Initial Specification

Whilst it is still my intention to project manage the work myself I am going to get a quote from a main contractor for comparative purposes.

In any event I am going to need a specification of work required so here is my first version of it. It is not particularly detailed in as much as it does not specifiy where light switches should go and what radiators to use but it is a start.

I am sure I will have missed out some major items but you've got to start somewhere.

Outside

1. Remove / repair / replace all damaged render from left flank wall as required.
2. Re-point right flank wall as required.
3. Bond “falling” bricks above the front door.
4. Clear front and back garden.
5. Paint all masonry and front door.

Inside

1. Remove current kitchen, bathroom, fitted wardrobes and cupboards, flooring (not floorboards), electrical fittings and heating / plumbing.
2. Remove all plaster from front and back rooms to ceiling
3. Remove plaster as required to all other rooms including back bedroom ceiling.
4. Repair / replace downstairs joists as required and ensure that they are not touching outside walls.
5. Repair current stair treads as required.
6. Install airbricks to provide adequate under floor ventilation.
7. Install chemical DPC to outside wall in two reception rooms.
8. Treat all wood for worm etc.
9. Install new window with lintel to new upstairs bathroom.
10. Install studwork for new upstairs bathroom and hall.
11. Install new soil pipe and waste to upstairs bathroom and connect to main drain.
12. Re-wire house including new fuse box.
13. Install new boiler and heating system.
14. Brick up windows no longer required.
15. Plaster all rooms as required.
16. Replace / repair skirting board as required.
17. Replace all windows as specified.
18. Install and fit new kitchen
19. Install and fit new upstairs bathroom
20. Sand downstairs floors if possible.
21. Re-glaze existing internal doors and re-hang.
22. Line walls if required.
23. Install insulation into the loft.
24. Paint and decorate all rooms
25. Tile kitchen and bathroom walls and floors as required.
26. Carpet stairs and bedrooms.
27. Fit laminate flooring if sanding downstairs floors is not possible.

If anyone can think of items I have doubtless forgotten please let me know.

Decisions Decisions

I have been reviewing all of my calculations and looking at all the quotes I have got so far to consider what to do about the delay and the increased costs. Here is the full spreadsheet with all the calculations in it in full. It is fairly straight forward but basically column1 titled “Initial Estimate” is the initial estimate posted before, the next column is revised to reflect the actual figures so far and any additional estimates or revisions and the next column is the same with a revised purchase price (more later).

When I set out on this project my aim was to make a 20% return before tax and assumed that we would sell the property on. I have tried to take everything into account including figures for agents and solicitors fees on the sale and the cost of money (or lost interest) for three months. It is very easy to ignore or forget these figures and then claim a higher profit! In any event CGT has to be paid on the gain so while you want the profit to be as high as possible there is nothing to be gained by under stating it. My apologies for the way this table is formatted . Blogger is excellent in many things but getting tables and pictures to format properly requires the patience of a saint. I am sure you will get the idea. If I ever work out I why I'll fix it!

	Initial Estimate	Quotes / Updates I	Quotes / Updates II
Total Purchase Price	£185,000	£185,000	£174,900
Legal Fees	£1,050	£1,050	£1,050
Stamp Duty	£1,850	£1,850	£0
Survey	£470	£470	£470
Electrics / Re-Wriring	£3,000	£2,776	£2,776
Clearance House and Garden	£2,000	£2,000	£2,000
Central Heating	£4,000	£6,200	£6,200
Bathroom	£1,000	£1,000	£1,000
Windows and Doors	£3,500	£3,731	£3,731
Upstairs Bathroom	£2,000	£2,000	£2,000
Flooring and Tiling	£2,500	£2,500	£2,500
Plastering and Making Good	£2,000	£2,000	£2,000
Re-Decoration	£2,500	£2,500	£2,500
Kitchen	£1,500	£1,500	£1,500
Contingency	£3,000	£3,000	£3,000
Items Added After Initial Estimate
Re-Rendering		£2,500	£2,500
Re-Pointing		£1,500	£1,500
DPC and Associated Rendering		£4,700	£4,700
Wet rot repairs		£1,250	£1,250
Total Expenditure	£30,370	£42,527	£40,677
Total Price Completed Property	£215,370	£227,527	£215,577
Cost of Money 3 Months @ 5.49%	£2,956	£3,123	£2,959
Project Cost	£218,326	£230,650	£218,536
Resale Price	£249,950	£249,950	£249,950
Agents Fees on Sale	£2,500	£2,500	£2,500
Legal Fees on Sale	£750	£750	£750
Net Proceeds	£246,701	£246,701	£246,701
Gross Profit	£31,624	£19,300	£31,414
% Return on Capital (Gross)	14.5%	8.4%	14.4%
CGT	£5,692	£3,474	£5,655
Profit after CGT	£25,932	£15,826	£25,760
% Return on Capital (Net)	11.9%	6.9%	11.8%

I still feel that there is flexibility in these numbers and I would hope that some of the expenditure figures would be lower than stated and that not all of the contingency will be required but in order to get to a 20% return before tax I need to shave near enough £10,000 of the initial estimates and £22,000 off the revised figures. On the prudent assumption that the difference is not going to be made up with an increased property price I think that this will be impossible. As a result, and taking advice from comments received on the blog and elsewhere, I feel that this project is only going to work with a reduced offer for the property of £174,900 obviously specifically selected to come under the stamp duty threshold. It still won’t be easy to get to 20% but I think that it will be possible to make 15% and that would not be a disaster.

There is only one thing stopping me. I haven’t made this proposal to the agent yet. That is tomorrow’s task although as I have sent them a link to this blog they may already know!

Deja Vu

I spoke with a friend yesterday who is following this blog. He (you know who you are) has redeveloped many many properties including one that I bought with a friend about 20 years ago which he did up for us.

Interestingly he reminded me that some of the problems that I have already highlighted in this blog were exactly the same difficulties that he had all those years ago. It is also interesting because I have almost no recollection of what work was required for that project. In hindsight maybe I should have taken more notice, it might have come in handy now.

By coincidence, that house was remarkably similar to this project in other ways. They are both two up two down cottages with front doors leading directly onto the living room with single story kitchens. If I remember rightly the earlier cottage did not have a bathroom at all, just an outside toilet. We (or at least he) put a bathroom between the two bedrooms which worked very well. Something we are going to try and do with this house.

He thought that the budget for the redevelopment was tight. I was pleased to be able to tell him that verbal quotes given to me on the replacement doors and the re-wire were below the initial guess which I was quite pleased about. His view was that those were the two areas where he thought we over estimated and that most of the other items were too low!

I got the first quote for the plumbing work last night and that is substantially over the guess so he may have a point. I will publish a guess v quote reconciliation when the written estimates have arrived.

The whole point of publishing my figures in such a public way on a blog was so that I couldn’t subsequently change history by claiming that I thought the refurbishment was going to be more money in the first place and therefore claim that I was right all along! It is clear that delivering this project within budget will be difficult but I still think achievable. We are not going to use a main contractor and will be employing the appropriate trades as needed so that will give us the flexibility to spend our money wisely by picking the best prices.

Sara Beeny will be proud.

Initial Estimates

We had a long discussion the other night over a couple of bottles of wine about how much this house will cost to do up and could we do it and where would we get the money and so on. Instead of trying to agree on costs we thought we would both write down on a separate piece of paper the work we thought was required and how much each job would cost. Here is what we came up with. Where the figures were different (which was most of the time) the highest is listed.

Item	Our Guess
New Kitchen	£1500.00
New Downstairs Bathroom	£1000.00
Plumbing and Heating	£4000.00
New upstairs shower room	£2000.00
Re-Wiring and Electrical Work	£3000.00
Clearing House	£1000.00
Clearing Garden	£1000.00
Flooring including carpets and tiling	£2500.00
Replacement Doors and Windows	£3500.00
Plastering and making good	£2000.00
Re-Decoration	£2500.00
Contingency	£3000.00
Total	£27,000.00

This list doesn’t include the cost of borrowing or the estimates for legal fees. We know what these are and are based on the purchase price what with the associated stamp duty but I won’t tempt fate by telling everyone how much the house will cost before exchange.

It would be all too easy to change these figures but I want to record them here so I am forced to be honest with myself on what we estimated it would all cost before we start to find out the truth.

The survey may tell us about things we have overlooked but let’s hope not.

Starting Out

I never set out to be a property developer. In fact until the middle of August I hadn’t given much thought to the subject at all.

I had always had a niggling thought at the back of my mind along the lines of “I wish I had kept my last flat instead of selling it to buy a house” but thoughts like that are as valid as saying “I wish I could go back in time and buy four or five houses in my street when they were built in the 1930s”. They were so cheap then. None the less there does seem to be a lot of people who own more than one house and at the moment I am not one of them.

So why the change of heart? Very simply, our neighbours. They decided to put their house on the market. They claim that it had nothing to do with the fact that we had just applied for planning permission to build a large extension on our house but you can never be sure.

Shortly after they told us they were selling the agents board went up and within five minutes we were on the internet looking up the price. It still seems slightly obscene to ask your neighbour how much they are selling their house for but perfect reasonable to go and look it up.

After looking at the price of their house I took the opportunity to see what else the agent had to sell and there it was. A 1900’s two up two down detached house requiring complete modernisation. Without really thinking it through I phoned up the estate agent and arranged to go around and view the house with the rest of the family that afternoon.

So what was it like?

The house, which is painted white, is on a reasonably busy road without it’s own parking but there is plenty of parking on the street. There is a tiny front garden and the front door opens directly onto the front room which leads to the back room which leads to the kitchen which leads to the bathroom. Splitting the front and back rooms is a staircase that would give a mountaineer difficulties. At the top of the stairs there are doors left and right leading to two decent sized bedrooms. Allegedly there is 70ft garden however it was so over grown I didn’t make it further than about 6 ft before being turned back by some vicious thorn trees. I think we’ll take the agents word for the length of the garden!

To the untrained eye (mine) the house looks structurally sound however it needs at a minimum a complete re-wire, replacement central heating and plumbing, new windows, a new kitchen and bathroom, a lot of re-plastering (much of it has come away from the wall), complete redecoration, some new flooring and maybe some new ceilings. It seems amazing to me that somebody was living here until recently but I guess it would look a little better with furniture in the house as that would cover up a multitude of sins.

We have put an offer in, which has been accepted, by making a load of guesses and assumptions on the work required and now we need to do some detailed assessments on what it will cost to complete the refurbishment.

Solicitors and surveyors have been instructed and we should get a chance to see if more work is required over and above the original assumptions.

Incidentally, at the time of this blog entry we have had our offer accepted but haven’t exchanged contracts so this could end up being the shortest blog in history.