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crashmonitor

Modernisation efforts not rewarded when reselling

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I looked at this house in 2011 and tbh regretted not buying it over the one i did. The house I did buy for 242500 and  sold for 275000 I did nothing to, except 7000 in maintenance over 4 years. Just strikes me that you don't get much reward for updating because the one i thought i regretted was a bit of a pig. Needed new central heating, redecoration entirely, new kitchen and new bathroom, all of which and more the vendor has done. But 232,000 in 2011 to maybe 280,000 now  doesn't seem a lot given houses have supposed to have boomed ( the index says like for like should have done that). Now I know on Homes under the Hammer they could do that for £3,000 and have six builders queueing up to do the job and have it all done and ready to flip yesterday and then there is magic profit which excludes stamp duty and everything else (I really want to know how Homes Under the Hammer escape the stamp duty and solicitors and resale costs and estate agents fees, but they evidently do). Now as crashmonitor is a bit useless on the DIY and builders take about six months just to answer the phone let alone give a quote I reckon i would have needed 50k to do that and made zilch.

The house I didn't buy in 2011 for £231,574........

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=19576185&sale=60232683&country=england

 

and the same house refurbed nearly six years on......

http://www.rightmove.co.uk/property-for-sale/property-45539712.html

 

 

Edited by crashmonitor

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9 minutes ago, TheCountOfNowhere said:

And now SSTC !!!

Fwiw for the four years we owned in Nottingham and considering lost investment income and buying and selling costs plus the maintenace there would have been a small gain renting.

Regarding the house i didn't buy, you would have been better renting for six years, let someone do all the hard work and  refurb it and then buy it for 50k more six years later.

Edited by crashmonitor

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Kitchen looks like a tart up job only, maybe just repainted the old units - all the units look to be same size/location. If so everything else will have been done on a budget, a cheap bathroom suite is a couple of hundred. So overall maybe not much more than your maintenance bills sunk into that one if reasonable amount of DIY painting done etc.

 

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15 minutes ago, onlyme2 said:

Kitchen looks like a tart up job only, maybe just repainted the old units - all the units look to be same size/location. If so everything else will have been done on a budget, a cheap bathroom suite is a couple of hundred. So overall maybe not much more than your maintenance bills sunk into that one if reasonable amount of DIY painting done etc.

 

And new central heating. Tbh it's a bit more than a tart up, the bathroom, especially, has been gutted and retiled. Other stuff like all the floors done.

But I did say i was one of those people that couldn't do it for £3,000 Homes under the Hammer style and still have change for a holiday in Florida.

At the end of the day things would have been different in some God forsaken part of  Cambridge  rather than chosen a leafy posh suburb of Nottingham. Probably double money without effort.

Edited by crashmonitor

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OK yes, it would be more, but it does seem pick the worst house in the best location holds true a lot of the time. The best location bit over the last decade seems to be in alignment with areas where there are still quality jobs available, or where those who used to have those jobs wish to retire to. 

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40 minutes ago, crashmonitor said:

Fwiw for the four years we owned in Nottingham and considering lost investment income and buying and selling costs plus the maintenace there would have been a small gain renting.

Regarding the house i didn't buy, you would have been better renting for six years, let someone do all the hard work and  refurb it and then buy it for 50k more six years later.

Really? Renting for 6 years would cost you (for an equivilant house) about £60K (£10K a year, £800 a month).  The refurb would cost more than £110,000?

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1 hour ago, canbuywontbuy said:

Really? Renting for 6 years would cost you (for an equivilant house) about £60K (£10K a year, £800 a month).  The refurb would cost more than £110,000?

Compound Interest my dear by, Compound Interest.

 

4fa553724eee8492b2c77f10bdbc01bd.jpg

 

 

How many years have you been here ?

 

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Is that the compound interest on lost investment income? Nought point f-all compounded is not much you know. 

Edited by Funn3r
Typo

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11 minutes ago, Funn3r said:

Is that the compound interest on lost investment income? Nought point f-all compounded is not much you know. 

It is now, not quite that bad back then. Extraordinarily good further back in around 2007..7% five year fixes. 

I'm still primarily a saver and we've had good times and bad.

At the moment bloody awful.

Edited by crashmonitor

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9 minutes ago, Funn3r said:

Is that the compound interest on lost investment income? Nought point f-all compounded is not much you know. 

Interest on mortgage debt, interest on depost savings, interest on fees, interest on savings.

Compound that up your jacksy.

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This is the Sarah Beeny 'property ladder' phenomenon laid out. 

To her credit, she always pointed out that most of the gains people made were down to the rising prices, not their interior design genius.

I see this all the time.

'FIX UPPER - PUT YOUR OWN STAMP!!!' - 360K. And at least another 30k, plus time to get it even habitable. And maybe another 30 to get it looking spanking.

Structurally identical - 'Ultra modernised, fabulously maintained house' - 375k, and accurately described (at least on a cursory level).

Another reason the financial illiteracy thread is so apt.

 

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more relevant to commercial property but useful to highlight point here...the contractors method and open market comparison method are valuation methods that will arrive at different results. It is total nonsense to say that if you spend x on 'improvements' the property value will increase by x.

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4 hours ago, Frugal Git said:

This is the Sarah Beeny 'property ladder' phenomenon laid out. 

To her credit, she always pointed out that most of the gains people made were down to the rising prices, not their interior design genius.

I see this all the time.

'FIX UPPER - PUT YOUR OWN STAMP!!!' - 360K. And at least another 30k, plus time to get it even habitable. And maybe another 30 to get it looking spanking.

Structurally identical - 'Ultra modernised, fabulously maintained house' - 375k, and accurately described (at least on a cursory level).

Another reason the financial illiteracy thread is so apt.

 

This is the thing, it's very hard to buy a fixer-upper at a price that makes it worth it for all the flippers circling like vultures, and the vendors know this so they slap a premium on the price for its development potential.

I have an architect friend who does work for property developers. He says any that are worth having are bought before the likes of you and I get a look in.

These are the people who can bring a house up to modern standard for minimal cost, and know their turnaround times and margins, and the connections to get first dibs.

If they are not interested, their family or mates get next dibs. If their not interested, it ends up on the open market.

The ones that do end up on the open market, therefore, are the overpriced ones that an amateur without good connections to the trade, could not make good without spending more than a non fixer-upper would cost.

There are, of course, plenty of the latter people that fancy themselves and pay the premium.

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9 hours ago, crashmonitor said:

It is now, not quite that bad back then. Extraordinarily good further back in around 2007..7% five year fixes. 

I'm still primarily a saver and we've had good times and bad.

At the moment bloody awful.

You were talking about 2011 to 2016.  Sweet FA interest on savings.  Let's even be generous and say someone got 1.5% net on their savings. 

  • someone buys that property in cash for £230,000.  That means that cash isn't in the bank earning that 1.5% net, so the opportunity cost = £17,775 in interest (yes, compounded, not that it makes that much difference when the interest is so low).   But then then they save £60,000 in rent they would have paid.  Who knows how much they paid in doing up the property, but the property also rose in value by £50,000 in those 5 years. £110,000 - £17,775 = £92,225.  I bet they are more in (potential) profit than £17,775 after the refurb costs are taken into account. 

Or am I wrong, and even in these crazy HPI times, it was better to rent from 2011 onwards? I did rent from 2011 to 2016, and I think I financially lost out in a big way.  I can stare defeat in the face.  No problem.  I make decisions and move on from it. 

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I've averaged about 4% over that time with an equity mix included. I have kept a balance sheet going since 2006, capital introduced from investment income has been £110,000, the two properties I have owned with my partner have made me £12,000 ( my half) after buying and selling costs. 

Average over that time had been two thirds in investments one third in property, about where I am today.

When we have been between propertes we rented flats from £ 3000 pa.

I'd be slightly better off even if we haf stuck to renting something more equivalent imo. since 2006.

 

Drawings when renting have tended to be lighter, a lot of incidentals crop up like furnishings as an owner.

Edited by crashmonitor

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6 hours ago, crashmonitor said:

I've averaged about 4% over that time with an equity mix included. I have kept a balance sheet going since 2006, capital introduced from investment income has been £110,000, the two properties I have owned with my partner have made me £12,000 ( my half) after buying and selling costs. 

Average over that time had been two thirds in investments one third in property, about where I am today.

When we have been between propertes we rented flats from £ 3000 pa.

I'd be slightly better off even if we haf stuck to renting something more equivalent imo. since 2006.

 

Drawings when renting have tended to be lighter, a lot of incidentals crop up like furnishings as an owner.

This requires the average family to be pretty savvy with investments, while also renting flats for £250 a month?! You're saying this is possible for a family? I say "family" because these are family-sized homes.  Sure, a couple can make-do with a lot less.  I just think you're really putting a crazy-positive spin on things. Renting is a killer for families (I have two kids).  You're looking at £800+ a month if you want your kids to have space and everyone has privacy. 

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1 minute ago, canbuywontbuy said:

This requires the average family to be pretty savvy with investments, while also renting flats for £250 a month?! You're saying this is possible for a family? I say "family" because these are family-sized homes.  Sure, a couple can make-do with a lot less.  I just think you're really putting a crazy-positive spin on things. Renting is a killer for families (I have two kids).  You're looking at £800+ a month if you want your kids to have space and everyone has privacy. 

Plus of course it wouldn't have worked south of Watford, needed prices to be stable. They were in the north not in the south.

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21 minutes ago, crashmonitor said:

Plus of course it wouldn't have worked south of Watford, needed prices to be stable. They were in the north not in the south.

 

Looked liked a £50,000 increase in 5 years - is that considered stable?

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Getting your  full money back on improvements has not always been the case, in the 90s there used to be percentage points for different  individual improvements made, rarely was there a 100% repayment for any improvement , Its only since rampant HPI took hold that it gave the impression improvements were always repaid in full.

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34 minutes ago, canbuywontbuy said:

 

Looked liked a £50,000 increase in 5 years - is that considered stable?

Well it dipped from 2007-2011 and then retraced up here. In the example of the modernised property most of that would have gone in transaction and improvement costs. I'd be very surprised if there was much profit left. And this was in the second half of the last decade when property was supposed to a one way bet.

In my own case I have been fortunate to find buyers over the last ten years during two moves. About 12k profit each with the wife but that could easily have been zero. That's fairly stable and less than rpi, a fall in real terms.

We did get a boom of course but that was back in 1997- 2005 whence houses tripled and vastly outpaced London. Since then it has reversed to the south.

Edited by crashmonitor

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From personal experience I have found that having high quality products in your home when selling is rarely reflected in the price. In my bathroom, I had a digital shower valve with a remote control, luxury bath, de misting mirrors , under tile heating but most viewers had no idea of their worth or usefulness. These weren't bling items and the bathroom didn't have shiney big tiles , so no wow factor to the untrained eye. After I sold the new buyer ripped out a bespoke wooden double glazed storm porch door and replaced it with a white upvc one  because she didn't believe wooden doors could have double glazing ! There's no accounting for taste.....

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7 hours ago, awaytogo said:

Getting your  full money back on improvements has not always been the case, in the 90s there used to be percentage points for different  individual improvements made, rarely was there a 100% repayment for any improvement , Its only since rampant HPI took hold that it gave the impression improvements were always repaid in full.

Spot on, in practice spending money on home "improvements" tends to be in practice throwing good money after bad. 

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But it's not really a well done set of improvements.  The revised kitchen, for a start, would be on the rip it out list of anyone really looking to improve the house.

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