If you are buying the property in Knightsbridge, London you have to refurbish according to the value of the property. If you are buying a small terrace cottage in an ex-industrial district, you will want to spend much, much less.
As a rule of thumb, look to spend a maximum of 15% of the property value for a complete refurbishment.
If you are on a tight budget, make sure that your renovation and decoration are right – don’t try to cut too many corners.
Construction costs are very difficult to figure out as a percentage of the property’s value.
Construction could include:
- Building an extension
- Underpinning
- Moving load-bearing walls
- Adding a mansard
This kind of work is generally beyond the interest of the Buy to Let investor.
Renovation would include replacing:
- Kitchens
- Bathrooms
- Wiring and plumbing
- Lighting
Again, this level of work is typically beyond the Buy to Let investor as it requires a more substantial investment of time and focus.
But purchasing a run-down property that needs renovation is a very good way of increasing your yield and return.
Decoration work would cover the carpeting, painting and decorating, fixtures and fittings. As a Buy to Let investor, you might well spend time and money on these aspects of the property. A clean and smart property lets faster and will be treated better by the tenant – usually.
Expect to paint all walls and all woodwork and replace fixtures, fittings and carpets before letting the property.
Typically, to paint and carpet a £100,000, two-bedroom flat might cost £2,000 – £3,000.
This might include replacing and improving some fittings, perhaps the kitchen work top and so on. After each letting you should consider a partial repaint.
Remember to factor in carry costs when considering renovations.
Carry costs depend on the amount of work that you need to perform on the property before you can release it into the lettings market.
From the day of completion, allow the following time:
Activity Time / Allowance
Renovation: 4 to 6 weeks
Simple Redecoration: 2 or 3 weeks
Letting Time: 2 or 3 weeks
If you are simply redecorating the property, allow a total 2 to 3 weeks for painting and a further 2 to 3 weeks to let.
If you are renovating as well then you might need to add an extra 4 to 6 weeks onto this total.
In the case of construction, you might spend up to 3 months and then another 6 weeks, so you will be looking at maybe 18-20 weeks of carry costs before your property is let.
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Daniel Peacock