The property development market in the UK provides numerous alternatives for property investors. One of the most popular is buying a derelict property with the objective of renovating it and then selling it for profit. As long as you buy at the right price and effectively manage your development expenses, fixing up old and rundown properties will almost always make an excellent investment.
Why choose a derelict property?
A derelict property refers to one that has been abandoned for a long time and is in such a bad condition that it needs to be demolished. Derelict properties are usually in an uninhabited state and need to go through extensive repairs or have to be restored to a liveable (and therefore mortgage able) state. As of 2008, there are more than a million derelict properties in the UK.
Derelict properties are seen as good investments because they can be acquired cheaply, although they need to be renovated and developed first before they can be occupied. Regardless of their dilapidated conditions, most of these properties have walls and foundations that are still intact thus entailing the use of less cement and cheaper building expenses.
How to find a derelict property
While searching for a rundown property is generally considered difficult unless you spot one in passing, there are many creative ways of locating them. One is at auction where many properties put up for sale are often in need of restoration. Major auction houses typically offer a catalogue listing the properties scheduled for sale.
You can also find derelict properties through the registers made by different conservation groups such as the English Heritage, the governments legal advisory body on the historic environment. The association produces a register of different buildings at risk. Also, you can also look up websites that offer to help find such properties. Most of them provide details of empty homes in different locations. Estate agents as always are worth talking to as well.
The value of a derelict property
To determine the value of a rundown property, you should have a complete building survey conducted by an experienced surveyor. Before you make the purchase, be sure to check planning possibilities carefully. If the property has a planning permission for change of use, it can command a higher price.
Financing a derelict property
Obtaining a mortgage to finance the renovation of a derelict property can be complicated but there are financial institutions that will lend on such properties. The Ecology Building Society and Norwich & Peterborough will lend on derelict properties through their green, self-build or renovation mortgages. Most of these lenders will release the funds in drip-feed method in stages so that if you default on your repayments and the property has to be sold, the lender can recover its money.
It is sometime possible to get a grant from your local council to help with renovation expenses but these are usually only available to landlords who plan to make the refurbished property available for housing association tenants. There are also councils that provide small grants to those with renovation plans or energy efficiency work.
Renovating old and rundown properties still remains a sound investment for many property investors. However experts advise that developers put a high priority on repairs done to an excellent standard using appropriate materials. This way the value of the property increases considerably.