What Running a Construction Company Taught Me About Refurbs
Running a construction company taught me that refurb builders rarely fail on skill. They fail on money, time and paperwork. We delivered HMOs, commercial-to-residential conversions and buy-to-let refurbishments for clients, and I learnt what a refurb really costs, and what happens when a builder goes wrong. Here are six lessons.
Some background first. In 2011 my wife and I started an e-commerce business, Girly Handbags. It taught me marketing, margins and how to sell to people I'd never meet. Then came property, and with it the construction company. That company is closed now, but it's the business I still draw on most when a sourcer sends me a deal with a refurb in it.
What did running a construction company teach me about refurb builders?
That most refurb problems are decided before the first wall comes down. A vague spec, a quote with one contingency line, money paid up front and nobody checking who turns up on site: each one looks harmless on day one. Together they're how a straightforward job turns into an argument.
The fixes are just as unglamorous: name your risks, pay against finished work, write everything down and check in every week.
1. Is a 10% contingency enough?
No, because a flat 10% is a guess, not a plan. Price contingency as named risks instead: the age of the boiler, damp, the roof, a rewire. Each one either happens or it doesn't, and each one has a price. When you name them, you can tell an investor exactly what could go wrong and what it would cost.
On a viewing, that means photographing the boiler plate so you know its age, getting into the loft and looking under the rugs. The risks you can see are cheap. The ones you didn't look for are the expensive ones.
2. Why is time the biggest cost?
Because every week a refurb overruns is a week of no rent, more finance cost and an investor wondering what's going on. Delay is the cost nobody puts on the quote.
That's also why I steer people away from heavy refurbs. A light job that finishes on time usually beats an ambitious one that drags. A full buy, refurbish and refinance only makes sense with roughly £20,000 or more of genuine uplift. Below that, the time eats the profit.
3. How much should you pay a builder up front?
Never more than 10%. Pay the rest in stages against finished work, for example 40%, 30%, 20% and 10%, each released when that stage is done and checked. Money paid ahead of the work is money you're lending the builder, with nothing to show for it if something goes wrong.
I've seen a builder go bust halfway through a rip-out and leave the clients £13,000–£14,000 down. Tight payment terms are what keep a loss like that small.
Who is actually doing the work?
4. Check the builder isn't subbing everything out
Ask for references you can phone and photos of finished jobs. Then ask the question most people skip: who will be on site? A builder who subcontracts every trade is a middleman with a van. That isn't always a problem, but you need to know, because it changes who you're really relying on.
5. Why write the spec down?
Because "do the kitchen and freshen it up" means something different to you, the builder and the investor. A written spec, room by room, is the only version everyone agrees on. Add a snagging list at the end and a handover pack: certificates, warranties, photos and the final spec.
It also makes you look like a professional. An investor overseas who gets a clear spec, stage photos and a handover pack trusts you with the next one.
6. Should you call it project management?
Only if you're truly taking on that liability. If you're arranging the builder and checking progress, say "project coordination". The words matter. Project management can make you responsible for the outcome, and if it goes wrong, your investor will remember which word you used. If you're unsure where your responsibility starts, ask a solicitor before you write it into an agreement.
What this means for you
If you're sourcing deals with refurbs in them, or refurbishing your own portfolio:
Price contingency as named risks, not a percentage.
Treat time as a cost and keep refurbs light.
Pay no more than 10% up front, then in stages against finished work.
Find out who's on site, not just who's quoting.
Write the spec down, then snag it and hand over a pack.
Choose your words: coordination unless you're carrying the risk.
None of this needs a construction company behind you. It needs a system you use every time, which is the same lesson I took from handbags: know your product, know your numbers, and don't let it all depend on you. It's also why I tell sourcers to pick one product and stop running three strategies at once. One kind of refurb, done the same way every time, is far easier to price.
FAQ
How much contingency should I add to a refurb?
Don't add a flat percentage. List the specific risks you can see, such as the boiler's age, damp, the roof or a rewire, and price each one. That gives you a contingency you can explain to an investor line by line, and it makes you look properly at the house on the viewing.
How should I pay a builder for a refurb?
Pay no more than 10% up front, then in stages against finished, checked work, for example 40%, 30%, 20% and 10%. That way you're never far ahead of the work. If the builder stops or goes bust, you've lost far less than if you'd paid a large deposit.
What should I check before hiring a refurb builder?
Phone their references, look at photos of finished jobs and ask who will actually be on site. Some builders subcontract every trade, which changes who you're relying on. Agree a written, room-by-room spec before any work starts, and plan a snagging list and handover pack at the end.
Is a heavy refurb worth it for an investor?
Usually not. Every week a refurb overruns costs rent and finance, and heavy jobs overrun more. A full buy, refurbish and refinance generally needs around £20,000 or more of genuine uplift to be worth the time. Below that, a light refurb that finishes on time is usually the better deal.
Want a second pair of eyes on your next refurb?
Checking deals and refurb numbers before they go to your investors is a big part of what we do in mentoring.
Not sure where you're stuck? Take the 3-minute quiz: what type of property operator are you?
If you're already doing deals and want them tighter, book a mentoring call. It's a one-hour video call, and by the end we'll both know whether mentoring is the right fit.
Comments