Renovating your rental property on a budget: Why it matters & expert budgeting tips
When renovating a rental property, every landlord has a budget – and it’s usually a pretty strict one. While you want your tenants to live somewhere nice, running a rental property is a business, and protecting your bottom line is always important.
There are many reasons to renovate – from keeping on top of maintenance to staying attractive and high-value on the rental market. So, what are the tricks of the trade to renovate a rental property the right way?
In this article, we’ll share expert tips on how to renovate a rental property as a landlord, how to set a good renovation budget, and why renovating/budgeting matters when renovating as a landlord.
Why budget renovations matter for landlords
Landlord costs are increasing, but it’s still worth investing in property renovations during and in between tenancies. With the right renovations, landlords can benefit from:
- Increased rental value
- Improved tenant satisfaction and retention
- More relevancy/competitiveness in the local rental market
Yet balancing costs with quality during renovations is important. You want to spend enough on long-lasting work that gives the results you need, but not too much that you risk the bottom line.
How to renovate a rental property on a budget
Renovating a rental property on a budget is a good idea. You can be more flexible with a home you plan to flip or live in, but with a rental property, every expense matters.
Careful planning, budgeting, and investment are needed, and here are our tips to get you there.
1. Set a realistic renovation budget
Cheap and cheerful isn’t always the answer, but neither is blowing a huge amount on rental renovations. You want to be realistic about how much you’re going to spend, but you don’t want to shave too much off profits.
To set a budget for renovations:
Assess current rental income and expected ROI
There are different strategies you can use to set your renovation budget as a landlord. For example, you can use the 50% rule, where you allocate half of your total rental income to fund expenses (including renovations), while the other 50% remains profit. Or you can set aside an amount per square foot (like £1 per square foot).
Or you can work out specifically how much profit you’d like to make and give yourself a renovation limit. For example, if you earn £6,000 in profit each year, agree to £1,000 per annum on renovations.
Or work out what return you’ll get from investing. For example, if you renovate an outdated kitchen, will this increase your rental value? How long will it take to earn a profit from the investment?
Prioritise urgent repairs vs. aesthetic upgrades
Consider what really needs attention when setting your budget, and what can wait. For example, if the kitchen is outdated, but everything works, this may not be a priority. But if the windows are deteriorating or the boiler is in disrepair, these are more urgent fixes.
Consider listing every repair, assigning rough costs, and ranking what’s more important to help you decide.
Plan for unexpected costs with a contingency fund
Every landlord should plan for the worst. When setting a budget, give yourself a contingency fund in case things cost more than you planned.
Adding 10-20% to your renovation budget for contingency spend can ensure you stay in profit. Generally, it’s a good idea to allocate more contingency (up to 20%) the more unknown or complex the project, and less (10-15%) the simpler the task.
2. Focus on high-impact, low-cost improvements
Use your budget wisely by undertaking cheap improvements that make a big difference. For example, think about what tenants notice the most about a property, and what small changes modernise the space.
You could do things like:
- Applying fresh paint in neutral colours: A little paint goes a long way. Sprucing up every room with fresh paint doesn’t cost much, but it can make a property feel newer, cleaner, and more modern.
- Adding modern light fixtures and energy-efficient bulbs: Switching from a pendant light with a lamp shade to a ceiling light with multiple bulbs makes a property look brighter and more modern.
- Install affordable but durable flooring: Choose laminate or luxury vinyl, which looks nice and lasts, but costs less. Or opt for cheap carpets with expensive underlay so it feels softer and lasts longer.
- Make simple kitchen upgrades: Renovating a kitchen is expensive, but changing handles, adding panelled splashbacks, or updating the worktop costs less, but goes a long way.
- Refresh the bathroom: New paint, new taps, a quick regrout, and replacing the silicone can make a bathroom look cleaner and newer.
A good tip is to spend more on things you don’t want to fix or replace frequently, like a good boiler or durable kitchen worktop. Then buy cheap for the less important stuff, like fixtures, taps, door handles, and even carpets.
When it’s more cost-effective, fix things instead of replacing them. For example, you could deep clean carpets instead of ordering new ones, or clean up faucets to bring back their shine.
3. DIY where possible (and legal)
To save budget, consider where you can tackle easy wins in the property yourself. For example, you may be able to DIY things like:
- Painting the walls
- Completing minor repairs
- Tidying gardens
- Installing new flooring (like laminate or luxury vinyl)
- Replacing fixtures and fittings (like door handles or showerheads)
Remember, some renovations must be completed by a certified professional in a rental property, and you’ll need the paperwork to prove it.
For example, gas, plumbing, electrical, and structural work must have certifiable sign-offs for your rental to be considered legal and safe.
When completing these works, keep your records somewhere safe and easy to find. For example, you can upload them to a property management software, like Rentila.
4. Source materials and labour cost-effectively
When hiring a professional is unavoidable, consider how you can save on material and labour costs. Some businesses offer discounts for landlords, and it’s worth shopping around to find the best deal.
Top tips to save money include:
- Shopping at discount builders’ merchants or reclaim yards
- Buying materials yourself online rather than via your labourer
- Taking advantage of seasonal sales and clearance deals
- Getting multiple quotes from local tradespeople
- Asking your network for recommendations
5. Maximise energy efficiency for long-term savings
New energy-efficiency rules for landlords will likely lead to rental properties requiring an EPC rating of C or higher from 2030. Renovating your rental now with energy efficiency in mind could save money later down the line.
For example, draught-proofing windows and doors, upgrading insulation (loft and walls), installing smart thermostats, opting for energy-efficient appliances, and switching to LED lighting.
These changes could also save on the costs of bills, which may increase demand for your property or make it easier to fill vacancies. Reducing expenses can also help manage the costs of voids in between tenancies.
There are even reports that suggest improving energy efficiency can increase the value of your rental property, helping it sell for more when listing it on the open market.
6. Use technology to plan and track renovations
The best way to renovate on a budget is to stay on top of how much you’re spending and how much you still need to spend. Using technology, like a property management software, is a big help.
For example, you can use software to:
- Log renovation expenses
- Track outgoings and total spend
- Monitor income and profits
- Set reminders for future maintenance tasks
- Store before-and-after photos and contractor details
Learn more about using property management software to improve rental management.
7. Consider tenant needs and expectations
Prioritising tenant-first renovations is worth considering. Rental properties that meet the needs of your target market can improve rental yields. Happy tenants may stay for longer (reducing marketing fees), and a well-staged property can shorten voids between tenancies.
Consider adding features that appeal to your ideal tenant. For example:
- One or two-bedroom flats: Consider installing built-in workspaces, wardrobes, or storage units.
- HMOs/flat shares: A well-designed kitchen or a good water heating system can go a long way in keeping tenants satisfied.
- Family homes: Consider easy-to-clean or scratch-resistant surfaces, secure garden fencing, and usable garden space.
Choosing hardwearing, low-maintenance materials is also a good idea – for you and your tenants. For example, installing laminate over hardwood, and using marble-effect kitchen countertops instead of real marble.
This reduces the maintenance your tenants have to do, and can reduce the need for you to frequently invest in new materials or appliances.
8. Evaluate the return on investment
The luxury of renovating a rental instead of a residential home is that you can see fast returns on the added value – provided you stay on top of the finances and the anticipated return on investment.
When planning future renovations – for this property or another – it’s good to assess the ROI, so you know what to spend money on in the future.
To evaluate your return on investment:
- Compare increased rental value vs. renovation spend: Evaluate the impact of your renovations through the increased rental rates. Work out how quickly you’ve made your money back.
- Review tenant feedback and demand post-upgrade: Has tenant satisfaction increased? Has turnover reduced? How quickly do you fill tenancies, and what is the demand like?
- Use your property management software to track yield: Investing in your property should lead to cost benefits – including yield improvements – later down the line. Use your property management software to track and monitor yield improvements over time.
Read more about tracking key performance indicators as a landlord (and how to use property management software to benefit profits).
FAQs
How often should landlords renovate?
There isn’t a specific rule, but as a landlord, you’re expected to stay on top of maintaining the property and keeping it looking nice.
Most landlords repaint every 3-5 years, and change carpets/floors every 10 years, depending on wear. Bigger renovations, like upgrading the kitchen or bathroom, can be done less frequently, such as every 10 years.
However, refreshing these rooms routinely and choosing a hardwearing, future-proofed kitchen to begin with can reduce the need for major renovation work every decade.
What’s most important is that landlords stay on top of maintenance duties and practice the rule that when things break, they should be fixed.
How often do landlords have to paint?
Guidance from tenancy deposit schemes suggests that landlords should re-paint a property every 3-5 years. However, it’s good practice to repaint in between every new tenancy or before listing the rental on the market.
It’s often a low-cost way to spruce up the rental and make it look fresh, appealing, and ready to move into. In turn, this can increase demand and help you fill vacancies quickly.
How much should landlords spend on renovating?
It depends. What works for one property will be completely different for another. Investing in the essentials is key, and you should try to invest to save (or increase profits) where you can.
A well-cited strategy is to budget 1% of the property’s market value annually for renovations, but you can tailor how much you spend based on your income and profit margins.
Things to remember: Renovating a rental on a budget
- Start by setting a realistic renovation budget, one that takes into account the top priorities/repairs, the added value you’ll get, and the immediate impact on the years’ profits.
- Find ways to save money and cut costs, from getting multiple quotes from contractors to DIY-ing (where possible and legal).
- Invest in renovations wisely, thinking about how to get the most out of your upgrades and whether they’ll save you/your tenants money in the future (e.g., via long-lasting or energy-efficient renovations).
- Use technology like property management software to track spend, plan work, monitor income, and evaluate the financial returns on investment. Explore the benefits of property management software.
- Prioritise what your tenants want as best as you can when planning and designing renovations. This can reduce turnover rates, minimise voids, increase demand, and even bump up your rental yield.
