How to refurbish a rental property
Always bear in mind when you’re doing up a rental property that you should only spend money if it is going to add value. If whatever you’re planning to do won’t either increase the rent or make it easier for find tenants quickly, then don’t do it.
Remember this mantra: only spend money to make money.
Sometimes it’s better not to refurbish a property, especially if it’s in an area where there is a severe shortage of affordable accommodation. If you’re prepared to let it at less than the market value, you might find tenants faster and they might stay longer if the rent is cheap, so you’ll have fewer, shorter voids.
Before you begin a refurbishment, speak to 2 or 3 local letting agents to find out how much rent your property will attract as it is and how much it will rise if you do it up, then work out how many years it will take to recoup your investment. If it’s more than 10 years, it might not be worth it, although a refurbished property should cost less to maintain, both in terms of money and hassle.
Bear in mind that every area and property has a ceiling price and just because you stick in a fancy kitchen and swish bathroom and cover the walls in Farrow & Ball won’t necessarily mean you’ll get any more rent.
Also when working out the cost of refurbishing, remember to factor in the time it will take because you wont’ just lose rent while you’re doing the work, you’ll also have to pay the council tax and other bills on the property, including buildings insurance, which might be more expensive if the property is empty. Don’t forget to tell your insurer you’re carrying out work or you might not be covered if something goes wrong.
If you do decide to refurbish your rental property, focus on the bathroom and kitchen as these are the areas that tenants can find most off-putting. Keep everything clean, bright, neutral and easy to maintain. Go for the best quality fixtures and fittings you can afford. There’s no point having stylish taps if they’re flimsy and break after six months, and avoid installing anything fashionable that will look dated in a year.
And here’s another mantra for you, less is more. In other words, it’s better to have few good quality fixtures and fittings than lots of flimsy things that will break.
If the boiler is more than 10 years old, it’s best to replace it when carrying out any other major refurbishments. If there’s one thing that tenants won’t put up with it’s a lack of heating or hot water and it’s a well-known fact that old boilers always conk out in the winter when you can’t get a plumber out for less than a zillion quid!! Seriously, stick in a new boiler and you’ll pat yourself on the back every year that it doesn’t cause you any problems.
The spec will depend on the type of tenant you’re hoping to attract, the number of tenants who’ll be living in the property at the same time and their lifestyle. Once again, if you don’t know the area you should take advice from local letting agents.
Remember that only the cost of repairs can be deducted from your income tax, any improvements can only be deducted from your capital gains tax when you sell the property. This means that if you replace an old kitchen with one of a higher spec, or you add more fixtures and fittings, this additional cost can’t be deducted from your end of year tax bill.
If you’re trying to attract students, make sure everything is robust, easy and cheap to maintain and easy and cheap to replace. They’ll require fully furnished accommodation but don’t go over-the-top with extra appliances such as dishwashers, tumble dryers and built-in microwaves – they won’t expect them and probably can’t afford to run them! Usually the only thing they insist on is wifi. Families and young professionals might appreciate all of the above, but make sure the rent will cover the cost.
When refurbishing, you can sometimes add value by creating additional bedrooms, for example by dividing a larger room into two, or by adding extra toilets or shower rooms. Conversely, you might be able to improve a property by knocking two tiny rooms into one. Again, local letting agents should be able to advise you. You might need to check with your local planning department if you are making any major changes, and if you’re adding bedrooms, you might need a licence to let.
Just one final tip: make sure you check on the work every day and don’t let your builder, plumber or electrician do anything, even the smallest job, without checking with you first. You’d be surprised how many stick spotlights, taps or plug sockets in the wrong place!
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