The ups and the downs of fixer-uppers
On the move:If the thought of renovating an old house doesn't make your heart stop, at least do your homework
With more than 100 properties on view last weekend in Dublin alone, it's not just the first shoots of spring we're seeing, but possibly a sign that busier times for the property market lie ahead. However, greater supply doesn't automatically equate to an easier property search, given that many of the properties that are coming on to the market are probate sales and thus carry the dreaded, or at least to us, "in need of modernisation" appellation.
Last weekend, for example, we visited a three-bed semi-detached house in an established estate in Stillorgan, south Dublin, on the market for €375,000. Unsurprisingly, at that price, the house attracted a lot of attention. We had to queue to go in, queue to get downstairs, queue to get out, such was the volume of people attending the viewing.
But it needed a lot of work. And with that many people viewing, there is the potential that the price will be pushed up and over the asking price. I've often wondered whether a few well-placed comments would dissuade other potential buyers from bidding too much. I've certainly heard people denigrate properties at viewings, and exclaim loudly what a money-pit the property could be and how you'd be mad to buy it.
But while houses like this appear to be good value and aren't in short supply, the problem is finding the funds and the commitment to do them up.
If you can bridge those twin challenges there is plenty of potential out there. Mortgage broker Karl Deeter bought his latest project in Drumcondra, north Dublin, last May, and has already renovated it for the rental market.
His advice is that first of all you'll need money, but not as much as you might have thought. He estimates about €30,000 would cover modernising a typical three-bed semi-detached house, including putting in a new kitchen, windows and boiler.
"Construction prices are incredibly good, but material prices haven't fallen by as much," says Deeter, although he adds that between applying for planning permission on his property and starting work, the cost of windows had come down by about 30 per cent.
"Depending on the level of renovation you want, the big things you want to check for are subsidence, bad roofs and drainage. If you get caught badly by those, you can really suddenly see costs go up exponentially," he says.
It sounds reasonable enough, but if you have spent all your spare cash putting down a deposit on the property, is it still possible to borrow more from the bank to renovate?
Usually it comes down to whether or not your work will increase the value of the property. "For example, with a Georgian house, adding a kitchen extension might not increase its value," Deeter says.
If you do get the go-ahead from your lender to borrow to do up a property, expect the funds to be released on a staged-payment basis, while detailed plans and costings from a builder or architect will need to be furnished to the bank. It is a more expensive approach, because you will have to pay rent to live somewhere else while the renovations are carried out. A cheaper way to go about it is to move in and fund the renovations over time yourself, but this isn't always possible with small children.
Don't underestimate the value of the advice of a builder and architect before buying a property. From our experience, you should be able to find an architect willing to visit a property for €100 or so. While finding out all the flaws in a house can put you off going through with a sale, in the long term such insight is invaluable.
"You've got to know what you're getting into. If you're not familiar with renovating buildings then you've no business buying that house," says Deeter. "I always say that renovating is a secret value creator; but if you don't know what you're doing it's the secret wealth destroyer."
There was further evidence last week that a "sale agreed" does not always mean a whole lot in the current market. Two houses, on at a little over €500,000 in Stillorgan and Blackrock, that were sale agreed before Christmas are now back on the market. It seems that the appetite is there to buy, but people are still being constrained by inadequate bank lending. It also seems that such demand is pushing up prices at the expense of other bidders, even though they can't always go ahead with the purchase.