PP: £170,000
Fees: £6,951
Work Costs: £25,811
Total Costs: £202,762
End Value: £231,500
Profit: £28,737
ROCE:14%
To know more about investing with EMJA Group, please contact us using the details below.
The Property
The property is an end-of-terrace pre-fabricated building where the previous inhabitants spent most of their adult lives. Although habitable, the property was in need of thorough modernisation and a full rewire. There was also a leak in the roof and a structural problem with the chimney stack.
The seller had inherited the property and attempted to renovate it in a DIY fashion. The result of this was an encouraging reassurance that we had chosen the right path by not adopting a DIY orientated business plan!
The Plan
Broadly, the plan was to use labourers to remove the previous owners' vintage belongings and to strip out the house. Having consulted the local agent, EMJA chose to retain the existing floor plan and simply renovate the property as it stood. Individual trades were hired to do the following:
Fix the chimney and repair the flashing.
Full Rewire.
Prepare and plaster all internal walls.
New kitchen and bathroom.
Replace many of the existing radiators.
New flooring throughout.
Paint and decorate throughout.
Light gardening.
Exit plans
A. Sell. The market was enjoying a high level of demand at the time. This made selling the most appealing option.
B. Buy-to-Let. If the intended sale price was not achieved, the house would have been refinanced through a mortgage to repay the investors. It would have been let to tenants for one year at which point Plan A would have been repeated.
Highlights
The power of Investors. This was a fully funded property acquisition using only private investor cash, so EMJA did not have to pay bridge loan fees. This meant we had to commit company money only to professional fees and development costs. This gave EMJA a fantastic return on investment.
Lessons learnt
Fix a leak, then let it dry. There were clear signs of damp in the main bedroom ceiling by the chimney breast, which was caused by a gap in the roof. Although this was fixed, our self- induced pressure to complete the project quickly meant that we did not take the time to inspect and dry out the chimney breast before plastering. The problem this caused became apparent when the new plaster on the back of the chimney breast simply would not dry.
Painting is a two phase process. We let the painter decorators do their work before the electricity points were fixed. While this allowed them to paint the walls and ceilings thoroughly around electrical points before they were screwed in, it did give them opportunity to leave before having to caulk the electricity points; a scenario that we overlooked and they were disinclined to raise!
Include ‘buffer’ days in the plan. While the tradesmen worked very hard to deliver on time, one was delayed due to unavoidable personal circumstances. While this caused only a three day delay, it held back the tradesmen who were dependant on his work being completed, reducing the time window in which they were able to do their work. A buffer period of 48 hours between key phases would have made this more manageable.
Lessons Retained
A happy workforce delivers. Having stayed loyal and as accommodating as reasonably possible with our tradesmen, they in turn will typically reciprocate that loyalty. This means we can keep the good ones and they will work to facilitate our needs as much as possible. It also meant that they communicated with each other where necessary. This made managing the project a smooth and easy affair.
If in doubt, investigate. The survey report failed to address a crack in the chimney when we bought the house. However, concerned that a problem may have been overlooked, we decided to investigate. The issue was structural and had we not fixed it, it would most likely have been spotted by the buyer’s surveyor which could have lost the buyers or given them the opportunity to negotiate a heavy discount. This would have cost time and money.
Get a survey. Ideally, a full survey should be conducted when buying any property. This will highlight problems that you might otherwise miss, which might then be identified by the buyer’s surveyor, costing you more time and money to fix.
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