Buying To Renovate by Stephen Pritchard.
This article is from www.channel4.com

Buying a house that is in a less than perfect condition can save money, and it is certainly a way to stamp your own style on a home -- without paying to remove other people's improvements.

But taking on a derelict or even a tatty property can be a real challenge, even for the hardened DIY enthusiasts. In today's market, it is rare to find a cheap, run-down property with just superficial or decorative problems. All too often there is something more serious that needs to be put right. This does not mean that less than perfect properties are off limits, but it is vital to enter into any deal with both eyes open.

Start by comparing like with like. What is the price difference between a "ready to wear" house and one that needs a lot of work? The savings might not be that great. Ask local estate agents for an indication of how much the house would be worth once it is done up. Knock off ten per cent from the selling price to account for the agent's enthusiasm, and add at least 10 per cent to the cost of any work. If there is still a difference, the house is worth a further look. "If you buy a property for pounds90,000 in a street where houses sell for pounds100,000, and it costs pounds20,000 to do it up you will end up out of pocket," says Michael Day, a director at the estate agency chain Connells.

Be realistic about what you can take on. If you have good contacts in the building trade, perhaps because you have refurbished a property before, then a run down house should pose few real challenges. Some problems, however, can be real warnings igns: subsidence, in particular, is very expensive and disruptive to put right.

If the place is a real wreck, think about renting before moving in. Builders work more quickly if owners are not under foot, and no-one really wants to live on a building site. If you do have to live in the house, think about the disruption and the time involved. "Buyers rarely account for their own time when they try to refurbish a house," says Michael Day. "But if you have to give up your evenings, weekends and holidays, there is a cost to that."

Consult the professionals from an early stage. Start with a good chartered surveyor; ask for recommendations to find someone who is thorough and knows about refurbishment. A surveyor might be willing to give a property a quick "once over" for a few hundred pounds, or even visit several properties on a shortlist for a day's fees. Once you have picked a property, pay for a full, independent structural survey. A bank or building society valuation on its own will be next to useless for this type of property.

Consider consulting an architect if the project is large. Architects' fees come to around 15 per cent of the total cost of the work, but often an architect can save more than this by better use of space and materials. Employing an architect will also help to keep the project on time and to budget. If the property needs structural work, the architect might recommend a structural engineer's services too.

If you can, arrange for tradespeople such as builders and plumbers to quote for the job before you make an offer. Then you have a good idea of how much the work will cost, and can use this in negotiations.

If you plan conversion work, such as converting flats back into a house or changing a commercial building to residential use, consult the local planners. Most planning departments will give basic advice by phone or email, and this can save serious headaches later.

Talk to lenders at an early stage about the work. Most banks and building societies will cap loans for less than perfect properties, until the work is carried out. This is known as a retention, and it will cause cash flow problems unless you budget for it in advance. For large-scale projects, a phased release mortgage might be the answer. Here the lender hands over money at key stages, such as roofing or plastering out. The Ecology Building Society and the Norwich and Peterborough are both sympathetic to self-builders and to refurbishment projects.

When it comes to budgeting, allow a good margin for error. A 20 per cent safety net is a good guide, but some projects can easily double in cost. Watch out for "project creep", where the cost goes up and up because you, the builder or the architect are adding more work. Make sure at least some money is to hand as cash, as there will always be urgent bills to pay.

Don't try to compete with property developers. Refurbishing a house as a way to have a home that is ideal for you is a reasonable goal. But when it comes to making money, local developers will have the edge: they have the contacts, the cash, the experience and most of all, they never have to live in the house.

Useful contacts
Royal Institute of British Architects: www.architecture.com
Royal Institution of Chartered Surveyors: www.rics.org.uk
Federation of Master Builders: www.fmb.org.uk