Despite being thought of quicker and less risky than a full-scale development, there are various ‘hidden’ costs that affect refurbishment projects specifically that need careful forethought.
It is crucial to consider the following factors whilst helping your client calculates the true cost of a refurbishment:
Have resources readily available
Although this is a key point to consider with any development, a refurbishment is (usually) a shorter build period, therefore availability of resources becomes all the more critical to complete on time. For example, if a refurbishment is forecast to reach completion in six months yet then a lead in period ensues for certain materials of up to six weeks when an instant purchase was expected, this could cause work to stop and severe delays which accumulates additional costs.
Establish clear access to the property
Most refurbishments happen within a built up residential area, and it’s in these situations that logistical problems can occur. Neglecting to confirm viable access to the building for the supply of materials and machinery can cause unwanted delays.
Budget for professional fees
Fees for advisers such as solicitors, valuers or architects come as standard with any development and can amount to 10-15% of the overall cost. However, it is the tendency not to factor them in over the course of a refurbishment project that lands them on our list. After purchasing a property for refurbishment a building control certification is required to declare the property fit for purpose. Is your client planning for a heavy refurbishment? An architect may be needed who expects to be paid promptly.
Factor in the cost of contractors before making a purchase
If your client is procuring contractors after purchasing a property, they are leaving themselves unnecessarily in the dark when it comes to calculating the overall cost of the refurbishment. It is advisable to engage a consultant before acquiring the property and establishing the cost of their work, to manage any financial risk.
Check if the property needs structural work
A failure to have a property fully and professionally surveyed prior to purchase can lead to unplanned, unbudgeted structural changes mid-development. This can be a very pricey error!
Budget for unforeseen costs
Coming across unexpected issues such as hidden damp, faulty plumbing or electrics that need extensive re-wiring can put the total cost of the build up even further. Missing these on initial inspection is not unheard of, however always budget to anticipate for hidden costs.
Allow for contingency time
When your client’s project begins, they may think they have their refurbishment planned to precision with all possible factors considered. However, in reality the majority of developments run over schedule. Anticipating for contingency time is frequently overlooked, especially when obtaining finance, and can amount to around 5 – 10% of the overall cost of the refurbishment. This is why it is important to go with the right lender who can provide flexibility when it comes to repayment.
Find out more about LendInvest refurbishment finance here.