How to find a cheap rundown property to buy and renovate

It’s the dream that could allow those with a low budget to finally own bricks and mortar: find a dilapidated house, buy it cheap, do it up and then live there or sell it for a profit.

If you choose your home wisely (good location, good yield etc.) and stick to your transformation budget, this is actually an excellent way to get your foot on the property ladder.

However, there are pros and cons to flipping a home, and it can be difficult to know where to start if you’re a first-time buyer.

Not to worry, we are here to answer all of your questions, starting with the big one: where and how can you find a rundown house to purchase?

Where and how to find a rundown house to buy

There are several ways to find a crumbled home in need of love.

Search online, talk to local estate agents or – and this might sound a little morbid but it is a legitimate strategy – go hunting for probate property (houses that belong to someone who has died recently).

‘The first thing to do is to speak with local solicitors and asset management companies to see if they have any probate properties for sale,’ Rene Lynburge from Yopa’s local estate agent for East London, tells us.

‘In many instances these properties are unmodernised and, in some cases, rundown. 

‘After that, it’s worth calling your local estate agents. You may find that they are in fact selling such properties, but you haven’t spotted these online.

‘This could be because they aren’t including all the images of the property in their advertisements so as not to spoil the aesthetic of their websites.’

Your best bet to finding a property that suits your needs and budget is to look around.

A lot.

‘Finding a relatively cheap rundown house to renovate is a numbers game,’ says Paul Gibbens from Housebuyers4u.

‘The more estate agents, auctions or even friends in the sector you have/look at, the more likely you are to find one.

‘Not only that but the more you look at, the better you’ll get at spotting gems that could bag you a big profit.

‘Online portals like Rightmove or local newspapers are worth checking out as many homes are listed on these platforms. Also don’t forget to check out specialist websites like Property To Renovate and Pick Up A Property.

‘In addition, you can check for repossessed homes online and purchase them for a good price providing you have the funds.’

Another savvy way to secure a cheap property is to find them ‘off-market’.

‘It would surprise a lot of people to know how many properties are actually sold ‘off-market’, i.e. without being marketed on websites such as Rightmove and OnTheMarket.com,’ Cory Askew, Chestertons’ regional sales director for central London.

‘The only way of finding out about these properties is often through local estate agents or by doing your own detective work to identify the owner.

‘This detective work will often start with the Land Registry website, which you can use to see when the current owner bought the property and what they paid for it.

‘Ex-local authority/council properties often present good development opportunities as they generally were well-constructed but often just a little neglected, but buyers must be aware of some restrictions that lenders have relating to these sorts of properties, especially concrete buildings over a certain number of floors.’

Best areas in London to flip a property for profit

This is a difficult question, because every area of London could see you get a nice profit on a sale – and this can differ street by street or postcode by postcode in certain locations.

But central and prime central offers less opportunities and higher risk (but on the flipside, also a higher reward), explains Cory.

He says: ‘The terraced streets of south east and south west London are full of development opportunities, where typically you have an ageing population in traditional neighbourhoods looking to downsize. 

‘These may not be “wrecks’ per se, but are likely to offer extension and development opportunities and still be mortgageable by high street lenders.’

How to buy property at auction

‘Property auctions are also a great place to find a fixer-upper,’ adds Rene.

‘They’re a quick and decisive way of disposing of property, so you’ll find that neglected properties are often sold this way.’

Do your research – most auction houses will release a catalogue of available properties about a month before the actual auction takes place, so as to entice prospective buyers.

Each home will also include a guide price and a reserve price, but these are changeable up until the day before the auction, so keep yourself updated.

You can also place a bid on a property before the auction, but this is a risky move as it shows you are interested (and could drive up the price).

Now for the logistics.

Don’t just walk in and put a bid down on the property that ‘looks’ like the best one – do your research and read the small print.

Check how much other properties in the area are worth and how much you stand to make if you give the house a makeover and sell it or rent it.

Ask yourself: is it worth it?

And what does the market look like – will you be able to sell the property quickly after fixing it up?

‘No matter where you look for houses to fix up and sell on, it’s important to have a strategy,’ says Paran Singh, advisor from TIC Finance.

‘Bond Wolfe Auctions’ June online-only auction had a 98% success rate, with over 3,000 bidders in a record-breaking event that saw some houses sold for more than double the guide price. 

‘On the other hand, many lenders have raised their loan to value thresholds in response to Covid-19, that could make it much more difficult to shift a property once it’s been fixed up.

‘While the demand for housing isn’t going anywhere, economic insecurity will still make it difficult for sellers, so having a robust strategy will be essential.’

Don’t forget to do a property survey and request a legal pack from the seller for your solicitors to look over.

Pros and cons to buying a rundown property

Pros

Cons

Tips by Richard Adamson, partner and auctioneer at Allsop.

What about the mortgage?

‘If you’re willing to buy a dingy, rundown house, then you could well get a great deal, plus a doer-upper can also be a great way of buying at a rock bottom price, cutting stamp duty costs and eventually adding value,’ says Richard Hayes, CEO and co-founder of online broker, Mojo Mortgages.

‘However, the most important thing to bear in mind is cost. If you’re looking at a property that needs everything doing to it, the first job will be to do the maths.

‘Determine, as much as you can, how much the work you want to do is going to set you back. Projects like rundown houses take nerves of steel so you need to be very realistic about costs, and you should always budget in more than you think.’

If you don’t have the cash flow to pay for a property upright, organise a so-called mortgage Agreement in Principle (also known as Decision in Principle).

It’s essentially a piece of paper that states how much the lender is willing to let you borrow, should you buy a property.

And don’t forget to buy your buildings insurance before money changes hands, so that you are protected from the get-go.

‘The problem with buying with a mortgage is that the lender is probably going to be more risk-adverse and less in a hurry than you,’ adds Cory.

‘This could jeopardise your ability to complete a purchase quickly, and therefore makes you a less reliable buyer in the eyes of the seller.

‘Cash buyers are usually more successful and will generally then go on to mortgage the property once the transaction has gone through and when there is not such a time pressure. 

‘Totally unmodernised wrecks that are not deemed “habitable” (i.e. without a kitchen or bathroom) will often be un-mortgageable or be limited to Development Finance, the terms of which are considerably less attractive than a straight forward residential mortgage.  

‘However, freehold houses in London are always very highly sought-after and most likely to hold value through market ups and downs. 

‘Some of the best buys I’ve seen over my career have been those with a development angle. But be warned, aspiring developers on tight budgets will also need to have a very good handle on development costs and planning pitfalls in order to genuinely benefit from a purchase of this type.  

‘Buying a wreck at the right price is only half the battle: getting the design and development wrong can rapidly erode the value inherited in the purchase.’

Speak to local real estate agents and find out what buyers frequently ask for, and if this is something you can add into your existing budget.

Ask yourself: what will bring most value to the property?

Is it those beautiful but expensive marble tiles that you want to shell out a few thousand quid for or is it a boring but necessary update of the toilet?

Flipping a property is a lot of work, but it could pay off in the long-run.

Prepare yourself, both mentally and physically – and begin.

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