Spain is currently a buyers’ market and increasing numbers of people are using this opportune time to invest in homes which have seen price reductions in the last year or so due to the impact of the pandemic. In Barcelona city, the average price of a home has decreased by just almost 3% year-on-year to the end of March 2021.
Investors are currently purchasing homes for both for short and long term returns. Cities such as Barcelona will always benefit buyers in the long run. But for those who want a short term gain, buying a property to renovate – to sell on (sometimes called ‘flipping’), to rent out or as a primary residence – is becoming an increasingly popular way to see a profitable return on your investment.
Acquiring a property in need of renovation will require money, time and, often, a lot of patience. Whether it is to create your ideal home or for financial investment, many of us relish the idea of taking on this type of creative project. But, as with any project which needs timelines and budgeting, you need to weigh up the pros and cons to work out if a renovation project is the right decision for you.
Why buying to refurbish
Potential to add value to your home
Even if you give your new home a superficial makeover such as whitewashing walls, sanding floors, tidying the garden or balcony, your home could instantaneously be worth more. First impressions count, so if you wanted to rent out your property, a makeover would be highly advisable in order to get the best possible yield. For a greater return on your investment, there are some renovations which are usually fail-safe.
Updating kitchens and bathrooms can add substantial value to a property. Spending €10,000 to €15,000 on a kitchen can add up to €30,000 on a home’s re-sale value whilst converting a basement or a loft space can mean an even greater return, as could adding another bedroom or bathroom, especially if the property is in a good location.
Create your perfect home for the same total price
To find your ideal property in the perfect location is nigh impossible, so buying a ‘distressed’ property in your desired location could be the next best option. Buying the ‘worst’ property on the best street probably gives you maximum scope to add value. If the current condition is enough to put most people off, a lower price should reflect that.
As a renovator you are unable to change a property’s location but you can completely transform and customise the home, making it far more attractive. Remember that the price you pay for a property is crucial. In an ideal scenario, you want to find a property that has real potential that no-one else has spotted in a highly desirable location.
You can now live in your perfect home
If you are struggling to find a property that you genuinely like, sometimes embarking on a project is the best way of creating a home that you could soon love. By purchasing a property which needs a bit of work, you are in a perfect position to create a home which will be customised to your own tastes.
The money you will have saved in buying a renovation project can be used to add value in a way that suits you in the short term and, in the long term, will turn out to be just what a future buyer is looking for!
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Key points to consider
Running out of budget and time
When renovating a home, you need to be realistic about what you want to achieve from the outset and be clear about how you will go about it. Knowing exactly how much you want to spend and how much time you want to spend on the project is key. While there is scope for adding value to a property by renovating it, overspending is always going to be a risk. Just because you have spent a large sum of money doing up a property, it does not always guarantee a profit.
Time is money, so in some cases, having a project manager who can take care of each different task can be economically beneficial. Project managers will ensure that the builders carry out work as you have requested and should also make it more likely for the project to remain within budget. The downside is that they won’t do all this for free!
It is sometimes recommended to account for an extra 20% in addition to your initial budget, as contingency for unexpected issues, especially if structural work is required.
Be clear about how much renovation is needed
Different properties require different levels of renovation. Choosing the property which is most suitable to your budget and aspirations is important.
Whilst you may be open to purchasing a property that requires a lot of work, you will also need to be realistic about how much work, money and time you can commit to. Older properties tend to require more work and sometimes specialist attention. They can also be more expensive to insure.
A risk that no value will be added
However much you spend on doing up a property, ultimately its location will be what adds value. Even if you transform a rundown property into a stunning home, if the location is not that attractive, the price will reflect that. Again, it is worth remembering that buying the ‘worst’ home in the best location is better than the ‘best’ home in an inferior setting.
Finding good tradesmen is not always easy
There are many builders and tradesmen who claim that they can do a job well but sometimes this is not always the case. Finding someone or a company that you can trust can be difficult and it can make or break a project. Listen to recommendations from friends. Do your research: never go with the cheapest option just because you think it will save you money.