As a rental investor, have you ever been tempted to overlook the reality of a property because of its potential? Taking on a property that needs significant work can be a daunting task and it’s easy to go over budget and schedule in pursuit of your vision for what it could be. Here’s our 10 step guide to getting a refurbishment right.
It’s easy to fall in love with a property, especially if it doesn’t look at its best, because you can see how it can be transformed into something spectacular. However, it still needs to be a business decision so before you get carried away with grand plans you need to be sure that it is in an area that is popular with tenants and the type of tenants you are hoping to rent to. Visit at different times of the day to ensure that there isn’t anything about the property or the area that could be off-putting for your tenants.
You also need to research other properties in the area e.g, the ones generating the highest incomes. What is it about these that tenants are prepared to pay more for? There’s no point incorporating the things you think are important into the refurbishment plans if that’s not what your tenants are really after.
Read our guide to what makes the perfect rental home
Part of the problem with a run-down property is any period of poor maintenance could mean bigger problems lurking below the surface. Don’t get caught-out by plumbing issues, rising damp or a falling roof, check everything inside and outside, from the loft space insulation to whether the toilet flushes.
Pay attention to smell because damp and sewage issues are difficult to mask; and don’t be afraid to touch walls for damp and jump on floorboards to check the joists. Any large-scale problems will only add costs to the project and could scupper the refurb’s success.
Our tips on how to plan maintenance works
Be rational and logical, even when the planning needs seem contradictory: maximising the number of bedrooms and bathrooms without making the property feel cramped and boxed in; providing great storage without losing any light or space; and making the property bright and airy whilst being cosy and comfortable.
A top tip would be to use an architect. They can take into consideration the minutiae of detail such as making sure the fuse box, electricity and gas meters are accessible while ensuring the property’s overall flow.
That’s not to say they have sole charge of the design and planning, you should go with a clear idea of what you want. Visit at different times of the day, for example, so you can advise them on the best use of light. Have a clear picture of your ideal tenants and what their living needs are, there’s no point the architect wooing you with a Juliet balcony if you are planning to rent to a young family.
Familiarise yourself with the layout of the property to the extent that you know which way the doors open and where the plug sockets are, even measure and plan where the furniture will go. It means you can work closely with the architect to make the best use of the space.
Here’s how to maximise your rental return on a period conversion
These begin with whether the property is worth taking on in the first place and extend to decisions about what needs to be changed. Don’t make choices based on your personal taste and don’t spend money on gimmicks. Consider how some elements will affect your rental package, for example if you plan to include bills then it is worth spending money on good insulation and double glazing. Spending money on good quality basics rather than gimmicks will pay off long term. This is especially true when it comes to furnishing your rental property.
The property may have been cheaper to buy but that doesn’t mean there is surplus money to spend – costs can spiral quickly. A good rule of thumb is to consider the maximum rent you can achieve on the property versus how much money the planning and building will cost and how long the project will take to complete. A long and expensive build could mean that you won’t see profit on your investment for months or even years.
Work out the expected costs and then the unexpected costs; set aside at least 10% of your total budget for any unforeseen problems. If you have worked closely with the architect then you will have a clear idea of what’s essential and what’s just a preference. This is vital should an unexpected problem arise and you need to make adjustments to the plans and/or savings.
Finally, agree a payment and retainer strategy with your building team so that the work is carried out and completed to your satisfaction. This should extend to a few months following the build just in case any amends or repairs need to be made.
Get a free rental valuation for your proposed property
You’ll need to assemble a reputable, qualified and certified team to carry out the work. This begins with an architect and as the project gathers momentum, you will need builders, plumbers, electricians, carpenters, plasterers, a project manager, designers and decorators.
It is vital that this team is one you can trust. Ask for recommendations from people you know and follow that up by seeing examples of their work and by speaking to other people they worked with. Do this for every trades person and contractor you hire; don’t be tempted just to research the architect but not the building firm they recommend for example.
Working with the architect and builder, draw up a detailed spreadsheet of what needs doing based on the plans, what is the cost and time frame expectation for each item. It will help to ask each contractor for a price breakdown at the beginning so you know what is being spent and where.
This is a working spreadsheet so include columns for actual start and finish dates along with the associated costs. If any unexpected problems do occur, you can instantly see the knock-on effect and related costs. It will enable you to make decisions more quickly and efficiently as well as keeping a tight rein on the project.
Even with a tight schedule and spreadsheet of work and costs it is important to decide how involved you want to be. If you choose to project manage the process then be prepared to be on site every day, all day, phone in hand and contacts at the ready to solve problems and answer questions on every minor detail.
You must also be prepared to be flexible; projects almost never run according to plan. You’ll also need to develop a good working relationship with your contractors so they don’t dread coming to you with issues or feel like they are being micromanaged. For the project to run smoothly it is well worth the cost of an experienced project manager. They will check in with you at the end of each day so you can update your working spreadsheet and only contact you if there is a significant problem.
Each of the structural elements of the refurbishment will need to be signed off by a certified trades person and the industry’s health and safety inspector could choose to to pay a visit to the site too. Only once the work has been signed off is it considered completed. Even then, there may be elements that aren’t working and need to be fixed such as a light switch at the wrong height or a staircase that needs a slight adjustment. It is wise to have a negotiated a retainer clause in the payments so you can finish the refurb to your satisfaction with the same contractors at no extra cost.
The decoration and furnishing is just as important as the structural refurbishment and is what will ultimately win over your tenants. Don’t be tempted to save money and do this yourself unless you are a professional decorator and designer – tenants will be able to spot anything that isn’t quite up to standard.
Don’t be tempted to express your personal tastes either, opt for neutral colours and furnishings that are on trend and of a high quality. We can complete this service on your behalf, offering a high success rate for attracting high calibre, professional tenants.
Read: tenant appeal – the secrets of furnishing a rental property
We’ve refurbished many London properties over the years and can advise on how best to plan accommodation in order to maximise rental. If you would like advice, then please get in touch with your nearest lettings branch who will be happy to advise further.
View all posts by Marc von Grundherr