Analysis of a potential investment property is essential.
Before buying any property, you should clearly identify your strategy (buy-to-let, serviced accommodation etc.), target tenants, location, nearby amenities, cash-flow figures and also, crucially in this case, what needs to be done to add value and raise the overall price of the property post-purchase.
In the case of analyzing for potential refurbishments you should either have experience in that world or a close trusted partner who can provide the required guidance.
With this analysis you’ll be able to draw up plans regarding the work needed, expected costs and potential future benefits for the property.
Getting Bang for your Buck
Which leads us nicely onto point two… Getting bang for your buck!
When renovating or refurbishing your own home you will clearly want a high level of quality and expect to pay a cost relative to that.
The same, to a certain extent, can be said when refurbishing an investment property however here you will want to make the biggest possible impact for the least amount of money as every pound spent will eat into your future profits, whether cash flow or capital gains.
How do you achieve this? The key is to source tradesmen and materials at the cheapest price possible whilst still maintaining the standards and guarantees needed and if you lack the relevant experience to do this you may need to draw on your own property power team or trusted colleagues.
How to Add Value to your Buy-to-Let
As mentioned above, experience is an important element in this part of the property investing process but, for those of you just starting out, we thought we would highlight some of the key areas of refurbishment potential.
Kitchens and Bathrooms
It should come as no surprise, even to those with almost zero interest in property, that kitchens and bathrooms are huge variables in the value of a property.
These two rooms, due to both importance and appliances required, are generally the most expensive in any house and as a result they will have a major bearing on your future property value and potential rental incomes.
This reality means that buying an investment property with terrible, or inadequate, kitchen and bathroom facilities can represent a great opportunity if you have the know-how required, or can draw upon it, to improve both in a cost-effective way.
What are these improvements? We would suggest you focus on providing clean, modern appliances paired with stylish, but inoffensive, interiors.
Attic conversions are rife with legislation from planning regulators but, if it’s possible in your new property and you think you have the required space, it can represent a huge opportunity.
Depending on size and accessibility, you could sell the new attic conversion to potential tenants as a spare bedroom, an office space or simply more storage space, which is generally always a positive.
If and when properties lie in the hands of non-existent landlords, tenants who don’t care, or owners with other priorities, the outside spaces (gardens, backyards etc.) can quickly fall into disrepair.
Depending on size, privacy and what’s on offer, redevelopment and refurbishment can represent an opportunity to add value to the property and make it more desirable to your target tenant or future buyer.
Also, in most cases this work won’t require anything more than good old-fashioned “elbow grease” meaning you could do the work personally or at a cheaper cost.
Potential tenants, buyers and property investors all appreciate warm, energy efficient homes and as a result improving the eco-efficiency of a property can have long-lasting positive impacts on value.
This could include the installation of double-glazing (if it doesn’t currently exist), the purchasing of new doors or even the installation of a new heating system such as gas if it’s available.
It’s also worth remembering that poor energy efficient homes may fail the adequate standards for rentals in the future so it pays to make them as energy efficient as possible.
The opportunities mentioned above are all, in general, extensive jobs requiring specific materials and expert tradesmen in certain cases but that doesn’t mean smaller opportunities don’t also exist.
Depending on the condition of your investment property the interior décor can be improved with the aim of raising the value.
Tenants nowadays generally want a clean slate on which to build their own home, so we would recommend decorating in a clean, modern and minimalist way. This would mean focusing on using basic, modern furniture and clean, inoffensive colours, amongst other things.
The final issue to consider when planning any potential refurbishments or work to your property is that, as this is a property investment business, all work (including materials and labour costs) are tax deductible.
Something that could always come in handy when you’re sitting with your accountant at the end of the next tax year…
Until Next Time...
As with many aspects of property investing and development, experience is a vital element and factor in future successes.
Over time, through various deals and experiences, you’ll develop the knowledge and know-how to truly gauge what will add value to an investment property and how to do it in a cost-effective way.
With that in mind, it’s all about getting started because you can’t gain that experience without getting out there and operating.
Check out our Belfast Property Meet events and Property Success University if you’re unsure of how to begin or want to rub shoulders with other real-life property investors.