If you want to be a property developer in France then you must keep a tight rein on your budget and not let emotions get the better of your sums!
a = Purchase Price
b = Renovation Costs
c = Re-Sale Value
d = Profit
Your profit (d) is the resale value (c) minus Purchase Price (a) and Renovation Costs (b). Don’t take your eye off this equation.
Let’s look at the purchase price because the cheapest buy doesn’t necessarily make the biggest profit – if there are hidden structural issues the cost of renovation could be prohibitive making the prospect for a healthy profit remote. One thing is certain, in property developing you make your money when you buy not when you sell!
The ideal property is structurally sound and affordable with little work needed and a high profit margin (achieved either by adding value or by external factors such as major infrastructure or jobs coming to the area). You really have to have your ear to the ground to pick up the early tremors and pick a bargain in an emerging hot spot, for most properties there is a trade off between the 4 cornerstones of the equation.
Get a full structural survey done to be sure your investment is solid as a rock and will not turn into a money-pit. Know what you are prepared to pay for something and go no more – be prepared to walk away. Remember you’re in the business of selling on, you are not buying for yourself.
You should have a budget for renovation costs, remember to talk to builders to get estimates for re-wiring, re-plumbing, kitchen and bathroom improvements etc so your budget is realistic. Budget for the following:
Labour and materials
Electrics and plumbing
Kitchen and bathroom
Windows and doors
Furnishing and decorating
Fees and Costs (eg. applying for planning permission, architect’s fees etc)
Contingency (when dealing with old properties expect the worst!)
Your total Renovation budget will be well spent providing you bought astutely and your Re-Sale value warrants the investment. Factors affecting the Re-Sale value include whether your property is:
Close to an airport with budget flights
In a lively town or village
In an up and coming town or village
Close to the coast
Close to ski stations
Other factors affecting re-sale value are outside space, barns to convert, protected views or scope for a roof terrace – all enable you to add value to to your investment and increase the all-important bottom line, your profit.