Your tenants have just moved out and the property is clearly in need of a refresh – carpets are worn, the kitchen is creaking at the hinges and the avocado green bathroom is no longer fashionable. But the question is, how much is too much to spend?Firstly, find out how much more refurbished properties go for locally and therefore how long it will take to recoup your expenditure. Two or three years is fine, but anything over five years makes it too risky – rents may dip locally over such a long period.
Let’s take Earlsfield in South West London. It’s a mid-market area where the greatest demand is for ‘average’ two-bedroom apartments at around £1,500 a month. “Most tenants want a flat that’s modern but at a price that enables them to save to buy later on,” says Caroline Basma, Lettings Manager at KFH’s Earlsfield branch.
The difference between refurbished and un-refurbished properties in Earlsfield is on average 10% but there are variations. For example, the gap between a basic and a modernised one-bedroom flat is nearer 20%. But expensive refurbishments are risky here, even at the top of the market. Speaking to a few sources, I’ve discovered that revamping your four bedroom house attracts a premium of £2,400 a year (or £200 per month) on average. It would require a new kitchen and bathroom, fresh carpets and a paint job throughout (costing a likely £11,500 to achieve), which would take nearly five years to recoup in extra rent.
Balham, one of the hottest property markets in South West London, is different. The 10% value uplift rule still applies here in the mid-market but it’s fashionable enough to attract high-earning late 20 and early 30 somethings who are happy to pay £900 a month each to rent an upmarket property. A typical two bed flat in Balham can cost between £1,600 and £1,900 per month depending on the specification.
This means properties with interior ‘wow factor’ can achieve 25% more than their more pedestrian, middle market cousins and might make spending substantial sums worthwhile. However Will Brindley, Lettings Manager KFH’s Balham branch says: “I think it’s important to advise landlords of the distinction between upgrading and maintaining a property – maintenance alone does not add value. Renovation works however to modernise a property do increase market value by around 10%, but the timeframe in which the outlay is recouped is typically 3 to 4 years and this should be factored in to the calculation regarding the level, and cost, of work.”