Landlords upgrade property to enjoy rental and capital gains

Standards in privately rented property are being boosted with four in five landlords upgrading each rental home they purchase, a survey reveals.

The findings from Paragon Bank found that 81% of landlords will improve every property they buy.

And 22% of them will invest more than £25,000 when upgrading, with 18% spending between £10,000 and £20,000.

On average, a landlord will see a 19.8% increase in the property’s value after work has been completed – and see a 16.5% boost in rental income.

‘Landlords have helped improve standards across the private rented sector’

Paragon’s managing director of mortgages, Richard Rowntree, said: “Landlords have helped improve standards across the private rented sector over the past 15 years and the upgrading of stock they purchase is central to that.

“The vast majority of landlords will look to upgrade each new property to boost the capital value and the potential rental income.

“However, they also do this out of a genuine desire to provide a good quality home to their tenants.”

Landlords prefer to purchase property that needs refurbishing

The bank’s research found that 40% of landlords prefer to purchase property that needs refurbishing, with 21% opting for properties that are ready for tenants to move into.

The findings highlight that PRS standards have improved over the last 15 years and in 2008, 44% of rental homes were defined as non-decent in the English Housing Survey.

Today, that figure stands at 23%.

Paragon also says that the growing number of quality homes has significantly reduced poorer quality homes – in 2008, there were 1.8 million rented homes classed as decent.

By 2021, that number had risen to 3.3 million – an 83% increase.

The number of properties classed as non-decent – fell from 1.4 million to 990,000, a 29% reduction.

Reasons why landlords improve a rental property

The reasons why landlords improve a rental property include offering a quality home for tenants (83%), making a home more attractive to tenants (82%), while 66% want to improve the home for better rent and 57% want to boost its capital value.

Paragon also says that 47% of landlords are upgrading a property for energy efficiency reasons.

Painting and decorating is the most common improvement that landlords typically make (95%), followed by installation of a new bathroom or kitchen (78%) and boiler (also 78%).

Six in 10 (60%) also add new windows, whilst a third of landlords (36%) also make improvements to gardens.

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