Lots of property investors have grand plans of buying a rundown house or flat with the intention to do it up and rent it out for a competitive fee; however, there are many considerations to bear in mind before you embark on a complex facelift of your property. Here are some pros and cons of doing so.
Making your property more attractive
The major benefit of renovating your home is that you will improve the overall appearance of the property. By doing this, you have a greater chance of attracting more prospective tenants to take a look at the asset and consider moving in.
Tenants typically choose accommodation that is comfortable for them to live in, as they won’t reap any financial rewards by spending money in doing it up themselves. Therefore, the state of the property when they move in is likely to be the same as it is when they leave; that’s why most residents want their home to offer a certain level of comfort and attractiveness.
By making the property look as nice as possible, you’re more likely to appeal to tenants, meaning you can begin earning a rental yield on the asset as soon as possible.
Earn a greater rental return
Ensuring your property is attractive also means you can reasonably charge a competitive fee for the monthly rent. You might find that you are only able to put a low rental cost on a rundown property as tenants can easily find somewhere else to live that offers more comfortable living quarters. Therefore, by spending a bit on renovating the property, you could find your regular income increases substantially.
It may take a while for this to balance the costs you’ve already invested in the asset, but as months roll into years, the difference in rent will certainly pay off if you can receive a higher rental yield month-on-month.
Another benefit of investing in a buy-to-let property that needs a lot of work doing to it is you are likely to be able to get it for a far lower price than other similar assets that have been well looked after or recently renovated.
By buying a rundown property you could get yourself a bargain and, even if you have to spend a considerable sum working on the home, you are still likely to make a lot of profit in rental fees – far more than you would do with a decrepit house.
While there’s a good chance you could make a lot of money by renovating your property, you do have to consider the costs involved in doing so. You can increase your buy-to-let mortgage to acquire a more expensive property; however, in order to pay for renovation work, tools and materials, you need to have the cash available.
There’s always a risk when it comes to renovating a property, as you don’t know whether you might uncover more problems than you expected by starting to work on it. Therefore, you could end up having to repair a lot more than you planned to, and subsequently spend a greater amount than you had put in your budget.
It is also worth noting that, even if you intend to do all the work yourself, you still need to plan to spend money on all the materials. These can add up considerably, so you should put aside a fair amount to cover this, so you don’t end up short.
Finding the time
A particular consideration to bear in mind when planning to renovate a buy-to-let property is being able to find the time to do it. Every month you aren’t renting the asset to tenants, you are missing out on an income and losing money to cover your mortgage fees. Therefore, it is imperative that you get the property repaired and redecorated as soon as possible.
However, this isn’t always easy to do if you have a full-time job or a large portfolio of properties that you look after. You may find there are a lot more things to fix than you prepared for, so you need to set aside a reasonable amount of time to get the work done so your deadline is realistic and reachable.
Bradley Shore is an experienced property and investment author. He tries to knowledge his readers on all the different aspects of property investment whilst influencing them to invest in property. His experience in the property market is what makes his articles real. He has worked with a large number of online magazines and blogs such as innovo property but would one day like to run his own property blog.