So, you’ve just bought a house. You’re completely in love with it and your mind is a whirlwind of ideas and plans. Perhaps an extension, a loft conversion, new kitchen and bathrooms, or maybe even a pool! But, hold your horses! There’s something called the ceiling price and it’s incredibly important to understand. The last thing you want if you do ever come to sell your new home, is to find out that you overspent and won’t make your money back. In this post I’m going to tell you how to stay safely under that threshold.
I’m not trying to rain on your parade and I certainly don’t want to curb your enthusiasm. It’s still perfectly possible to make big changes to a house and make it your dream home. It’s just a case of knowing the facts first, so that you don’t go over budget.
We have renovated and extended many homes over the years and our latest project is our tenth. I know, we’re insane and gluttons for punishment! I wrote a five-part series on our property journey and what we learned from it called: How To Climb The Property Ladder – feel free to have a read. The new house is a beautiful Victorian Gothic three-storey semi-detached townhouse that we call Victorian Dream, but it’s in need of some love. Our initial thoughts were that the house is top heavy. There are currently six bedrooms and two bathrooms upstairs over two floors.
Downstairs there is a huge entrance hall and a downstairs loo under the stairs. Then, there is a large living room and two more extremely large rooms that have been knocked through to create one “mahoosive” space! Off of that is the current single storey kitchen, which is also rather lengthy, but dog ugly. Finally, there is a dilapidated conservatory. The number of downstairs rooms don’t match what’s upstairs. So, another single storey extension would balance out the house, right?
Well, yes, but we have to remember that our house is a semi-detached. All houses have a ceiling price that they will fetch on the open market, but attached properties have a more rigid maximum in my opinion. So, we have decided that we won’t be adding the extension to the house. Instead, we are going to make much better use of the space that is already here, making every inch work hard and have a purpose.
But, Hang On One Cotton-Picking Minute!
I know you’re thinking: “why are your talking about your house’s selling price when you’ve only just bought it?” – “Surely, you’re all loved up with it, does it really matter what you spend, you may stay there forever? Not everything is about money you know!”
Here’s the thing: your house is the most expensive item you will ever buy and the biggest investment. I know it’s difficult to look at it coldly like this, but it’s true. You never know what is around the corner and even though you may think you have found your forever home, anything can happen. If you do come to sell one day, then you want to get as much profit out of it as possible, either for buying the next house, or for your retirement.
Never underestimate what a house’s profits can do for your life. Our last house sale allowed us to not only buy our little slice of Victoriana, but also enabled us to move to the coast and buy a holiday home too. There was a huge amount of hard graft along the way, but essentially, it paid for our new life. Get my drift?
How To Work Out Your House’s Ceiling Price
The ceiling price of a property is quite complicated and not cut and dry. However, there are a few easy steps you can take to work it out:
- You already know what you paid for your home. Did you pay the asking price, or did you manage to get it for less? Well done if it’s the latter!
- What are similar houses in your area selling for? You can look at sold prices on Rightmove. Usually, sold prices tend to get published about three months after they’ve completed the sale. You need to factor in whether they are attached, what condition they are in and whether they have been extended. You can usually see photographs and a floor plan on Rightmove too.
- Get the estate agents in. You may know what you paid for the house, but they will be able to tell you what you could realistically hope to achieve in todays market once you’ve done the renovations. Make sure you tell them everything you plan to do.
- Get more than one agent. The one you choose could be a complete numpty, so get at least three and then you can take the mean average valuation.
- Pop on to Zoopla to get a price estimate for your home. Sold prices can be a bit skewed if similar houses haven’t sold in your area for a while. With Zoopla you can add in all the renovations you are intending to do to get an idea of what the house will be worth.
Work Out Your Budget
Once you’ve found out the ceiling price of your home you will be able to then work out the difference between what you paid for it and the ceiling price. This is your maximum budget if you want to at least break even if you had to sell as soon as you finish renovating. But, you want a profit right? So that means you need to spend less than the ceiling price. It’s dull, I know, but you’ll thank me in the end.
This realisation can potentially ruin your plans. Aren’t I the epitome of joy today! Let’s say you bought for £300,000. You’ve found out that your ceiling price is £390,000 in the current market. That means your maximum budget to just break even is £90,000. That of course, is not taking into consideration selling costs, stamp duty (UK property tax) on the next house etc!
Our Plans Now We Know Our Ceiling Price
After working out our ceiling price, we came to the realisation that an extension was not on the cards. Instead, we are going to make the house as beautiful as it can possibly be, make good everything that is dilapidated and change the flow of the house. We don’t need six bedrooms. You’ve got to be careful taking bedrooms away because it can affect the sale price, but five bedrooms is still a lot and a third bathroom would add more value.
Changing the current kitchen into a home office, a boot room/utility room and a better situated downstairs loo will also add value and give the space a better purpose. The two huge downstairs rooms that have been knocked together will become the new all singing, all dancing kitchen/diner of dreams and a chill out zone. Always wanted one of those, although don’t know if I’d ever actually “chill out” near my kitchen. I’d be too busy thinking about the washing up, or whether the oven needs a clean!
The current downstairs toilet will become a kitchen pantry (jealous much?) and the living room will have reclaimed French doors added to it to create drama and lead people to a reception room (I’m calling it the Drawing Room and I don’t care how pretentious It sounds!) as they enter the house, instead of the kitchen. We will also sort out the guttering and all the external issues. Finally, we will redesign the garden and turn it into an oasis of calm and somehow we will connect it to the house better, so that we bring the outside in.
So, you see, even though we aren’t doing the extension, the plans are still super exciting. Actually, I now think we don’t need the extension at all. We just needed to utilise the existing space better. By knowing and understanding our ceiling price we have been able to make quite early decisions that will hopefully mean that we don’t go over budget and don’t risk breaking the ceiling price of our home. You can definitely do the same!
Now, what I’m about to say, will sound like I’m contradicting everything in this article, but hear me out. It is sometimes possible to break the ceiling price of a home and still make a profit. I know, roller coaster crazy, right? Mad as a lipstick me! It’s a rare thing, but we have achieved it a few times. It’s about choosing the right house and making sure your decisions are sound and that the finish is impeccable.
Our last property was detached. It was also very ugly and had a mountain as a garden. However, there were quite a few other detached houses near by that were very beautiful and very expensive. I’ve already said that there is more leeway with a detached house because you can change the look of it so much more than you can an attached one.
We were able to change that house into a much larger New England weatherboard home. It did take three years of planning permission hell though! We also bought the field at the top of the garden to add flat space to outside. We then put every ounce of our passion for interiors and gardens into it and tried to think about the family that might buy it one day. What would they need in a house? What lifestyle are they after? Everything we did was very much our taste and what we wanted, but with a keen eye on what future families might need to. We made it extremely saleable and then waited for a good market.
So, it can be done, but you’ve got to be so careful and really do your homework first and be honest with your ability to transform something. I’m so excited about our current renovation. Good luck with yours and let me know your plans!
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