How to Renovate Your Flat with a Loan?
Property is one of the most valuable assets a person can have. From the times of the Great Recession, flats and houses became pretty costly again so they can become profitable for owners. Depending on the current goals, you can rent out or sell the property. Obviously, profits will be higher if the house is in good condition, with new furniture, modern appliances, and stylish look.
That’s why a lot of people consider renovating or modernizing living quarters. For this, they often need pretty huge amounts of money so cash lending increase in popularity. MoneySuperMarket notes that average income of borrowers who apply for renovation/housing loans is the highest among all clients. Also, the study reports that the highest number of applicants are from 25 to 44 years old. There were 17,500 persons in the research compared to 8,814 for 45-64 category which occupies the second place.
Yeah, it seems pretty easy to get a loan, renovate your flat, and then rent it or even sell to earn on the price difference. However, in practice, it’s a bit trickier industry. Let’s find out how to use borrowed money for the best results.
Key Reasons to Renovate a Property
Beginning with the entry point, we want to briefly cover several reasons why one may want to repair or renew the property. Here are a few of the most frequent reasons:
- Plus point to comfort. Redecorating or minor repairs are viable options. They help to maintain the house in good condition with beautiful and handy interiors.
- Long-term investment. You may want to sell a flat way later but expect services to rise in price. Also, renewed homes can bring a higher return on investments.
- Property flipping. This business approach stands for buying real estate, renovating it, and selling quickly. It’s possible to earn if you consider all the fees.
- Renting. Another option stands for owning the property after its redecoration but renting it out. In this way, you will get slower but potentially higher ROI.
- Size increasing. Apart from repairing your home, you can rebuild it by adding more rooms. This process is more expensive but also increase the house’s price.
The list isn’t exhaustive but you catch the message. Before requesting a loan, you want to get a clear and detailed plan of renovation. It should feature main stages, expenses, repayment and ROI estimates, potential profits, and so on. Be sure that you know the exact reason to get a loan and the way you will use it.
The Best Loan Types
Okay, let’s assume that you defined the reason and ready to apply for a loan. At this moment, take a break and explore the loan options at your disposal. Depending on the type, a bank or another lending company can feature different interest rates, loan terms, collateral requirements, and other conditions. Of course, you want to get the most suitable one so check them now:
Alternatives to Loans
Also, it’s possible to avoid getting a loan at all. Further, we list a number of options for housing owners who don’t want to borrow money:
Yes, credit lines and cards are pretty similar to loans but they aren’t identical. Sometimes, these options may suit your renovation strategy better. Nonetheless, you should always remember about repayments and credit scores. Try not to cheat on partners when it comes to big money.
5 Steps to the Perfect Renovation
First and foremost, ensure that you realize all costs and fees. It’s not only interest rates or the lender’s fees but it’s also realtor commissions and numerous taxes related to renting and/or selling.
Also, you want to clearly understand what you want to change and how much it will cost. Feel free to consult with builders and designers to reveal the pitfalls.
Find Suppliers and/or Subcontractors
Needless to say how important is to find a dedicated building team that will complete the project on time, without exceeding the budget, and without stealing some goods from the house.
If you’re ready to do it by yourself, find trusted companies to get building materials and tools from. Surely, you should add these costs to the initial plan.
Almost everywhere, you will need governmental permits for the building, renovation or redecoration. Be sure that you know all the stages of getting these documents.
Don’t hope for sudden luck because even the smallest delays can ruin the entire plan. Ideally, find exhaustive info and visit the right persons before you even start the project.
That’s the topic of our guide. For perfect renovation, you will need enough money.
At the first stage of this plan, you should add all direct and indirect expenses, including accidental and totally unpredictable ones.
Really, it’ll be much easier to return unused funds than cancel the project because of the lack of money.
Enjoy or Move Out
The last part of the plan is about the post-building period. After the renovation, you can stay in the flat to live in new conditions, sell the property or rent it.
If housing is a long-term investment asset, you may consider living in another house and renting this one to get constant profits.
Of course, this point should be considered before the start of any works.
The Final Tip
Last but not least, we urge the readers to consider the pros and cons of loans or other borrowing ways.
Renovation is a pretty long and costly process so it is better to understand all the potential expenses clearly.
There are a few options that you can use to avoid applying for a loan and going into debt.
Be aware of consequences and never opt for a loan if you feel unable to return it.
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