by Celia Craske

Created on: July 17, 2006   Last Updated: April 24, 2007

Buying a property that needs repair can be a great way for first-time buyers to get on the property ladder, or for investors to make a good return.

Obviously the cost of any repairs has to be added to the purchase price but if the repairs are not too extensive and especially if you can do at least some of the work yourself, you stand a good chance of ending up with a decent property that has still cost less than other houses in the area.

Many older properties are sold as "in need of modernisation"; this can mean that it needs a new kitchen or bathroom, heating system etc. The advantage here is that you can start off with your dream kitchen rather than doing what so many of us do when we move into a new house and make do with whatever's there.

Financing such a purchase can be tricky. Many mortgage lenders will refuse to grant a mortgage on property that needs extensive repairs, especially if the damage is structural. In some instances, they will advance a percentage of the loan with the rest to follow when the work is completed. If this is the case, you need to consider how you are going to make good the shortfall.

Having a full survey carried out is good advice for any would-be house buyer but is especially important for anyone buying a house in these circumstances. A full survey will tell you exactly what needs to be done. Before proceeding with the purchase, you should then get quotes for the repairs. If the purchase price and the cost of the repairs far exceeds the market value for the area then maybe you should reconsider.

If you are buying the house as a home, will you be able to live in it while the work is being carried out? If not, then you will have to also allow for the cost of alternative housing.

If you decide to buy a property that needs repair try to buy one in as good an area as you can. This is because the cost of installing new windows for example, will be the same for similar size properties in different areas; however, in one area you might see your investment increase in value whilst elsewhere you may be lucky to break even.

Just remember to do your homework before you buy, and unless you are in the trade avoid properties that need major structural repairs.

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