You’ve found a property that needs a full refurb. It’s on the market for £90,000 and once the work is done, you think it could be worth around £140,000. Sounds like there could be a good deal in there…but where has that £140,000 figure actually come from? That’s the bit I’m interested in.
When I’m looking at a property for one of our clients, I can’t just take a potential end value, pop it into an appraisal and hope for the best. Especially if the whole investment depends on the property being worth that amount once the work is finished. I want to see the evidence and actually, this is something you can start doing yourself.
Have a look at what properties nearby have actually sold for. And I mean sold. Not what they’re currently advertised for.
If three houses on the same street are on the market for £140,000, that doesn’t necessarily mean houses on that street are worth £140,000. They might eventually sell for £135,000. They might even sell for £125,000. Orrrrrr…plot twist….they might not sell at all.
I’d much rather look at recent sold prices and then start digging a little deeper.
Is it the same type of property? Is it roughly the same size? Does it have the same number of bedrooms? Is one an end terrace while the other is mid-terrace? Does one have a driveway, garage, extension or a much bigger garden? Then have a look at the condition it was in when it sold.
If the property that achieved £140,000 had a beautiful new kitchen, new bathroom, fresh flooring throughout and was ready for someone to move straight into, that’s useful information if you’re planning a similar standard of refurb. But if you’re comparing your little two-bedroom terrace with a three-bedroom house around the corner that has an extension, driveway and twice the garden, the fact that it sold for £140,000 isn’t really that helpful.
This is where it can be really easy to make a deal look better on paper than it actually is. You start with the number you want the property to be worth and then go looking for something that proves it.
I try to do the opposite. I want the evidence to tell me what figure I should be using.
This matters even more if you’re planning to refurbish and refinance. If your numbers only work because you need the property to be worth £160,000 at the end, but similar properties nearby are actually selling around £145,000–£150,000, I wouldn’t use £160,000 just because it makes the deal work. I’d rather be cautious with the numbers at the beginning than get a nasty surprise at the end.
Of course, none of us can guarantee exactly what a property will eventually be valued at. That decision ultimately sits with the valuer at the time. But we can 1000% do our homework beforehand.
At JH Property Connect, this is part of the work that goes on behind the scenes before we present an opportunity to one of our clients. We’re looking at the property, the immediate area, recent comparable sales, the refurb required, rental evidence and most importantly, whether the numbers actually stack up.
Our clients are generally busy business owners and investors who have the capital to invest, but don’t necessarily have the time to spend their evenings scrolling through property portals, checking sold prices, speaking with agents, attending viewings and trying to piece all of this together themselves, so that’s where we come in.
So, next time you’re looking at a potential investment and somebody tells you what the property could be worth once the work is finished, ask them…..
What are we basing that figure on?
Then go and look at the evidence for yourself. Because that one question could stop you building an entire investment around a number that was never really there in the first place.
Contact no: 07432455713
Contact email: jhpropertyconnect@gmail.com
Website: www.jhpropertyconnect.co.uk
Socials: @JHPropertyConnect
