Low-level refurb and let ASAP (for less) OR extensive renovation and let (for more)(5 Posts)
Hello all- I really don't want to descend into the ethics of BTL in this thread- I was simply looking for some advice please (bear with me).
I recently walked away from a purchase that simply wasn't going to happen (too financially stretching), and decided to delve into the world of BTL instead. Everything moved pretty quickly, which is great. But I have some important decisions to make.
I am on the cusp of exchanging on a property:
- 4 bed mid-terrace with garden
- town house
- ground floor: integral garage, double bedroom, downstairs toilet, ‘utility area’ (very basic)
- 1st floor: kitchen & living room (not quite open plan- but the kitchen is doorless)
- 2nd floor: bathroom, 2 bedrooms (a large double, and a medium-sized double) and 1 box room (perhaps the size of a study).
Now, at the point of completion (assuming nothing goes wrong…I hope!), I will have a little over 20K in savings, which could potentially go towards refurb.
I have a few options, the 2 main ones I’m thinking through are:
1. Low level refurb: about 6K (on the cheap)
- do the bare minimum to justify the going rent for a decently spruced-up house of this sort in this area
- new bathroom on 2nd floor
- new toilet on ground floor
- possibly new kitchen
- a few other bits and bobs: new fences, extensive paint job etc
- can be let as soon as 4 weeks post-completion (if I’m organised :-s)
2. More extensive work: will use the entire 20K (and no more if I’m very lucky…but this is unlikely)
- wall knocking (ground floor) and stud wall erecting (1st floor)
- re-configure: move living room and kitchen to ground floor (dividing wall in between, so not open plan)
- extension at back to make large kitchen-diner
- 2 good size doubles and bathroom on 1st floor
- 2nd floor configuration: unchanged
- build porch- creating space for downstairs loo (and try to squeeze washing machine +/- tumble dryer in here)
- work will likely take 8-12 weeks (if I'm organised!!), so this delays letting (which will be at 300-400 pounds more per month than Option 1)
I've never done this before. And I suppose the answer may seem obvious- spend as little money as possible for a liveable house and basic refurb; but the reason I’m seriously considering Option 2 is:
- higher cash flow can't be a bad thing...as long as the end justifies the means, obviously
- to be able to add value (extending; bringing living space on the same level as the garden)...I'm genuinely interested in a property 'project'.
- increased potential capital gain
An identical house a few doors down completed for 100K more than the purchase price of this one last month- however it has been extended in a similar way I would like to. I feel I can achieve this on a budget, and still be left with a house which in the future (15-20 years) which will pay its way.
I also read somewhere that for renovation to make financial sense, the property should be worth at least: it's purchase price + costs to renovate + 20%.
Does it make sense to put in the hard graft now (and use the majority of not all of the 20K); and know I won’t have to do anything major to the house (re: renovation) over the next 10-15 years?
I'd also rather not put in a new kitchen and bathrooms (however cheap they may be) and have resort to ripping them out in under 5 years time; to carry out Option 2 anyway- that would be a waste.
What would you do?
p.s. Again, sorry if this message comes across like I'm out to take advantage of renters. I'm not. I'm simply interested in property (as I have been for many years), and at the moment I'm fortunate enough to be in the position to to get involved
Hmm I am in a simiar - ish situation and my first thought is that your budgets are optimistic, and also your time scale. I have been trying to do a basic refurb on a smaller property outside London. Started in August and it is still a building site, uninhabitable and definitely not lettable. The simple refurb I had envisaged should have taken I fondly imagined, a max of 6 wks and cost a max of £10000. What I had not factored in, because I am new to this, was that I was not living on site (actually renting myself, 2 hrs drive away) so managing trades, deliveries of goods and decisionmaking at a distance, while working full-time is extremely complex and stressful. Good people are always busy, co-ordinating good people from 100 miles away is up there on a par with brain surgery and rocket science. Because they know that you do not HAVE to have a working toilet or functioning central heating because you are not living there means that jobs for other people take priority. And then stuff happens. Ripping out the old bathroom revealed that a slow leak had rotted the floor, and the base plate of a stud wall and the joists below that. This means joinery work and plastering work not budgeted for originally. My costs will be overr £20000 and I cannot now see the project being finished before next spring, and all the time the place iis empty it is not earning its keep and there are other bills to cover, like council tax for example. I had thought that because there has been no water connected for 4 months, that all the ceilings and walls are being re plastered, that there is no kitchen etc. etc. that I would be entitled to some kind of discount but my local authority does not agree with me. So I guess if you have the financial wherewith all it does make sense to do things as thoroughly as possible, is better for tenants and will ultimately increase the value of the property, but I would guess, especially in London, that your figures, and time frames,need to be doubled, at least.
I very much doubt you can do the option 2 wish list for £20k.
Option 1 also v optimistic. Sorry. Bathroom alone I'd say £4-6k.
first, stop making excuses for wanting to set up a business. Only on mumsnet is it considered a crime to try to make money from property. The bile-spitters are happy to pay mortgages, pay for food and probably buy tons of sparkly tat that wrecks the planet. THAT's immoral.
now, back on topic...
the best bet is to make the place as livable as possible. For instance, no washing machine space means 'how do the tenants do their washing? ' Also think how they dry it - if no outside space they will have no choice but to wreck the place with condensation if there's nowhere for a dryer. Nice clean new kitchen and bathroom are always winners, as is fresh paint and carpets. The question to ask is 'would I have all I needed if I lived here?'
you also need to check electrics (not a legal requirement but a good idea) do gas safe, get all the insurances...you've big initial outlays coming.
so it is a bit half and half.
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