new mortgage as a single applicant on an average wage.

However if I renovate and want to sell in a few years I feel I would be back to square one on terms of my LTV.
Any ideas what would be for the best? Or how much I should budget for renovations as a percentage of the value of the property?

As an aside I am on quite an unfavourable variable rate on my mortgage so I would have the option of switching providers to lower my current repayments but don't know if they would do a top up with that ?

johnnyskeleton

However I believe the renovations should add value to the property , of at least 25% but possibly more.
At that calculation I'm at a loss of of 5% so why would I bother !

Well, because it needs to be done or you'd like it to be done. A house isn't a static investment and requires constant maintenance etc. If this has been neglected over a number of years, then a full refurb is required, and this is just doing all the work from previous years at once.

Unfortunately the house is in such a state of disrepair that it is practically uninhabitable the roof holds barely any water so the ceilings, walls and floors all substantially damaged and in need of replacing. I still live there but it is uncomfortable. The front part of the house is ok but the two rooms where there is ingress of large volumes of water are basically slums.

I feel I might have difficulty selling it now as is, there would certainly be a lot of room for negotiation from the buyer.

Bizzarely, the Irish market puts a premium on houses that need lots of work.

For example, if a house, when fully done up costs €350k and requires €100k worth of work, you would think that the fixer-upper value would be less than €250k (€350k-€100k), when you consider that a fixer upper takes up a lot of time, stress effort and renovations typically overrun their estimates. But in many parts of Ireland, the fixer upper is more likely to go for closer to €300k than for under €250k, meaning that the fully completed cost will be over the value of a fully done up version of the same house.

Presumably, this is because Irish people like the idea of doing up houses, putting their own design on them etc. Or they don't like other people's designs and so will want to rip them out anyway.

The point being, if you are solely looking at the market value, or are thinking of selling, then it makes much more sense to sell as a fixer upper rather than do it up and sell then, in my opinion.

Also if I sell it I am not sure I would qualify for a decent new mortgage as a single applicant on an average wage.

Without prying, did you buy the house on the open market and has your financial situation disimproved since you bought the current house? I would assume that if you bought around 2010 that you got the house at the bottom of the market at a time when lending was very tight. Even if you are in the same financial/personal position now as you were then, I would've thought you'll still be in a better position to buy now than you were then, due to changes in the market.

However if I renovate and want to sell in a few years I feel I would be back to square one on terms of my LTV.
Any ideas what would be for the best? Or how much I should budget for renovations as a percentage of the value of the property?

I'd say explore the feasibility of selling and buying again as your first port of call. A bank will look at your finances and tell you exactly how much you can borrow and for how long. Many estate agents will do a free market valuation for you, and putting the house on the market generally doesn't cost much and there is no real committment until you sign a contract for sale. So you could then work out what it is likely to sell for and also what you could likely buy afterwards.

Once you've answered that question, then the rest should be easy. If you can't get a place you want if you sell and take out a new mortgage, refurbish the place to your liking and consider it a home, not an investment. If you could get a place you want more easily after a sale, then it makes sense to sell now.

As an aside I am on quite an unfavourable variable rate on my mortgage so I would have the option of switching providers to lower my current repayments but don't know if they would do a top up with that ?

Yeah that shouldn't be a problem, but is subject to LTV rules etc. It is unlikely that a bank will lend above 80% LTV, for example, so the maximum amount you are likely to be able to borrow to renovate will bring you up to 80% LTV.

Using your figures, with say a €400k valuation on the house at present:

House current value 400k, remaining mortgage 280k, equity 120k

Estimated fully done up value (plus 25%) = 500k, cost of works 120k, new mortgage 400k = 80%.

So because the costs are 30% of the current value and the estimated future value is 25% greater, the Loan to Value could still be under 80% as you are currently at 70%.

Best of luck, whatever you decide.

brisan

Rachiee wrote: »

Hi just looking for some broad opinions. I am ten years into a mortgage on a property that is in need of substantial renovation. Loan to value currently about 70%. 24 years remaining on the mortgage.

I have gotten quotes from a couple of builders and if I was to do everything I wanted to renovate the property I'd be looking at a bill (and so a top up loan from the bank ) of around 30% of the current value of the property.

However I believe the renovations should add value to the property , of at least 25% but possibly more.
At that calculation I'm at a loss of of 5% so why would I bother !
Unfortunately the house is in such a state of disrepair that it is practically uninhabitable the roof holds barely any water so the ceilings, walls and floors all substantially damaged and in need of replacing. I still live there but it is uncomfortable. The front part of the house is ok but the two rooms where there is ingress of large volumes of water are basically slums.

I feel I might have difficulty selling it now as is, there would certainly be a lot of room for negotiation from the buyer. Also if I sell it I am not sure I would qualify for a decent new mortgage as a single applicant on an average wage.

However if I renovate and want to sell in a few years I feel I would be back to square one on terms of my LTV.
Any ideas what would be for the best? Or how much I should budget for renovations as a percentage of the value of the property?

As an aside I am on quite an unfavourable variable rate on my mortgage so I would have the option of switching providers to lower my current repayments but don't know if they would do a top up with that ?

As has been stated in the above post if you spend 100k on renovations you are highly unlikely to get it all back
Your best option would be to put a new roof on it , rewire it , replumb with central heating ( air to water with ground floor underfloor heating ) insulate it and replaster it
Then sell it as a blank canvas
You should get back most of the money you spent
Grants are available for heating and insulation upgrades , or they were recently, not sure if the same applies now
If you put in fancy kitchens , bathrooms doors staircase etc the new owner may rip them out

Ray Palmer

It isn't that property that needs work sells at a premium it is that it is priced as if you do the work yourself. While it may cost €100k to pay somebody to do the work it would cost less for a person to do it themselves. So who you are competing against small time developers or people who can do the work themselves for a lot less. It could cost less than €25k doing the work themselves.

In terms of losing money by fixing the house up it is just the wrong way to look at it. From what OP is describing this is repair work that is currently reducing the property and progressily getting worse.

My suggestion is see what you could do yourself. I learnt how to do modern plumbing off YouTube and saved easily 5k since and €10k at the time. Putting up plasterboard is very easy as is pulling it down. Lots of labour costs can be saved and friends are good help.

brisan

Ray Palmer wrote: »

It isn't that property that needs work sells at a premium it is that it is priced as if you do the work yourself. While it may cost €100k to pay somebody to do the work it would cost less for a person to do it themselves. So who you are competing against small time developers or people who can do the work themselves for a lot less. It could cost less than €25k doing the work themselves.

In terms of losing money by fixing the house up it is just the wrong way to look at it. From what OP is describing this is repair work that is currently reducing the property and progressily getting worse.

My suggestion is see what you could do yourself. I learnt how to do modern plumbing off YouTube and saved easily 5k since and €10k at the time. Putting up plasterboard is very easy as is pulling it down. Lots of labour costs can be saved and friends are good help.

If heating is required then the installation will have to be signed off on .
No decent plumber will sign off anybodys elses work

Ray Palmer

brisan wrote: »

If heating is required then the installation will have to be signed off on .
No decent plumber will sign off anybodys elses work

There are obviously certain aspects that require certification. That would be aspects like the boiler but not the radiators needing sign off.

There are a lot of things that a person can do themselves. You can even run the cables for electricity and then leave it to be inspected before an electrian fits all switches and the like. There are inspectors you can hire to give certification.

A lot of cost is basic manual labour. Not for everyone but if you have a limited budget it is worth considering. I saved myself €600 recently installing a replacement pump. Took me 1 hour. I would have spent longer looking for a plumber.

It all depends on how much time you have and budget.

brisan

Ray Palmer wrote: »

There are obviously certain aspects that require certification. That would be aspects like the boiler but not the radiators needing sign off.

There are a lot of things that a person can do themselves. You can even run the cables for electricity and then leave it to be inspected before an electrian fits all switches and the like. There are inspectors you can hire to give certification.

A lot of cost is basic manual labour. Not for everyone but if you have a limited budget it is worth considering. I saved myself €600 recently installing a replacement pump. Took me 1 hour. I would have spent longer looking for a plumber.

It all depends on how much time you have and budget.

I am a sparks ,brother is a plumber another one is a carpenter -cabinet maker
We have flipped numerous houses ........it does not work that way

Ray Palmer

brisan wrote: »

I am a sparks ,brother is a plumber another one is a carpenter -cabinet maker
We have flipped numerous houses ........it does not work that way

I'll put my 30 years experience and my families 50 years up against yours any day. I have done this numerous times. Also a qualified civil engineer. So yes it does work this way if you want you just haven't been involved with such work.
The suggestion from you is that installing a radiator requires certification is nonsense. I have had inspectors rip electricians apart for their work and pass my work with out an issue. Also have caught plumber installing boilers incorrectly. Trades are very unreliable and must always be watched. Had a plumber put in a water tank and the overflow pipe was higher than the tank. The average joe should understand what is being done so as not to end up ripped off or with bad work.

Been a while and new regs may make it a little different but mostly just on the electrical side.

listermint

brisan wrote: »

I am a sparks ,brother is a plumber another one is a carpenter -cabinet maker
We have flipped numerous houses ........it does not work that way

What's the regulations around installing atw heating system in a house. And who are the certified trades for said system.

brisan

Ray Palmer wrote: »

I'll put my 30 years experience and my families 50 years up against yours any day. I have done this numerous times. Also a qualified civil engineer. So yes it does work this way if you want you just haven't been involved with such work.
The suggestion from you is that installing a radiator requires certification is nonsense. I have had inspectors rip electricians apart for their work and pass my work with out an issue. Also have caught plumber installing boilers incorrectly. Trades are very unreliable and must always be watched. Had a plumber put in a water tank and the overflow pipe was higher than the tank. The average joe should understand what is being done so as not to end up ripped off or with bad work.

Been a while and new regs may make it a little different but mostly just on the electrical side.

If you think a good tradesman is going to let you do half an installation and then finish it himself you are wrong
Its the tradesman whose name is in the cert
I am 43 years in the trade and both my brothers have 35 years plus in the game
We have flipped over 20 houses
If you want to stand over your work you do it or supervise it from start to finish
Its my name on the cert at the end of the day
Agree too many cowboys out there but regs and insurance claims have sorted most out

Ray Palmer

brisan wrote: »

If you think a good tradesman is going to let you do half an installation and then finish it himself you are wrong
Its the tradesman whose name is in the cert
I am 43 years in the trade and both my brothers have 35 years plus in the game
We have flipped over 20 houses
If you want to stand over your work you do it or supervise it from start to finish
Its my name on the cert at the end of the day
Agree too many cowboys out there but regs and insurance claims have sorted most out

You don't need the trademan to certify you can get an inspector to do. Regulations are very open here as there is no building bylaw approval anymore.

You are overrating the importance of certification from tradesmen.

It is all possible and legal. A good tradesmen that doesn't try to overcharge and does a good job is a rare thing. Are you going to say you never overcharged and always did the best work?

brisan

Ray Palmer wrote: »

You don't need the trademan to certify you can get an inspector to do. Regulations are very open here as there is no building bylaw approval anymore.

You are overrating the importance of certification from tradesmen.

It is all possible and legal. A good tradesmen that doesn't try to overcharge and does a good job is a rare thing. Are you going to say you never overcharged and always did the best work?

Of course i have overcharged as has every supplier of every service
You charge what the market /buyer will pay
And yes i always did the best work
I can stand over every job I ever done

Ray Palmer

brisan wrote: »

Of course i have overcharged as has every supplier of every service
You charge what the market /buyer will pay
And yes i always did the best work
I can stand over every job I ever done

To think that says a lot. Do you go into a dentists expecting them to charge more because they think the person has more money and can afford it?

It is by very definition price gauging.

Most services have price lists and set charges. Tradesmen are so opportunistic they think overcharging is normal when it certainly is not.

If they have 2 jobs and find an awkward part while on the less profitable job they will bodge and rush off to the other higher paid job if they can get away with it.

I know plenty of tradespeople and they admit it freely in private.

Given you admit to price gauging I find it hard to believe you always do the best work. Not saying you left things unsafe just not the best. Light switch or sockets no aligned correctly, used 2 set of switches rather than a double switch because you didn't have it in the van etc. .. I have seen it all and dealt with trademen chasing bigger paying jobs. I understand why and get the reasoning but it is precisely why trades are not trusted.

brisan

Ray Palmer wrote: »

To think that says a lot. Do you go into a dentists expecting them to charge more because they think the person has more money and can afford it?

It is by very definition price gauging.

Most services have price lists and set charges. Tradesmen are so opportunistic they think overcharging is normal when it certainly is not.

If they have 2 jobs and find an awkward part while on the less profitable job they will bodge and rush off to the other higher paid job if they can get away with it.

I know plenty of tradespeople and they admit it freely in private.

Given you admit to price gauging I find it hard to believe you always do the best work. Not saying you left things unsafe just not the best. Light switch or sockets no aligned correctly, used 2 set of switches rather than a double switch because you didn't have it in the van etc. .. I have seen it all and dealt with trademen chasing bigger paying jobs. I understand why and get the reasoning but it is precisely why trades are not trusted.

Do you think a dentist in Dalkey charges the same for a filling as one on the north strand
Do you think a solicitor in Connemara charges the same as one in Ballsbridge
its the way of the world
The word is gouging by the way and I never admitted to it

I charged what the market will bear at a given point in time
And no I have never bodged or half done a job in my life
4 years apprenticeship under what was called a master tradesman at the time made sure of that