Four home improvement ideas that increase the value of buy-to-let properties

Your property's value could increase if you make renovations

We calculate the potential increase in your buy-to-let.

Your buy-to-let (BTL) property may increase in value by tens of thousands of pounds if you make certain renovations.

A survey of 1,000 landlords revealed that nearly nine out of ten (88%) have renovated at least one of their rental properties in the previous five years.

The Mortgage Works, a division of the Nationwide Building Society, which commissioned the survey, found that adding an extension or loft conversion could increase your property's value by 24%.

According to the Land Registry, the average English or Welsh home is worth 272,995. This would raise the asking price by 65,518.

The asking price of a BTL can increase by 13% with an additional bedroom, 8% with an additional bathroom, and 3% with a 10% increase in floor area.

A BTL can increase its value by twice as much as an owner-occupier property (4 percent) by adding a second bathroom.

"Location is still important to house values, but other factors, like the number of bedrooms and bathrooms, are also important to landlords," stated Nationwide senior economist Andrew Harvey.

"Upgrades that expand the property's size, like a loft conversion or addition, can increase rental income and add value. The "

The average amount of money spent on renovations by each of the 1,000 landlords was 88,000.

These four renovations can have a big impact on landlords' rental income, according to the research.

It can be increased by 26% with an addition or loft conversion, and by 12% with the addition of a double bedroom. A second bathroom increases rental value by 6% for a BTL property.

According to the study, improving a property's energy efficiency could lower rent for your tenants and raise the property's value.

"A more energy efficient BTL property (rated A or B) attracts a significant premium of 10.9 percent compared to a similar property rated D," Harvey clarified. The "

The most well-liked green upgrades are solar panels.

Of the 1,000 landlords polled, 18% had their homes made greener. Of these, 33 percent had boiler or pipe insulation installed, and 37 percent had solar panels installed. Electric car charging was installed in nearly one-third (32%).

According to Harvey, it's "likely" that some of these upgrades were done to help landlords comply with minimum energy efficiency standards (MEES). In order for rental properties to be rented out, they must have a minimum energy efficiency rating of E.

According to Nationwide, almost 1.5 million homes in England currently have solar panels installed, a growing number. This represents approximately 6% of all English homes, an increase from 3% in 2013.

With 1.8 million homesor 7% of all homes in Englandhaving a charging station, electric vehicle (EV) charging is also becoming more common.

How does BTL operate and what is it?

Buy-to-let (BTL) is when you buy a property with the intention of renting it out as a source of income. You can benefit from any capital gains if home prices increase.

Unless you can afford to pay for a house up front, you will have to take out a buy-to-let mortgage. These are like residential mortgages, but with some differences:

The amount you can borrow on a BTL mortgage is determined by comparing the cost of the mortgage to the amount of rent the property can produce.

In order to cover any rent shortfall, such as when the property is vacant, BTL mortgages occasionally require you to have a minimum salary.

BTL mortgages typically have higher interest rates because lenders consider them to be riskier than residential mortgages.

Usually, a minimum deposit of twenty to twenty-five percent is needed to purchase a property to rent.

Purchasing a property with the specific goal of renting it out should only be done if it is financially responsible, just like any other financial decision. The "rental yield" is therefore something you must take into account. A rental yield is considered good if it is more than 5%.

The rental yield is the return you get on the property and can be worked out by dividing the annual rental income by the purchase price, then multiplying this number by 100.

For instance, a gross yield of 5% is obtained by dividing the annual rent of 10,000 by the property you purchased for 200,000, then multiplying the result by 100.

You can consult a rental agent if you're unsure about how much rent to charge. There are also free-to-use calculators which guide you on how much rent you should charge based on your property type, location and demand, like Homeowners Alliances.

In a different guide, we examine the top locations for buy-to-let landlords.