We are currently renovating 6 flats we purchased in Perivale. On the fourth or fifth visit, in between contemplating whether we should do a light refurb for now or go for a full fit out, the penny dropped to say why don’t we turn each property into a 2 bedroom. This simple procedure is expected to increase the rental income by 50%. It wasn’t obvious as these were smallish one bedrooms; however, each one had a square communal area which fed into the all the rooms. The kitchens were all in separate rooms. Therefore, with some clever reconfiguration we could have decently sized 2 bedroom flats with open plan kitchens.
I ran it by the corporate tenants we already have in mind to take the property, and as long as the minimum square footage is complied with, they are onboard.
A minor refurb here isn’t really appropriate as these properties haven’t been touched in a few decades.
The difference in cost is around £5K for a light refurb and around £25K for a full refurbishment.
With a light refurb, the incoming tenants would have continuously been reporting problems, and more importantly, the valuation would not have been to the level we would have liked.
We have now gained planning permission on the ground floor for 2 flats; we were looking to go back in for 3, however, we will be doing a U turn and sticking to the original plan.
This has been driven by the long term tenants we have in mind, the rent they will be paying for 2 four bedroom flats will far outweigh the rental which would have been achieved on three smaller units.
The aim is to finish the works as soon as possible, with a view of extracting our client’s money out and then having a constant cash flow.
There is, however, much much more which can be done to this property; and looking at the building it looks intuitively possible.
Namely by going two stories higher and also pushing out to the rear, again 2 more stories.
There is a reason why we will not be holding our breath for this to come through. For this to happen we would enter the uncertain and whimsical world of planning. There is no fixed time for this to occur and no certainty as to whether it would occur.
So, from an investment angle it is better to play the cards you have, and tidy the deal so your investment is out and is still producing for you on a monthly basis. Your deal is now stabilised; and you are not dependent on the planning coming through. You can then look to cash in further.
The tenants too have been chosen with a second peak of COVID19 in mind. It is anticipated that rental should still be coming in.