After much consideration, you’ve decided you want to enter the world of rental properties. With the market dipping in some areas, it’s a good time to buy, and with a bit of elbow grease you reckon you can turn a hovel into a palace.
You’ve been watching all the renovation shows you can, and you’re ready to take the leap.
What do you really need to know?
Well, for starters:
1. You Need Two Budgets
You need a budget for the property purchase, and a separate budget for the renovation work.
When it comes to your property budget, you want to try and get in under your limit, because you’ll need every spare penny for the renovation itself.
Your property budget needs to include things like taxes and transfer fees, all of which can add up to a nasty surprise if you don’t include them.
When it comes to a renovation budget, the rule of thumb is that you set a reasonable budget and expect expenses to end up triple what you worked out. Renovations can come up with some nasty surprises, from crumbling foundations (ouch) to unsafe load bearing walls (bigger ouch).
2. You Need to Find the Right Property
If you want to renovate, there are a number of options.
Checking auctions should be your first step; you can find properties in fairly good condition for a surprisingly lower cost than expected.
Another trick is to contact agents directly for off-website sales – if a house is in particularly poor condition, some agents don’t place pictures on their sites because it (a) tends to scare away potential buyers and (b) upsets the aesthetic of the website.
A word to the wise: if this is your first ever renovation attempt, avoid listed buildings. The costs to renovate a listed building is exponentially greater that an everyday house, and there will be specifications on everything from the type of brickwork and plastering required to what sort of interior changes you can make.
Some listed buildings will need specialised craftsmen to work on them. All of this will push your costs up and add to the difficulty in renting the property out down the line; very few tenants want to give up their satellite tv, for example, and they don’t particularly care that the building is 500 years old if it interferes with the latest episode of Love Island.
3. Figure Out Your Market Before You Buy
Your rent is going to be dependent on the area. If you purchase a home in a low income area and spend 50K on renovations because the ceiling has made intimate friends with the floor, it’s going to take a very long time to start earning a profit.
You also won’t be able to push your rental too far out of reach of the locals; if the average rent in an area is £750 a month for a two bedroom and you’re trying to charge £1200, you aren’t going to get a lot of takers.
Decide in advance whether you are aiming at the high income, mid-income, or low-income markets, and buy and renovate accordingly.
4. Renovation Will Make Or Break Your Property
There’s a big difference between watching something done and doing it for the first time. If you plan on doing the majority of the work yourself and you’ve never swung a hammer, your life is about to be very unpleasant, and your renovation journey exceedingly short.
You need a team. You need multiple teams. You need qualified electricians, you need plasterers, you’ll need plumbers – it all adds up to a large amount of people working on your house.
Get the best team you can afford for each area, because quality work now means less issues in the future. Shoddy workmanship guarantees issues six months down the line.
Make sure you have a plan for each team and a reasonable timeline for finishing each room.
5. Keep Your Fittings and Finishings Financially Reasonable
There are gorgeous fittings out there. Door handles that cost several hundred pounds, tapware and bathroom sets that wave at the £1000 mark, stick their thumb in their mouths, and explode.
These fittings and finishings are great for a house you intend to live in yourself, if you have the budget for them. Unless you are aiming at the higher end of the executive market, they don’t belong in your rental property.
You can find decent quality, mid-market fittings and finishings that won’t make your budget feel like it just escaped a bad remake of 50 Shades of Grey.
And finally - don't forget your landlord insurance
Don’t forget to check your landlord insurance policy to make sure your rented properties are properly covered and for the correct sums insured.
Do you rent to students, refugees or benefits claimants? We’ve got you covered – click here to fill out a short form and we’ll pass your details onto our list of brokers.
QuoteRack can also help you with property renovation insurance, to cover your development project whilst your refurbishment is under way.