When acquiring a new buy-to-let property it can be very tempting to make major changes and invest a significant amount of additional capital. The key to any successful buy-to-let investment is to “make the most” of what is there already by trying to find a balance between additional investment and long-term rental returns. There is no point investing a large amount of additional capital if there is a rental ceiling in the area which could curtail your plans to increase the rent to retrieve your additional investment.
There are a number of ways in which landlords have been known to invest into areas which offer little or no additional value to the property and can in some circumstances be seen as a waste of money.
Renovations
When looking at any buy-to-let investment you need to consider those which will acquire additional investment to bring them up to standard and those which are “ready to go” from the moment a deal is completed. There is nothing wrong in investing additional capital into renovations as long as you can see the path to additional value in the medium to longer term. You need to know your market and to know what potential tenants will expect from a landlord. Do they really want the latest and greatest designs? Do they really need that extension through into the back garden?
The best way to get an angle on the local rental market is to visit properties which are available for rent and see exactly how they are set out. Ask your local estate agent whether there is a “rental ceiling” because this should be a major part of your final decision to acquire a buy-to-let property. There are obviously some properties which will require significant renovations before they are “suitable” to put on the open market but investing in major renovations for the sake of it is not the most sensible way to obtain the best return on your investment.
Furniture
Many rental properties are sold with relatively dated furniture which quite rightly a new landlord would plan to replace as soon as possible. Unfortunately some landlords can “go over the top” with regards to their investment in furniture and other appliances often forgetting that these are the depreciating assets. This means that at some point they will need to be replaced requiring yet another injection of additional capital, a cost which can soon add up. The initial investment in new furniture and appliances can also have a serious impact upon a landlord’s cash flow in the short to medium term but there are other options that not only improve cash flow but also provide substantial tax incentives too.
An alternative is looking at leased furniture which is perfect for the private rental industry because it significantly reduces upfront payments allowing landlords to pay a monthly fee while leasing the furniture. In some situations it can also allow landlords access to quality furniture which they may not have been able to attain if all payments were required upfront. Many landlords fall into the trap of investing heavily in new furniture and appliances from day one often forgetting about the impact on cash flow and the fact that these are depreciating assets. There is one company in particular by the name of Landlord Smart which offers such a service in the UK, a service which is becoming very popular.
Garden landscaping
Curb appeal is a very popular subject when it comes to renting properties because ultimately you can have the best property on the street but first impressions will ultimately decide whether a potential tenant visits your property or not. Therefore, it is not difficult to understand why some relatively inexperienced landlords will go all out to improve the curb appeal with an investment in areas such as garden landscaping. Very often this investment is undertaken without looking too far ahead because a relatively major garden landscaping overhaul can be expensive in the initial stage and it can be expensive to maintain going forward.
As with all areas of investment in the buy-to-let market you need to find a balance between improving the curb appeal of a rental property while also keeping additional investment to a minimum. In many ways potential tenants do not want a “fancy garden” and one which is generally tidy, low maintenance and easy on the eye, is likely to be as popular as one which has everything. There is no reason why a general gardener or the landlord themselves cannot undertake the bulk of the work to tidy up the exterior garden thereby reducing any additional investment.
Personalised decor
Everybody has an opinion on the buy-to-let industry and in particular what type of decor is required. Some inexperienced landlords feel that the “neutral colours” which are more commonplace across the industry are boring and show a lack of vision. As a consequence, some of these inexperienced landlords often decide to go for a personalised decor to put their own particular “stamp” on a property. In theory there is nothing wrong with this but many new tenants would prefer to have a “blank canvas” allowing them to put their own stamp on a property. Let’s not forget, it is the tenants who will actually be living in the property and many will plan to stay for the longer term.
If, as a first-time landlord, you do opt for personalised decor you can bet your bottom dollar that you will alienate at least part of your potential tenant pool. What some see as an eye-catching and well decorated property may be seen by others as loud and not to their particular taste. At the end of the day as a landlord you want to appeal to as large a market as possible which will hopefully allow you to play potential tenants against each other to gain the best rate. Opting for personalised decor is a very dangerous route to go down because not only will you alienate at least part of your potential tenant pool but what long-term value does this offer? Décor only adds ‘perceived value’ and will depreciate, so keep this in mind when deciding whether to stay neutral or not.
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