Money talks: why it's not always cost-effective to renovate a rental home between tenants

My tenants are moving out, having found a place to buy, and once again I find myself wondering whether to do up the property before attempting to get anyone in to rent it.

It was last renovated when my husband and I bought it more than 12 years ago, and for a while now I’ve been thinking that the bathroom and kitchen could do with a makeover. Everything still functions perfectly, and the flat isn’t difficult to re-let, in fact, I rarely have to do more than a day of viewings, but I think both the bathroom and kitchen look dated.

Also, the last few couples have stayed for only a year each and I’m wondering if tenants might stick around longer if the flat is nicer. But it is not strictly necessary, says my husband.

I have form in wasting cash on renovations. I spent £10,000 on a new bathroom and a garden makeover in another flat, which didn’t add to its rental value. In fact, I struggled to find a tenant once the works were completed and ended up re-letting the property for about £50 a month less than I was getting previously. I don’t want to repeat my mistake, so this time I agree with my husband that we should “do the maths” first. We work out that new kitchen units and fixtures and fittings will cost at least £2,500, while tiles will add another £300 to the bill.

Labour will be about £8,000 and the work will take at least a month, maybe much longer, during which time we’ll be losing rent and we will have to pay the council tax during this period, too. Altogether, I reckon the job will set us back at least £14,000.

The question now is, how much extra rent could we earn once the renovations are complete? Working out what a property is worth isn’t an exact science because they’re all so different, but even if we were able to increase the rent to equal that of the most expensive flat in the area, we would earn only an extra £900 a year. That means that it would take more than 15 years to cover the cost of the renovations, by which time we would almost certainly need to replace the kitchen and bathroom again.

My husband points out that re-letting the flat only costs us about £500 a year, so it would still take 10 years to recover the makeover costs. Also, we both know there is a danger I will get carried away and bust the budget, as happened on the last flat renovation when I put underfloor heating in the bathroom that tenants neither wanted nor used, and created a super-cool garden that tenants like but aren’t willing to pay extra for.

I asked my existing tenants what they thought. They said I should leave the flat exactly as it is, as it’s by far the nicest they’ve ever rented and they wouldn’t want to change a thing. They are only leaving because they want a place of their own, they said. So that’s a relief. I have just saved myself a shed load of work and money.