From Shack to Castle: Buying a Property to Renovate
It’s no secret that Dutch housing prices have skyrocketed over the past few years. We see increases of nearly 20%, if not more, in some areas of the country. In fact, it’s gotten so crazy that the Netherlands is in the top 5 European countries where housing has increased. Of course, it’s great if you already own your own home and have enjoyed the boom. Still, for those new to the home buying market, it can be a bit of a nightmare!
At Expat Republic, we wanted to see if there were some smart ways to get around this madness. There certainly is! A viable solution could be to buy an old or rundown property and renovate it yourself. This has proven to be a huge opportunity for homebuyers; however, it also has its challenges. To help us out, we interviewed Indra Manniesing from the Dutch Real Estate Company. She and her team have over 15 years of experience (and a 4.6/5 in Google reviews) and have helped hundreds of expats buy and renovate their homes. With her help, we’ll walk you through the various aspects of your home purchase and renovation and what to look out for. After reading this, you should know whether or not this is something for you!
Looking for a Rundown Property (the shack search)
Searching for an old property is very similar to searching for a turnkey property. Most properties “can be found on Funda or via personal contacts,” Mannesing confirms. Certain neighborhoods tend to have older houses; however, opportunities can be found across the country. After all, The Netherlands is over 440 years old!
Pricing, Costs & Competition
Evidently, buying an old rundown property to renovate is far cheaper than a new house that requires minimal changes. Generally, you can expect to pay between 10% – 20% less for a rundown property per square meter. Also, there is more room for negotiations (or, shall we say, less overbid), as there will be less competition. Many buyers just don’t have the appetite to go down the major renovation road. They prefer to just buy a turnkey house and be done with it or continue renting because they have to shy away from the housing market. As a result, we see “a lot less competition” on properties requiring renovations, Manniesing mentions. The lack of competition ensures a lower cost per square meter. Let’s also not forget that building renovations are often tax deductible, which is a substantial financial incentive.
Things to be Aware of
When buying an older, more rundown property to renovate, certain things can be problematic or require further consideration for your renovations. A simple building inspection may not suffice. For instance, in the Zaandam area, “there are often issues with the foundation, so you want to avoid properties like that as foundation work tends to be more expensive”. If a property is way too cheap or has been on the market for a long time, that’s also a red flag; important to do your homework.
Asbestos and the dust it creates
Asbestos dust is known to cause cancer, which is why it has been banned for use in construction. It does, however, exist in many older post-WW2 era construction buildings. If asbestos exists and part of the renovations involves creating asbestos (i.e., removing asbestos) dust, there are special procedures which must be followed. There are also considerations for properties with lead pipes (FYI: lead is bad for humans).
Make sure you’re house doesn’t collapse
Every building has what is known as “support beams” these beams are critical to the structure and any work being performed on them has to be signed off on by an engineer. So it’s important to avoid weakening the property’s structure.
There are, of course, tons of other items to consider: old wiring that needs to be replaced by an electrician or disposing of older, harmful substances no longer used in construction. But, again, the key is to have the proper knowledge or have someone who does handle it for you.
The Cost of Renovations
It’s also important to consider the cost of renovations in your purchase. Choosing how cheap or how expensive will give tremendous budgetary clarity. For instance, hardwood floors tend to be more expensive than laminate. On the other hand, kitchens can go as low as 5k euro all the way up to 25k euro, if not more. So, although the renovation costs might be significant, there is more control for you when you buy a property to renovate. It also allows you to customize your property to your liking. Many buyers like to choose “what’s popular” to have an easier time selling it later. Others chose to “build their dream house” simply because they plan to live there for a long time. The beauty is in the flexibility, but you should be mindful to budget between €1000 and €1250 per sqm on average.
The Building Depot
One good thing many homebuyers make use of is the building depot “bouwdepot”. Instead of using your savings to renovate a property, you can get a building depot in addition (usually part of the Dutch mortgage). This amount should be used strictly for renovations. The loan will usually equal the difference between the purchase house price and the value of the house post renovations, depending on your income, of course. So, if you are worried about how to finance your renovations, you can look into making use of a building depot.
The Challenges of Renovating
These days it can be challenging to find good contractors; it can take anywhere from 3-9 months just to find someone reliable as most of the good ones are very busy. The worst thing that can happen is finding a contractor who does a bad job or doesn’t complete the job altogether. Leaving you in debt, alone on a construction site in your home. Make sure to check the reviews online and get some references before you select a contractor.
Finding a good contractor
“At Dutch Real Estate Company, we’ve eliminated this problem as we have contractors in-house,” mentions Manniesing, noting the difficulties in the current market to find skilled labor. She has decided to hire some contractors as employees in her company in order so the renovations can start once her clients receive the keys to the property. “They can start work right away,” she affirmed.
Getting building permits
As you may know, the Dutch love their rules for good reason. Any and all major renovations in a property will require the correct permits before construction can begin. For example, when removing a load-bearing wall, dealing with properties in protected city sites, or making alterations to pipes could all require permission on permit. This is something that Manniesing arranges for her clients as it’s all in Dutch and requires extensive knowledge of the nature of the renovations.
Finding suitable accommodation during your renovations
The thing to consider is that while you wait for your new property to be renovated, you will need to find accommodations. If you time things right, you may be able to stay in your old property or possibly arrange with the new owners to pay rent for the few months it may take to renovate your property. Renovations are usually never 100% on time, so budget 2-3 weeks extra of delay so you and your family don’t end up living on a construction site. Another great option is to stay at an Airbnb with friends, a serviced or short stay accommodation while the renovations are ongoing.
A Smart Strategy to Get Rich!
“Oftentimes what my clients do is buy, flip and move on and do it again until they can get a 1M euro house or more!” mentions Manniesing. Most often than not, the house price, in addition to the renovations, tends to be lower than the final market value of the property, especially if you wait for a little after the renovations are complete to let the housing market do its thing. Then, once the value of the property has appreciated, you can sell the property with a considerable capital gain (tax-free, mind you because it’s your primary residence) and reinvest it into a new property and do the whole exercise all over. 2 or 3 houses later, you’re rich! It takes some guts, patience, and some know-how.
Buying a property and renovating is a great opportunity, provided it is handled correctly, and you know what you’re doing. Indra Manniesing and her team everything from buying the property to supervising the renovations. They have a keen eye for spotting opportunities. Reach out to Dutch Real Estate Company and get started with this incredible journey!