How to Avoid the 5 Classic Landlord Refurb Mistakes

Nikka Sulton

How to Avoid the 5 Classic Landlord Refurb Mistakes

Refurb rental properties is a task landlords often undertake, and it’s a crucial component of the BRRR strategy (Buy, Refurb, Rent, Refinance, Repeat). This strategy involves purchasing undervalued properties and increasing their value through refurbishments, allowing for refinancing to release capital. However, one common mistake landlords make is overspending during renovations. To avoid this pitfall, it’s essential to focus on improvements that enhance the property’s value, safety, energy efficiency, or marketability.

Once the property reaches a habitable, safe, energy-efficient, and marketable state, any further expenditures should be directed toward adding value. However, this can be easier said than done, especially in the current climate of rising inflation. In this blog post, we’ll explore five classic traps that landlords, whether new to the game or experienced, can unknowingly fall into during the renovation process.

Landlords should steer clear of these five common refurbishment errors:

Not matching the specification to the property value
Under-estimating the cost of the work needed
Cutting corners on things that don’t show
Being too “on trend”
Neglecting energy efficiency improvements

1. Not matching the specification to the property value

Outside of London, extending into the side return rarely justifies the expense, as it doesn’t significantly boost property value or rental income. In pricier London areas like Clapham, high-end rentals above £5,000 – £10,000/month may expect side return extensions.

For rental property extensions, ensure they enhance marketability and rental potential. Adding extra bedrooms is a good choice if they aren’t too small or space-compromising. Extension type and desirability depend on location and target renters. Letting agents can guide you on how bigger kitchens or additional bedrooms/bathrooms affect rent and demand.

Be cautious with specifications; avoid overdoing refurb. While they may look great, excessive improvements won’t necessarily enhance market appeal. Replacing perfectly good bathroom suites is wasteful and eco-unfriendly. Instead, consider cost-effective updates like new taps and tiles.

Question the need to replace functional chrome taps with pricier alternatives like brushed copper or black. Will they add more value than their cost? Consider the area’s water quality; black taps may show white marks in hard water regions.

2. Under-estimating the cost of the work needed

Underestimating refurbishment costs is a common mistake when renovating older buy-to-let properties. Often, the full scope becomes apparent only after work begins, a mistake I’ve made myself.

A “back to brick” refurbishment is more straightforward because you can accurately budget for everything. However, costs can spiral on lighter refurbishments, with many small issues adding up. For example, seemingly solid walls may reveal problems when stripping wallpaper, necessitating skim plastering. The first rain after completion might expose the need to replace all guttering. Hidden problems like slow leaks in pipework and rotten joists and floorboards beneath carpets can also arise.

Unless the property is fairly new or recently underwent professional back-to-brick refurbishment, it’s wise to bring a builder for a pre-exchange assessment. They may spot issues you and your surveyor missed.

With material prices skyrocketing in the past year, don’t rely on costings from similar past projects. Clarify with your builder whether material prices are fixed or estimated. Someone must bear the risk of material price increases, and it’s crucial to know who.

While material costs like tiles matter, labor often constitutes the most significant expense in tasks like bathroom retiling.

To prevent cost surprises, consider using a quantity surveyor, more common in larger projects and new builds. A detailed schedule of works and specification leads to more accurate quotes. Establish a process for changes to the project’s scope to avoid “mission creep.”

3. Cutting corners on things that don’t show

Landlords should prioritize the long-term outlook when refurbishing buy-to-let properties. Opting for high-quality fixtures and fittings with long guarantees is both economically sound and sustainable.

Take, for example, carpeting. While newly laid carpet might initially look good regardless of quality, the temptation to cut costs with cheap options can lead to rapid wear and a shabby appearance. Investing a bit more in durable carpet that lasts 10 years instead of 5 is worthwhile. Frequent carpet replacements not only disrupt tenants but also incur double fitting costs. Moreover, from a sustainability standpoint, replacing carpet twice means twice as much polypropylene carpet in landfills.

To save money, consider removing and disposing of old carpet yourself and sourcing and laying underlay.

Additionally, prioritize addressing the building’s exterior to ensure it’s weatherproof. Replace broken gutters and downpipes, and repoint missing mortar in brickwork. Inspect the roof for missing tiles and damaged gulleys between front and rear elevations.

To prevent mold, identify the source of damp patches and install proper bathroom extractor fans. Make it clear to renters why they shouldn’t turn off these fans. Choose quiet versions to discourage tampering. Though it may cost more, use anti-mold paint in bathrooms to help prevent mold growth.

This aspect of refurbishment may not be glamorous or Instagram-worthy, but it’s crucial to thoroughly assess and repair every part of the building. Regular maintenance preserves your asset and provides a comfortable home for tenants.

4. Being too “on trend”

In today’s Instagram age, the allure of staying trendy can be tempting, but being a landlord is a long-term venture, and styles change.

Therefore, when making decisions, it’s about striking the right balance between selecting items that will endure while avoiding becoming outdated. Steer clear of fleeting trends that might age quickly, much like the avocado bathroom suites from the 1970s.

Across the pond in the US, real estate investor Tom Brickman, also known as The Frugal Gay, advises against opting for “cheap trendy finishes.” Instead, he prioritizes quality and timelessness, choices that have enduring appeal. He sets his properties apart by using different tiles and taps.

Certainly, it’s convenient for landlords to stick with white walls and grey carpets. This not only provides a neutral canvas for tenants but also avoids the challenge of selecting an “on-trend” color. The issue with trendy paint hues is their tendency to be discontinued shortly after gaining popularity. This can make it challenging to find the same paint for touch-ups between tenancies.

>> Pro Tip: Order an extra paint tin during the initial purchase and keep a record of the specific brand and shade of white chosen for future reference.

5. Neglecting energy efficiency improvements

The surging energy costs have brought energy efficiency to the forefront. Properties with an EPC of Band C or higher receive more clicks on Rightmove, making it an appealing feature for new tenants.

The government aims to enhance Minimum Energy Efficiency Standards for private rentals, potentially raising the minimum standard from EPC band E to C by the end of 2025 for new tenancies, with a cost ceiling of £10,000.

While the official news is still pending, Michael Gove’s statement in The Daily Telegraph on July 22, 2023, suggested a desire to “relax the rules” and reconsider the pace for private rented sector improvements, acknowledging the financial burden many landlords face.

Amidst this uncertainty, some landlords delay energy efficiency investments, waiting for the £10,000 expenditure cap to kick in at a later date. However, I believe landlords shouldn’t postpone energy efficiency improvements. Instead, consider a phased approach over several years to manage costs and cash flow. Roof insulation, if feasible, offers a cost-effective way to reduce renters’ energy bills. Wall insulation, though pricier and more disruptive, may be necessary for certain property types.

Energy efficiency enhancements benefit landlords by increasing property value and attracting tenants. Starting the journey toward energy efficiency is not only a wise investment but also the responsible choice for landlords.

In conclusion,

Whether you’re giving your property a makeover or planning a comprehensive renovation, steer clear of the common rental property remodeling mistakes mentioned above. Concentrate on improvements that enhance your rental property’s value.