Can I Extend and Renovate my “Fixer Upper” for €100,000? A First Time Buyer’s Renovation Budget Explained

In 2013, €100,000 was like a king’s ransom to most businesses in the Irish construction industry. Now clients approach us with budgets at this level and are shocked when we tell them how little can be achieved with such a large sum of money. We have decided to tackle this issue with a clear worked example.

In 2018, rates for some types of construction have increased 50% since the recession, client expectations have increased, there is a shortage of competent construction workers, and subcontractors are now more accountable for quality.

These pressures have inflated the many expenses which make up a typical renovation budget. Even the most seasoned commercial clients are struggling to achieve tenable construction prices, and first time buyers must understand the financial risk of buying a home in need of complete renovation.

First Look at The Figures

Here is an example of a “back of an envelope” feasibility calculation for an actual extension and home renovation for a typical 1970’s semi detached house with three bedrooms.

These prices are rough estimates based on our experience of recent projects, and while individual projects vary slightly these are the sorts of prices clients achieve after shopping around, negotiating hard, and adjusting the design for all possible cost efficiencies.

The same pattern emerges time and again.

Omissions:

This budget does not include items which may also be required:

• Replacing existing windows
• Attic insulation
• Gardening or landscaping
• Fences, garden walls or other boundary treatments
• Furniture or soft furnishings
• Domestic electrical appliances
• Flooring for the extension
• Road opening licences, development contributions or other local development taxes.

Particular Concern for First Time Buyers

At the moment, first time buyers in towns and cities are limited to existing housing stock. Because there has been practically no new house building for 10 years, a lot of houses coming on the market seem to be former “buy to lets”, receiver’s sales or executor’s sales, (where previous owners have recently passed away). Such houses often need a lot of modernisation.

A Shocking Lack of Value

What becomes immediately apparent, is that after fixing and modernising the house, there’s only enough money for 10.5 m2 of new space. That’s roughly equivalent to a minimum size double bedroom.

This Project Budget Allows Practically No Profit for the Main Contractor

It would be extremely difficult to find a good builder for this €100,000 renovation process. Our experience has been that projects of this type and scale receive very few, if any tender responses. We have talked with builders to analyse this issue. Most of this budget is actually allocated to sub- contractors, effectively other companies working for the main builder, leading to a “margin stacking” effect, and there is very little core construction work from which a main contractor could derive a profit. You would have to pay an additional premium, or increase the proportion/ amount of new building to attract a excellent main contract in the current climate.

Size Deficiency of Existing Housing Stock

House extensions are a necessity for most of our clients, NOT a luxury. Most Irish houses are far too small for how most people choose to live now, and they usually need a lot of new space. For example a 1920’s red brick terrace house could measure from 50m2 up to 70m2. A 1970’s 3 bed semi detached house might measure as little as 85 m2. A 1990’s 4 bedroom house could measure 125m2, in contrast, a 2 bedroom apartment from 2008 would have measured around 77m2, and the trend continues.

How Much Space Do I Need

A new speculatively built 4 bed home typically measures around 125m2, with some better examples measuring up to 150m2, and while it is possible for a family to live in this amount of space, my experience suggests this commonly accepted standard is in fact inadequate. We are frequently asked to extend houses, ostensibly designed for contemporary family living. When we list everything a person wants, and apply rational design techniques, we find a recurring standard for living space emerges.

Our clients consistently require a gross internal area of 75m2 for each of the first two people in a house, and 20m2- 30m2 for each additional resident. So a 124m2 four bedroom house for a family of five people, should measure between 210m2 and 240m2 to be truly fit for purpose.

Physical Condition of Existing Housing Stock

• Obsolete wiring
• Inadequate thermal insulation
• Poor quality rear extensions which must be demolished and replaced
• Badly constructed attic conversions which must be made safe
• Obsolete boilers, heating systems and heating controls.

Best Advice for House Hunters

Take, for example the typical 3 bedroom house from the 1970’s shown in the worked example. If a couple were to buy this house, hoping to raise a family, they would have to do a lot of work before even thinking about adding essential new space, as you can see from the table above.

Overall Strategy

A good strategy is to buy a house which is already liveable. When you get the keys, make only essential repairs and low cost high impact changes such as attic insulation and sealing air- tightness issues. If you buy an 80m2 house, get all 80m2 working for you as cheaply as possible before you consider major capital expenditure. This spend will have to be targeted, remember you may only get to do it once in your lifetime.

For most people, additional space delivers more value in terms of achieving their real goals in life than other aspects of the brief such as changing the external appearance of the house, or even improving energy efficiency. Energy efficiency is incredibly important, but it is also expensive to achieve in a renovation process, and no client can afford to it all.

For example, a condensing boiler, modern heating controls, solar water pre- heating system and external insulation could cost €35,000 for an average home. This would cut energy costs by a few hundred Euro every year. However the same amount of capital could be used to create two double bedrooms, and this extra space could facilitate having a bigger family, caring for an ageing relative, taking a serious hobby to the next level or working from home.

How to Target Your Spend

1. Pay for a very thorough structural survey, and if possible, get a QS to help you ascertain the cost of making good defects like roof leaks and dampness, which may be mentioned in the report.
2. Look at modern innovative solutions for defects, such as resin DPM for damp floors, and chemical DPCs for damp walls. These may help avoid reconstructing large parts of the structure unless absolutely necessary for structural reasons.
3. Try to buy a house which has not been vacant for a long period, and which has been modernised incrementally. Even if you dislike the tastes of the previous owner, improvements like functioning windows, a running boiler and a clean and serviceable interior can save a lot of money.

Conserve As Much of the Existing Structure and Systems as Possible

Houses are built with an overall service life of around 60 years, but the individual parts fail at different rates. With older houses, many parts have already failed and been replaced, so the different systems and structures each have their own timeline for renewal. Ask your surveyor or architect for their best guess of how long your roof, boiler, or window seals will last, and remember the service life of many individual parts can be extended very cheaply. If you embrace this concept, you can minimise, delay and even completely avoid some major expenses.

• Avoid houses which need both new heating and new wiring, they usually need to be completely opened up to access pipes and wires and this inevitably precipitates other unplanned tasks and expenditure.
• Talk to a plumber and electrician about reusing as much of the existing systems as possible, without pulling out ceilings and floor finishes throughout the house (remember the total cost of re- flooring this house in medium- quality laminate flooring is €4800). Copper pipes can be cleaned and reused if the boiler location and radiator locations are retained.
• Electrical systems less than 20 years old can usually be retained and made good, but this is not possible if it’s obsolete in ways which affect safety such as wires wrapped in rubber, or if the system uses fuses rather than circuit breakers.
• Note, completely new systems are easier and simpler for tradesmen to work on. From their point of view they can give a more complete guarantee because every component is new, they can charge more, and they can plan their work (and profit margin) more accurately. They often presume the house will be “gutted ” by the main contractor to facilitate installing pipes and wires.
• This is often incredibly wasteful and short sighted when the project is on the borderline of financial viability.
• It is difficult, but not impossible to find tradesmen who will work carefully to repair and modernise existing systems without tearing an existing house apart.

Tactical Changes to the Architectural Layout

• Talk to us, or other experienced architects. Pay for a lengthy design consultation to understand your broad options, even if you only foresee small changes.
• Don’t reorganize existing spaces without carefully planning the impact on the overall budgets for plumbing, electrics and redecorating. Several small changes to the layout can precipitate a massive leap in the overall scope of work. Moving a stud partition may only cost a few hundred euro, but may require repainting several rooms, new flooring, several new radiator locations, and opening up of the electrical system.
• A good tactic is to re-purpose small rooms while leaving them structurally unchanged, and to then target the budget at creating new, high quality space with the proportions you need. For example, “box” bedrooms measuring less than 8m2 are useless as bedrooms, but can work well for storage, as a small home office, an additional bathroom or even as a laundry room.
• Pay particular attention to low quality ad hoc extensions which may have happened in the past. If they need to be demolished and replaced, this will reduce your budget for new space accordingly.
• Plan extensions to “clip on” rather than merging with the existing spaces. This means that more of your budget goes into new space, and less into reconstruction, and retaining steelwork.

Every House is Different

Every existing house has a different range of defects, assets and design possibilities, and therefore a different renovation and extension budget. The worked example above is intended to illustrate this problem in the Irish property market, but is not a definitive guide to financial planning for your project.

We offer an initial consultation and site visit service starting  €295 Including VAT , for locations in Dublin, with options for travelling to locations throughout Leinster and some fully online services. We recommend all house hunters call us, or any other architect with renovation experience, for an initial consultation before committing to the purchase of a “fixer upper.”

Our experience shows, making the house liveable will cost a lot more than you think.