Should You Renovate Your Buy-to-let Property

Summary

Choosing to renovate a buy-to-let property is an entirely different decision from remodeling a home. If you decide to renovate a family home, that’s more to do with a family’s need for space. But when it comes to buy-to-let property, decisions should be based on financial circumstances. So, if you are currently in a quandary as to whether you should renovate your BTL, sit back for 5 minutes and let us help you out with the number crunching.

The decision to renovate

So, to renovate or not to renovate, that is the question we discuss in this guide. Now, of course, if you have bought yourself a fixer-upper way below market value, without the necessary plumbing, electrics and basics, you will have to upgrade. But this guide is more concerned with renovations you are considering making to perfectly occupiable property that you hope will increase the property’s value and/or its rentable value.

Whether it’s a lick of paint, a new bathroom suite or an extension to the property, any of these minor to significant improvements should only go ahead when you have thoroughly considered if they will benefit you financially.

Minimal Renovations

You can make your property more appealing to rent and increase the rental value slightly by adding minimal touches, such as:

Painting walls
Painting interior and exterior doors
Clean fresh flooring
Tidying the garden and driveway
Adding new kitchen cupboard doors and handles
Installing new window blinds

All of these improvements can be made very quickly and cheaply in between tenancies. It can also be a very effective way to increase demand for tenants for the property.

Major ways of renovating, Up, down or sideways and things to consider

You can, however, seriously increase the property and rental value by increasing the square footage of your BTL property. Especially in London homes, where rents are high, and properties are often shared, an extra bedroom and bathroom is the space for a new tenant, and a tidy monthly revenue increase. Depending on the size, an extension could allow you to house several new tenants, so it’s worth considering if it will be worthwhile for you.

It is definitely worth taking into consideration the time taken when undertaking any renovations. When you are dealing with renovations to your own home, it’s okay to put up with some mess and inconvenience for a while. But, you can’t expect a paying tenant to put up with any upheaval. If you decide you want to renovate, you need to do this when you buy the property before tenants move in or during a change in the tenancy.

Depending on the size of your property, renovations will take longer or shorter, but as a rule of thumb, you could get a loft refit complete in around six weeks. And if you are adding an extension to either the back or the side of the house, you can expect work to take approximately 18 weeks. If you consider adding a new basement, this could take up to a year.

So, whenever you consider a loft renovation, you should also add at least six weeks of lost rent to your loft conversion costs. Similarly, you’ll need to add around 4-5 months of lost rent to your side conversion and a year’s worth of lost rent to a basement refit.

It’s therefore essential you work these costs in and weigh them against the benefits. Extending downwards is unlikely to be cost-effective except in the more expensive post codes in London and the South.

And if you can extend up, that’s the best and cheapest way to go. Of course, you are looking to recoup your costs as quickly as possible. The total cost of your renovation, including lost rent divided by how much your monthly revenue will increase, will tell you how long it will take you to recover your immediate costs. If a £100,000 renovation increases your rent by £2000 each month, then in just over four years, you will have recovered that outlay in addition to owning a property with an increased value.

Kitchens and bathrooms, furnished or unfurnished?

New kitchens or bathrooms are also a way to add value to a property, but they won’t increase the rental value dramatically as they don’t create any new space. New kitchens or bathrooms may be necessary but make sure you don’t overspend on them, as you will likely need to replace them in 10 years.

It’s easy to get carried away furnishing a BTL property, but unfurnished is usually the best way to go. If your property is at the lower end in terms of rent, and your tenants are likely to be young people or students, then a trip to IKEA should do the trick if the property is not appealing to the market. You can add rental value to a property by furnishing it, but the furnishings are unlikely to last undamaged for many years and will only hurt your bottom line when you need to replace them.

Hiring a contractor for renovations

And finally, if you are going to go ahead with significant work, this is no time for hiring a contractor that is not up for the job. If it’s a large project requiring a professional builder, plumber, joiner, and electrician, consider a contractor that can deal with all aspects of the renovation; otherwise, you could be in for difficulties and delays. As we have stated, your costs are linked to the time the property is uninhabitable, so if your builder absconds for a few weeks, that could easily add thousands to your bottom line. You can use a site such as mybuilder.co.uk to help you find well-respected tradespeople with excellent reviews.