By Matthew Tooth, Chief Commercial Officer at LendInvest
Refurbishment on the whole is a far quicker project than a ‘ground up’ development, and with a tendency to focus on cosmetic changes, it could be considered less risky.
Of course there are common factors to take into consideration when undertaking any development, from acquisition and general construction costs, to finance and marketing fees. However, there are various hidden costs that affect refurbishment projects specifically that need careful forethought.
So, what should you consider whilst calculating the true cost of your refurbishment?
Have your resources readily available
Although this is a key point to consider with any development, a refurbishment is (usually) a shorter build period, therefore, availability of resources becomes all the more critical to complete on time. For example, if you have forecast the refurbishment to reach completion in six months and are then told that there is a lead in period for certain materials of up to six weeks when you expected an instant purchase, this could cause work to stop and severe delays, which accumulates additional costs.
Establish clear access to the property
Most refurbishments happen within a built up residential area, and it’s in these situations that logistical problems can occur.
Neglecting to confirm viable access to the building for the supply of materials and machinery can cause unwanted delays.
Budget for professional fees
Fees for advisers such as solicitors, valuers or architects come as standard with any development and can amount to 10-15% of the overall cost. However, it is the tendency not to factor them in over the course of a refurbishment project that lands them on our list.
After purchasing a property for refurbishment, you will need to get building control certification to declare the property fit for purpose.
Planning for a heavy refurbishment? You may need an architect who expects to be paid promptly.
Factor in the cost of contractors before making a purchase
If you procure contractors after purchasing your property, you are leaving yourself unnecessarily in the dark when it comes to calculating the overall cost of your refurbishment. It is advisable to engage a consultant before acquiring the property and establishing the cost of their work, to manage your financial risk.
Check if the property needs structural work
A failure to have your property fully and professionally surveyed prior to purchase can lead to unplanned, unbudgeted structural changes mid-development. This can be a very pricey error!
Budget for unforeseen costs
Coming across unexpected issues such as hidden damp, faulty plumbing or electrics that need extensive re-wiring can put the total cost of your build up even further. Missing these on initial inspection is not unheard of, however, always budget to anticipate for hidden costs.
Allow yourself contingency time
When your project begins, you may think you have your refurbishment planned to precision, with all possible factors considered. However, in reality, the majority of developments run over schedule. Anticipating for contingency time is frequently overlooked, especially when obtaining finance, and can amount to around 5–10% of the overall cost of the refurbishment. This is why it is important to go with the right lender, who can provide flexibility when it comes to repayment.