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Helpful Advice

Renting out your Renovation

Renting out your Renovation

By Peter Barry

Renting out your renovated property will provide you with a regular monthly income for the duration that you own it and will hopefully result in a tidy little nest egg when you eventually come to sell – assuming that prices continue to creep upwards. However, it’s often tempting to cut and run as soon as the paint has dried and the builders have packed away their tools.
When you’ve invested a lot of money in a property (purchase price, fees, mortgage repayments, refurbishment costs, utilities etc), the temptation is to recoup your costs, plus your profit, and move the money into your next project. But you should never make the assumption that your money will automatically work harder for you if it’s in your hand or your bank account: keeping it tied up in a newly refurbished property could be the best way to watch your investment grow over time.

Rental yield
If you can achieve a good rental yield from your property and can attract reliable tenants, then it’s definitely worth considering holding onto your property. Anything above a 5% yield is considered to be good, so it’s worth speaking to your estate agent to see what the property could realistically achieve in monthly rental. You might find that your type of property is in demand and can be put on the rental market at the ceiling price for the local area.

Talking of local area, this should be considered before you come to a final decision about renting or selling your refurbished property. Often, the sales and rental markets in an area can be very different, with tenants and prospective buyers coming to the table with a varying list of requirements. If your property is in an area that’s high on the rental wish-list but which is languishing when it comes to serious buyers, that’s another good reason to consider renting it out – at least until the sales market becomes buoyant again.

Cash flow
This is probably the most important consideration – do you need the equity in order to pay off existing loans? Will you still be able to invest in more properties if you leave money tied up in this one? If this is a one-off project, with the aim of building up an easily accessible lump sum, then the scales are weighed in favour of selling; if however, you’re looking to build up a property portfolio, it’s worth biding your time and keeping rent-friendly properties on your books.