What landlords need to know about refurbishments
Are you thinking about taking on a fixer-upper as an investment? Maybe you’re doing a refurbishment of an existing buy-to-let property? What do you need to think about? Where do you start? And how do you keep to time and budget? Here’s our Simple guide to get you going – in 7 easy steps.
1. Build the right team
Before any project you need to have a team in place. At the start, you’ll need solicitors, mortgage brokers and surveyors. Make sure they’re people you trust with a strong track record. Once you’ve secured your property, you’ll need qualified and certified sub-contractors and specialists – from a great architect to a great builder – and certified tradespeople for things like plumbing and electrics.
- Do your research. Look at credentials, pricing, previous work… Don’t rely on pictures, they could be anyone’s! Go and view it!
- Always ask for a price break down so you know exactly what you’re getting, and exactly what you’re spending where.
2. Think about your layout
Remember that the purpose of the refurbishment is to add value. When doing this you’ll want to minimise costs – but don’t be tempted to cut corners. Think about your ideal tenant and what they want. Resist fancy extras and concentrate on good quality basics. It’s always worth looking at other premises in the area to see what other landlords are providing, who’s renting, and what standard you’re looking for.
- Draw your rooms and plan where your furniture will go to estimate where your plugs and lights will go, your ceiling heights and which way your doors swing. This will give you a visual to help explain your vision to your team.
- Create and design your property for the people you are targeting e.g., young professionals, a family with young children, HMO, middle aged couple etc… make sure you consider how you would overcome wear and tear over time.
3. Prepare for your viewing
Buying a house is a big investment, and when you go and look round you need to know exactly what to look out for, and what questions to ask. Here’s some things to be thinking about:
- Before you even walk through the door make sure you’ve researched the area and done some maths. Is there a rental market? What’s the average rent? Who is renting? What type of property/no of bedrooms/bathrooms? What would your monthly income look like?
- When you do get inside you’re looking to see if you can add the rooms or the value you need to turn a profit, within your refurbishment budget.
- Look out for hidden costs that could put your project at risk. Use your senses; can you smell gas or sewerage? This could be a sign of potential breaks and blockages - which in worse case scenarios are very costly to fix. Is the property newly painted or is the ceiling yellow or newly painted? This could be hiding a multitude of problems, including covering damp.
- Put your hands on the walls. You’re looking for rising damp from the floor, or top down, from a faulty gutter leaking onto a wall, a window gap or the chimney.
- Is the floor springy near the windows, chimney? This could be the start of damp or poor insulation where the cold and damp has caused the floor to warp.
- Check everything, the lights, all the windows, flush the toilets, even taste the water!
- Make sure you go outside and all the way round the property so you can spot any issues from the outside.
- Where is the fuse box, and if there is one, where is the prepayment meter for the electricity? Sometimes these can be in inconvenient places such as storage cupboards. Could this impact on the amount or storage in your property?
- Is the property well insulated? Check the loft and windows – are they double glazed? This will also save you money later down the line if you include bills within your package.
- Go into the loft – 90% of people buying a new house don’t bother. It’s the best way to check the roof for gaps, and to see the level and state of the insulation. Both could be costly if you miss them.
- View properties twice, once in the morning, and once in the afternoon or evening to see if in a different light the property is still what and how you expect.
4. Reality check
Don’t get so caught up in the potential you forget your bottom line. Take a moment out for a reality check. Can this property help you achieve what you want to? Is it close enough to home or a letting agent you know and trust to manage it for you? Is the potential profit enough? Does it need more work than you were originally prepared for? Can the work realistically be done in your time-frame?
- If it’s not right – let it go. There will be others!
5. Create a schedule
So you’re now in the midst of securing your property. Time to create a gantt chart. It’s a useful way to manage and keep on top of your refurbishment project. It will help you plan for expected costs and savings, estimate start and end dates, and see how different elements of your project fit together.
Useful things to include are:
- Contract timings
- Work time scales
- Work and payment dates (weekly or monthly)
- You’ll also need a spreadsheet to keep on top of your projected and actual costs
- Include an additional 10% contingency into the plan for the unforeseen problems which may arise and keep 3.5% of your budget as retention in case any problems arise.
6. Managing the project
It is essential that there is good communication to ensure the work is carried out according to the time table you’ve set. You can manage your own project or employ someone independently – be realistic about how much you can do and how available you can be. You don’t want to be the bottleneck that holds up your own build.
- You’ll need to make time for regular site visits and calls to keep all your separate contractors running to their timescales – things will never go to plan, so be prepared to be both flexible.
- Put in set dates and times to finalise and sign off different stages of the refurbishment – 1st fix, 2nd fix, etc. Don’t move on until any issues have been sorted, because it’s likely to have a knock-on effect on the next stage. This is where you use your contingency time and money.
7. Complete things properly
The refurbishment project is not completed until it has been signed off by a certified tradesperson. Check at both the start of the project and at the end that the electrical and gas engineers have a valid certificate – if they’re not up to date they won’t legally be eligible to sign off your refurbishment.
- Retain 5% of your budget for this project for at least three months. This can be used for any additional work that needs completing, should corrections need to be made after the initial refurbishment.
Download a planning check list