Improving your property through renovations can greatly increase its value and generate higher rental income or sale prices. But not all renovations provide a good return on investment.
The key is budgeting properly for the renovation costs and choosing improvements that appeal to buyers and renters. Follow this guide to maximise your profit when renovating your London property.
Why Renovate Your Property?
“A well-executed renovation by a property renovator can completely transform a tired, dated property into a highly desirable and updated home,” says Mr. Smith, contractor of London Renovation Company. There are several financial incentives driving homeowners and investors to take on property renovations:
- Increase property value: An appraiser can determine how much value specific renovations will add. Kitchen and bathroom redos often provide 60-70% or more ROI.
- Generate higher rental income: Updating fixtures, finishes and appliances allows you to charge top market rental rates.
- Improve living conditions: Renovations like new windows, HVAC systems, and insulation make a property more comfortable.
- Boost curb appeal: Exterior facelifts with landscaping, paint or pavers help a property stand out.
How Much Does a Profitable Renovation Cost?
The average minor kitchen remodel costs $26,214 and bathrooms about $20,420 according to Remodeling Magazine. However, costs vary greatly based on factors like:
- Project scope: Are you doing a full gut job or a minor cosmetic refresh?
- Materials selected: Granite countertops, hardwood floors and high-end appliances cost more.
- Location: Labor and materials cost more in some markets.
- Size of project: Larger spaces take more time, supplies and labour.
Be sure to budget for contingency costs as unexpected issues can arise once walls are opened up. Get detailed scopes of work from contractors before finalising the budget.
Types of Renovation Costs
- Materials: appliances, fixtures, lumber, tile, etc.
- Labor: contractor fees, subcontractors like electricians
- Permitting fees
- Architecture/design fees if using pros
Choosing the Most Profitable Renovations
The renovations providing the highest ROI centre around kitchens and bathrooms. But smaller projects can also pack a punch when selling or renting.
“Kitchens and bathrooms sell homes, so focus there if your goal is maximising resale value,” advises Sara Thompson, Interior Designer London at Design and Build.
According to real estate agents, updated kitchens rank as the #1 renovation providing great resale returns. By investing in new appliances, countertops and cabinets, you can recoup over 70% at sale. Buyers favour:
- Open concept kitchens
- Spacious kitchen islands
- High-end appliances like SubZero, Viking
- Quartz or granite countertops
- White or grey cabinets
After kitchen updates, bathroom redos provide the next highest resale value – with 60% or more ROI. Key upgrades buyers look for:
- Soaking tubs and separate glass showers
- Double vanities
- Tile flooring and backsplashes
- Recessed lighting
- Heated floors
Smaller Curb Appeal Projects
While less expensive than kitchens and baths, good landscaping and exterior facelifts attract buyers.
Curb Appeal Renovations
- Fresh exterior paint
- New front door
- Paver walkways
- Outdoor lighting
- Yard landscaping with trees, shrubs
These projects cost far less but still boost perceived value.
Working With Contractors
It’s best to hire contractors to tackle the renovations unless you’re highly skilled. Here are tips for finding the right pro:
- Get 3+ detailed estimates
- Verify licenses and insurance
- Vet online reviews and talk to past clients
- Clearly define project scope and timeline expectations upfront
Having an experienced general contractor to manage the overall renovation is wise. They can schedule electricians, plumbers and other speciality subs at the right phases.
Try utilizing HomeAdvisor or Houzz to read reviews of local property renovators before selecting.
Financing Your Profitable Renovation
With proper planning, you can fund your next value-boosting renovation through:
- Savings accounts
- Home equity line of credit
- Cash-out mortgage refinance
- Renovation loans from 15-25 years
If you don’t have enough cash savings, explore low-interest renovation loan options. Compare terms and rates carefully as financing costs eat into ROI.
Recouping Your Investment
To fully capitalise on your costly renovation after improving your property, be strategic in setting rental rates and list prices.
Consult real estate agents on comparable area rental and sale prices for updated properties. Set rates higher per square foot since your asset now outpaces outdated peers.
Also, maximise exposure of your property’s new modern style by hiring professional photographers and staging if selling. The beautiful upgrades only translate to top dollar if properly marketed.
With smart budgeting, project selection and financing, your next property renovation can provide a major value boost without breaking the bank. Just focus on the projects providing the highest returns.
*This is a collaborative post. For further information please refer to my disclosure page.
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