10 Minute Read🏡 Renovating a Buy to Let
I recently bought a buy to let property in the UK for £106,000 and self managed the entire refurbishment costing £17,000 that has generated me a £15,000 profit in just 3 months and in this video I want to share with you 3 reasons why I decided to do this but more importantly, 3 major things I learned from doing it.
Since going through this – I’ve learned how I can be the best property investor and developer that I can be and I know that my future projects will be even more successful.
👇 Reason 1: Keeping Costs Down
When you’re working on buy to let projects, keeping costs down is crucial to ensure that you don’t overspend your budget and ultimately that you try and maximise your profits.
If you take a builder onboard when working on a project you’re going to have to pay for their time, effort and expertise so that they make a profit themselves on top of paying for their subcontractors and the profits and wages they need to make their own living.
Depending on getting different quotes you’d typically find that a builders quote VS doing it yourself and managing your own tradespeople often will be about 20 – 40% higher for the same amount of work and this is really to cover the fact they’re project managing your build, they’re doing all the trips to wickes, howdens, screwfix for bits and having to pay other contractors all while making a markup on this for themselves to make a living.
I originally budgeted £10k for my refurb but in the end spent about £17k doing the whole thing. Now this sounds shocking at first but with house prices going up – it still stacked up financially spending the extra £7k but my scope also massively increased.
After I got into the house I realised it needed WAY more work than I anticipated if I wanted to do the job properly. I could have skipped corners but with water damage and damp, it’s better to rip the walls off and fix the problem rather than let it get any worse.
This meant that doing as much of it myself helped absorb some of that extra scope.
👷♂️ Reason 2: Construction Experience
Secondly, I decided to self manage my buy to let refurb was to get essential experience.
The best CEO’s of companies are the ones who take the time to understand their business. By being on the ground and learning how everything works, learning where problems can crop up and how to make things better for yourself while learning on the front line can really help wonders in the business.
Whether that’s understanding how much time something takes, or even how much hard work goes into certain tasks like plastering, painting ceilings or things that are physically quite hard, it gives you an appreciation of why certain tradespeople price the jobs they do.
It’s too easy just to look at a spreadsheet or a plan and end up missing so many details on the ground that you end up overspending or taking more time due to mistakes.
I learned how to manage a build project in the right order, who should you get in first for the first fixes and then how does it all piece together for the second fixes?
I guarantee just by going through that process once you’ll get a good knowledge of how trades actually work together and in what order which will make you a better project manager and I know will certainly help me for future projects.
🙅♂️ Reason 3: Learning from Mistakes
Thirdly, I wanted to go through the whole process so that I could make mistakes and get things wrong because it really is the best way to learn.
My whole buy to let refurb at a high level has gone really well and everything is ticking along nicely, every problem that’s come up has been soled and we’re doing ok. But I’ve gotten things in the wrong order, made a few mistakes that have cost a bit of extra money, wasted time on things I shouldn’t have to waste my time on.
Which adds pressure onto the first project and definitely adds to the frustrations but it’s incredibly valuable because I’ve taken away so many mistakes that I know I’ll never make again whether that’s working with members of my power team who have let me down, things being overlooked in the property its-self and correctly estimating size of work required to finish a project, they’re all learnings and tweaks that I’ll make going into the next project to refine my team and make sure I have the best people around me.
I’ve noticed that even the professionals you hire around you can still make mistakes and sometimes they don’t get it right, which is fine – but it’s if they rectify their mistakes.
If they go above and beyond to get it right or even fix a problem before you even know about it then you’ve got good people, but if they wash their hands and make it your problem at your own time, cost and expense then you know it’s best to get rid of them and find someone better who will not put you in that situation.
After all your paying for services and work and if it’s not up to your expectations then they put risk on your own business.
They put risk on my business because I’m not yet the expert and that’s why I’m hiring and paying people to do what they should be doing best and if your team are holding you back either due to lack of expertise, communication, mistakes – then that needs to be tweaked to protect your project, your investment and ultimately your profit.
I’ve hired some great people that I’ll work with for a long time going forward and provide a lot of business to, but also I need to sack people from my business in future by not working with them for anything large or importantly because I simply can’t trust them to get it right.
As a business owner – it’s crucial to learn these skills.
🧪 Learning 1: Playing to my strengths
Everyone has different strengths and weaknesses, things they enjoy and things they don’t enjoy doing. I realised that my strength and background is on organising, leading and managing, it’s what I’ve been doing day to day in my job over the past 6 years in banking and that I’m someone who is paid to use their brain, rather than my physical strength or skills.
That being said – it’s been great to learn how to fit a kitchen, a bathroom, pulling plaster off a wall and it’s great fun, probably something I’d do on my own home project but thinking of this from a business perspective, the best use of my time is by managing and project, looking after the finances, processes and building up the business systems and processes.
Instead – for the more monotonous parts of a build project I need to make sure in future I outsource these, I got tradespeople in for the key parts like half the rip out, plastering, plumbing and electrics but I did a lot of the initial rip out, fitting of the kitchen, bathroom, tiling, painting and loads of other little bits which is great and I can do it but they’re not my strengths and it’s probably better to get a professional who will do a bit of a neater job than me for a bit of extra cash.
So if the project is the right price and makes the right profit – then it shouldn’t be a problem spending this money because I can then spend my time on building up the YouTube channel, building an audience, finding private investors, building up the brand, finding the next project, sorting finance for the future and all of the more important factors that will keep the business running and growing.
🤑 Learning 2: You make money when you buy, not when you sell
I’d heard this sentence thrown around quite a lot amongst the property instagram community and it’s so true.
If you buy a great deal with enough profit then you should have enough money to get a build team in place and make a profit.
For me, I was going for the beginner strategy, vanilla buy to lets and that needed a small refurb. This is a really hot market and everyone else is trying to do this.
This meant that I viewed loads of awesome properties but a lot of people were also bidding against me on the open market and this meant competing bids, sealed bids and properties selling for way more than what they were worth.
So when you’ve got properties selling for more than what they’re worth when they need £20k+ spending on them, then it’s incredibly hard to find a property that sells for what is reasonable AND be able to make a 20 – 30% return on top of it.
It’s shocking how many property investors out there either don’t run their numbers on deals or just get too emotionally involved and start paying silly amounts of money.
I saw so many refurb projects sell for a price that would have EASILY made a loss.
By buying at the right price, you know your profit is already baked into your numbers. For me I knew I could hit a 20 – 30% ROI but by doing the refurb myself.
I know in future to be able to factor in contingency, scope increase and outsource the full build process I need to ensure there’s a lot of room in the profit on the project so that I can pay to fully outsource it and still make a profit for me at the end of the day.
If a property starts getting too popular and the price is too high – walk away.
🚀 Learning 3: Work ON the business, not IN it
This is the most important point but so crucial. On this project I’ve intentionally worked IN the business because it’s been a great experience learning the ropes on the front line of how things work in the business that I’ve set up and that I’m running.
But as time goes on and I look to run larger projects in bigger buildings and hopefully with greater profits by understanding all of this is invaluable but it’s not scalable. To build a bigger scalable and sustainable business you need to be able to step back and work on the business to think about strategy and direction and pushing it forwards, rather than working IN the business.
To build a great business, you need to be able to build systems and processes that other people can run for you so that if you step away for a week then things still progress forwards.
For me managing this project – if I took a 2 week break, which I did near Christmas. It means that everything takes a halt on the project and it’s time I’ve lost on getting everything ready so that I can put the property on the market. If I’m not focusing on growing and expanding the business – then it won’t grow.
This is why a lot of tradespeople who start plumbing, plastering etc only ever keep a small business because they themselves are doing the work so it’s impossible to grow.
