Property Expert Nick Statman on Property Refurbishment Costs Management:
You’ve done it! You’ve bought an investment property and now it’s time to get to work. There are many decisions to make when entering the refurbishment process. Most of these decisions should be based on what upgrades will add the most value to your home. The idea behind a successful investment property is to refurbish the property in a way that costs you the least amount of money but adds the most value to your home.
Before you break out your toolbox, here are six ways to manage costs on a house refurbishment:
Replace What Can’t Be Repaired
Are there specific systems or appliances in your investment property that you know will continue to give you trouble and cost you money in maintenance? If so, it is a smart financial decision to replace the system or appliance instead of shoveling money into it each month for insufficient repairs. While this may seem like a financial burden upfront, it will probably be more cost-effective to replace the leaky sink, clogged toilet, or creaky door then it would be to answer service calls about these issues every month and put money into temporarily replacing them.
If you are trying to be cost-effective and maximize your ROI, you need to focus on refurbishment details that will add the most value to your home. Just because a refurbishment significantly changes the look or feel of a property, it doesn’t mean it will substantially add value and generate higher rental yields. If you’re going to spend money on refurbishments, make them the renovations that will end up increasing your home’s value and bringing in more money every month.
Be Picky About Upgrades
Adding an extra bathroom to your existing home will cost you anywhere between £2,500 and £6,000, and will generally increase your home’s value by a little over 6%. A kitchen model can be significantly more expensive, (costing anywhere between £8,500 and £10,000) this refurbishment only increases your home’s value by 5-6%. If you are trying to get the most bang for your buck, a loft conversion can increase your home’s value by 10% (but not all properties are equipped for this type of upgrade) and it could cost you anywhere between £12,000 and £35,000. If you’re trying to manage costs, decide on which refurbishment will add the most value to your home without breaking the bank.
Go In With A Budget
If you are serious about saving money and staying within a budget during the refurbishment phase, you must go in with a plan. Walk through the property and make a list of all the things you think need to be repaired, replaced, or upgraded. Then narrow it down to what refurbishments will increase the home’s value. Finally, narrow down those projects to the one or two that will cost you the least amount of money upfront. Go in with a budget and stay committed to that budget. Call around, get quotes from local contractors, and if possible, do some of the work yourself.
Go In With A Deadline
The most common investment property refurbishment should only take between four and six weeks. If these things have to be done while the property is empty, you want to ensure that the work is done as quickly as possible without sacrificing quality. The longer the project takes, the longer the property is vacant, and the longer you go without earning income. Work with a team of contractors that you trust, and that has earned a reputation for finishing projects on time.
Know Your Ideal Tenant
Refurbishing your home does not only add value. It also helps you appeal to a more specific and high-profile tenant. The right refurbishments will allow you to charge a higher rent price and increase the amount of money you are earning annually.
When deciding on the right refurbishments to make to your new investment property, it’s important to consider who your ideal tenant is. Is your property in an area that appeals to small families? University students? Busy professionals? Once you know who will be staying in your property, you can refurbish in a way that appeals to them.
Decide Before You Buy
One of the best ways to manage costs during a refurbishment process is by buying a property that doesn’t need that much work in the first place. This is especially important if you are not personally equipped or trained to handle many of these larger refurbishment projects. Hiring contractors and other professionals to do this work can quickly eat away at a limited budget.
You will be the most successful when you play on your strengths, experience, and expertise. If significant home repairs are not something you are comfortable or familiar with, you may want to start with an investment property that only needs minor home repairs. If you’re ready to tackle a bigger project, keep these tips in mind to upgrade your property without draining your bank account.