Adding value to your new investment

Congratulations! You have just taken ownership of your new property investment…

But now, how do you go about adding value to your property so you secure the best returns?

In this article, I’m going to share with you what you need to know about when it comes to:

  • Where to start when adding value.
  • The biggest profit maximisers in adding value you should be thinking of.
  • Some of the most expensive and ‘time-sink’ strategies you need to avoid.

If you are interested in getting the most value out of your property investments, check out these tips on using interior design from myself and Bernie Woods!

Congratulations! You have just taken ownership of your new property investment…

But now, how do you go about adding value to your property so you secure the best returns?

In this article, I’m going to share with you what you need to know about when it comes to:

·         Where to start when adding value.

·         The biggest profit maximisers in adding value you should be thinking of.

·         Some of the most expensive and ‘time-sink’ strategies you need to avoid.

 

If you are interested in getting the most value out of your property investments, find us on YouTube!

You have just taken ownership of your new property investment, and now it needs some love and attention to secure the best returns. This article will tell you everything you need to know about where to start, the most important work to consider and where your time and money might be wasted.

If you are interested in getting the most value out of your property investments, check out Premier Property’s proven strategy for building a successful portfolio.

You NEED to be prepared for these!

First Steps

The first step for any property investment we make at Premier Property is to make sure you make money when you buy.

Here’s the thing - many investors get stuck because they buy a property, but unfortunately can’t do anything with it or the works are too expensive.

You want to make sure that your property investment will be making money from day zero.

So how do you assess this?

Step 1:

Firstly, identify the target market of your property. Think about who is likely to want to live in this area, and in this home.

A family with children will want very different things to a group of young professionals, so make sure the property itself appeals to the same demographic as its location.

Demonstrating the use of a spare room as a bedroom, office space or home gym to the right buyer helps the buyer visualise the property as a home, increasing your chance of a sale.

Make sure your target market lines up with your property strategy. The people who might buy a property are not the same people who might rent it!

If it isn’t already, can the property be made suitable for your target market and strategy?

It’s much easier to adjust your target demographic than your property strategy, as thelatter can be financially messy. Your cashflow for a to-let will be totally different to the cashflow of a to-sell, so know your strategy and stick to it.

Step 2:

Firstly, always take the time to find a great builder for any major project. Ask friends and business contacts for recommendations and use online resources to find tradespeople. Sites like Checkatrade.com and MyBuilder.com should be your first port of call, be sure to check multiple comparison sites when possible.

Of course, that doesn’t mean you shouldn’t do your own due diligence as well, I'll be sharing some pointers on assessing credible tradespeople in more detail in a later article!

Step 3:

Get the property fully surveyed for any structural damage; you really don’t want the hassle of only finding something like this halfway through a major renovation!

It’s not that you can’t make money on a property like this, in fact many people go out of their way to find these ‘fixer-uppers,’ but you need to know what you are getting into, preferably before you buy!

Step 4:

All of the cosmetic flaws and faults in the property should be thoroughly investigated as well, as they might be hiding more serious issues. There might be damp behind the peeling wallpaper, and that mismatched paint in the corner could be hiding a serious mould problem.

Step 5:

Similarly, check all services such as wiring and plumbing are in good condition.

Always think in worst case scenarios here – the tap that doesn’t work might just need to be reconnected to the water supply, but what if it was disconnected because the pipes connecting it leak?

That is not something you want to find out right after spending thousands on renovation!

In short, do everything that can do done to be as certain as possible that later work will not be interrupted to deal with these types of problems, and that there is no chance for an undetected problem to cause damage later on.

One key tip which will save you tens of thousands of pounds is to make sure your terms are clear with the builder from day one.

We’ve all heard the horror stories of a simple miscommunication or misunderstanding that led to hugely expensive mistakes, so don’t let it happen to you!

Getting a botched job fixed can be expensive and will play havoc with your schedule. This is mostly down to you making sure your builders have the right instructions, but having a builder you can trust is one less thing to worry about.

It’s much easier to adjust your target demographic than your property strategy, as the latter can be financially messy. Your cashflow for a to-let will be totally different to the cashflow of a to-sell, so know your strategy and stick to it.

Dos and Don'ts

The first task for any investment is to get the property fully surveyed for any structural damage; you really don’t want the hassle of only finding something like this halfway through a major renovation!

All of the cosmetic flaws and faults in the property should be thoroughly investigated as well, as they might be hiding more serious issues.

Similarly, check all services such as wiring and plumbing are in good condition.

In short, do everything that can do done to be as certain as possible that later work will not be interrupted to deal with these types of problems.

Secondly, always take the time to find a great builder for any major project. Ask friends and business contacts for recommendations and use online resources to find tradespeople.

Getting a botched job fixed can be expensive and will play havoc with your schedule. This is partly down to you making sure your builders have the right instructions, but having a builder you can trust is one less thing to worry about.

Lastly, identify the target market of your property. Think about who is likely to want to live in this area, and in this home.

A family with children will want very different things to a group of young professionals, so make sure the property itself appeals to the same demographic as its location.

Demonstrating the use of a spare room as a bedroom, office space or home gym to the right buyer helps the buyer visualise the property as a home, increasing your chance of a sale.

Major Projects

Now that the groundwork is done, let’s talk about making some improvements to maximise your returns.

A new kitchen can greatly improve the likelihood of a sale. The kitchen is one of the most important rooms in the property for many buyers, and is usually the first room a new owner will look to refurbish.

Save them the hassle and provide a modern, attractive kitchen they can start using straight away. The prospect of having to handle a major renovation themselves can put off even the keenest buyer!

The average kitchen costs around £8,000, and adds 6% in value to the property. Many builders recommend kitchens by Howdens and Magnet, if you can arrange supply through the builder they will likely get it cheaper on a trade account.

If you can do it without eating into living space too much, creating a new bedroom can add significant value.

Now that the groundwork is done, let’s talk about making some improvements to maximise your returns.

A new kitchen can greatly improve the likelihood of a sale. The kitchen is one of the most important rooms in the property for many buyers, and is usually the first room a new owner will look to refurbish.

Save them the hassle and provide a modern, attractive kitchen they can start using straight away. The prospect of having to handle a major renovation themselves can put off even the keenest buyer!

 The average kitchen costs around £8,000, and adds 6% in value to the property. Many builders recommend kitchens by Howdens and Magnet, if you can arrange supply through the builder they will likely get it cheaper on a trade account.

If you can do it without eating into living space too much, creating a new bedroom can add significant value.

Dos and Don'ts

Major Projects

Now that the groundwork is done, let’s talk about making some improvements to maximise your returns.

A new kitchen can greatly improve the likelihood of a sale. The kitchen is one of the most important rooms in the property for many buyers, and is usually the first room a new owner will look to refurbish.

Save them the hassle and provide a modern, attractive kitchen they can start using straight away. The prospect of having to handle a major renovation themselves can put off even the keenest buyer!

 The average kitchen costs around £8,000, and adds 6% in value to the property.

If you can do it without eating into living space too much, creating a new bedroom can add significant value.

A loft conversion could cost between £20,000 and £40,000 depending on the scale, and can add as much as 10% to the value of the property.

Make sure your insurer knows about the changes!

Adding a bathroom can be a great way to improve the value of a property, especially en suite bathrooms.

A new bathroom could cost between £3,000 and £6,000, and will increase the value of your property by up to 6%.

As a general rule, try to maintain a ratio of at least one bathroom for every three bedrooms.

Extensions can also be a worthy investment; just make sure they add a decent amount of space, and don’t clash with the original construction.

Conservatories are a fairly common extension which can add up to 5% to the value of the property, as long as you don’t take up too much garden space building it.

Expect to pay between £4,000 and £10,000 depending on the design. For smaller conservatories you may not need planning permission, which can reduce costs.

Almost two thirds of garages in UK homes do not contain a car, so converting wasted garage space into living area can be a very cost effective way to add value to a property. You might not need planning permission for this, but you will still need to comply with building regulations.

Though garage space does not appeal to the majority of buyers, parking space does.

If the property allows, the cost of turning an unused front garden into a parking space large enough for two cars is around £10,000, and in areas where parking space is at a premium could return double that investment.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

A loft conversion could cost between £20,000 and £40,000 depending on the scale, and can add as much as 10% to the value of the property.

Make sure your insurer knows about the changes!

Adding a bathroom can be a great way to improve the value of a property, especially en suite bathrooms.

A new bathroom could cost between £3,000 and £6,000, and will increase the value of your property by up to 6%.

As a general rule, try to maintain a ratio of at least one bathroom for every three bedrooms.

Extensions can also be a worthy investment; just make sure they add a decent amount of space, and don’t clash with the original construction.

Conservatories are a fairly common extension which can add up to 5% to the value of the property, as long as you don’t take up too much garden space building it.

Expect to pay between £4,000 and £10,000 depending on the design. For smaller conservatories you may not need planning permission, which can reduce costs.

Almost two thirds of garages in UK homes do not contain a car, so converting wasted garage space into living area can be a very cost effective way to add value to a property. You might not need planning permission for this, but you will still need to comply with building regulations.

Though garage space does not appeal to the majority of buyers, parking space does.

If the property allows, the cost of turning an unused front garden into a parking space large enough for two cars is around £10,000, and in areas where parking space is at a premium could return double that investment.

Finishing Touches

It is also worth mentioning all the little details that might not add a huge amount of value to the property, but can make a sale at the right price just that little bit easier to get.

First impressions are vital, so replace that worn front door and put fresh paint on the window frames.

A claustrophobic hallway can turn off a buyer as soon as they step through the door, so hang a mirror to widen the sense of space.

Buyers are often on the lookout for convenient storage space, so creating storage areas under the stairs, in the bathroom or anywhere else there is an opportunity to do so is a cheap and easy way to increase appeal.

A loft conversion could cost between £20,000 and £40,000 depending on the scale, and can add as much as 10% to the value of the property.

Make sure your insurer knows about the changes!

Adding a bathroom can be a great way to improve the value of a property, especially en suite bathrooms.

A new bathroom could cost between £3,000 and £6,000, and will increase the value of your property by up to 6%.

As a general rule, try to maintain a ratio of at least one bathroom for every three bedrooms.

Extensions can also be a worthy investment; just make sure they add a decent amount of space, and don’t clash with the original construction.

Conservatories are a fairly common extension which can add up to 5% to the value of the property, as long as you don’t take up too much garden space building it.

Expect to pay between £4,000 and £10,000 depending on the design. For smaller conservatories you may not need planning permission, which can reduce costs.

Almost two thirds of garages in UK homes do not contain a car, so converting wasted garage space into living area can be a very cost effective way to add value to a property. You might not need planning permission for this, but you will still need to comply with building regulations.

Though garage space does not appeal to the majority of buyers, parking space does.

If the property allows, the cost of turning an unused front garden into a parking space large enough for two cars is around £10,000, and in areas where parking space is at a premium could return double that investment.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

Dos and Don'ts

Finally, here are a few quick tips that don’t quite fit into the above categories, but are worth knowing:

Do:

  • Keep original and interesting features. Memorable quirks like wooden beams, vaulted ceiling and frameless conservatories give the property character and make it stick in the minds of potential buyers.
  • Update the property with modern heating and double-glazing – just don’t get rid of those period windows!
  • Remove ugly or outdated features such as textured wallpaper and ceilings.
  • Get planning permission. It reassures potential buyers and costs around £300.

Don’t:

  • Convert the basement. It doesn’t appeal to a lot of buyers, costs upwards of £300 per square foot, and will require the organisation of multiple specialists.
  • Spend too much decorating and refurbishing bedrooms. While the number and size are important, a well-decorated bedroom is not likely to greatly raise the price or improve chances of a sale.
  • Spend too much on furniture in general. As long as furniture is in good condition and suits the property, that time and money is better spent elsewhere.
  • Outgrow your area. By pricing out most of the people looking in your area, you risk having a vacant property on your hands, or making a loss on the deal. Stay within the means of your target market.

Dos and Don’ts

Finally, here are a few quick tips that don’t quite fit into the above categories, but are worth knowing:

Do:

·         Keep original and interesting features. Memorable quirks like wooden beams, vaulted ceiling and frameless conservatories give the property character and make it stick in the minds of potential buyers.

·         Update the property with modern heating and double-glazing – just don’t get rid of those period windows!

·         Remove ugly or outdated features such as textured wallpaper and ceilings.

·         Get planning permission. It reassures potential buyers and costs around £300.

Don’t:

·         Convert the basement. It doesn’t appeal to a lot of buyers, costs upwards of £300 per square foot, and will require the organisation of multiple specialists.

·         Spend too much decorating and refurbishing bedrooms. While the number and size are important, a well-decorated bedroom is not likely to greatly raise the price or improve chances of a sale.

·         Spend too much on furniture in general. As long as furniture is in good condition and suits the property, that time and money is better spent elsewhere.

·         Outgrow your area. By pricing out most of the people looking in your area, you risk having a vacant property on your hands, or making a loss on the deal. Stay within the means of your target market.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

Choosing a student property

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

 If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings, as students are capable of inflicting significant wear and tear on a property. You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, ensure the landlord’s insurance has good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

Time-saving kitchen appliances such as a microwave and dishwasher add a lot of appeal to a student property.

Renting through a lettings agent rather than privately is generally a good idea as you will have the assurance of knowing your tenants have been referenced and credit checked, as well as reducing the amount of hands-on time you have to spend finding new tenants each year.

Students are usually pressured by their universities to find the next year’s accommodation before Christmas, but many savvy students know to avoid the higher prices of the ‘Christmas rush,’ so advertise your property throughout the year.

Outside the Property Market

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.

About the Author

Kam Dovedi is a leading UK property expert. Known for testing, taking underperforming strategies and accelerating them, and teaching people how to create their own personal wealth, he has become the 'go to' person for investors and developers that would like to create, grow and accelerate their property investing and developing. Having been a property investor and developer for over 28 years, and having successfully implemented (and still does implement) a range of strategies from: buy to lets, HMOs, Permitted Developments, New Builds and Commercial Conversion means he has built-up a significant Multi Million Pound Property Portfolio. Kam passes his information, knowledge, and experience to his mentees in the Premier Property Inner Circle and people who read resources and attend training by Premier Property Education.

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