Kensington refurbishment reaps 50% rental increase

We regularly advise clients on how keeping your property up to date or doing periodical refurbishments can increase the rental and sale value of their property. But even we were surprised when the rental on a local landlord’s one bedroom flat in Kensington achieved a staggering 50% increase of £200 per week. The rental income rose from £400 per week over the last 3 years to £600 per week following the refurbishment. The flat itself is a little gem in a prime Central London location, tucked away on the first floor of a period building above our lettings branch in Thackeray Street, W8. Ideally situated moments from Kensington High Street and Underground, plus Kensington Palace and Hyde Park, the location couldn’t be better. Our client, a local homeowner, had owned the property for ten years, throughout which we had been continually instructed. The landlord has enjoyed virtually no void periods and has had to spend very little spent on the property.

Creating a rental home that appeals to professionals

We recognised that a rental income of £400 per week is low for prime central London so we made some suggestions on how increase the rental yield from the property. We advised on a full refurbishment, explaining how this would not only attract a higher calibre, long-term tenant and increase the rental income but would also add to the capital value of the property. Our client could see that the figures made sense and agreed to the works. So in December 2014, three months before the tenant was due to leave, we appointed a design team from our sister company, a professional interiors business and they put together a new design and quote which was agreed by our client so that we were able to schedule the works to commence immediately after the tenant had vacated.

Refurbishing a rental property – the priorities

The design team took the property back to its bare bones, stripping it right down to the brickwork. The first job was to open up the kitchen to make a larger space, with room for a large fridge/freezer, oven and dishwasher. Previously the kitchen had been cramped and poorly designed with only room for a small fridge and no dishwasher (which most tenants do request). They then fitted stylish, new kitchen cabinets with integrated appliances to create a light, contemporary feel. Solid oak flooring was fitted throughout the apartment; virtually all our tenant’s request wood flooring as it is smart, modern and easy to keep clean and the lease allowed it. The team also fitted Acoustilay underfloor soundproofing; essential to keep other tenants in the building happy and untroubled by noisy footsteps above them. New sash windows, internal doors, skirting boards and wardrobes were also fitted.

Make sure the rental apartment has broad tenant appeal

A new, luxury bathroom was installed and we were faced with the decision of whether to install a wet room with shower only, as the landlord had originally requested or a bath with a shower over. Again our experience in lettings came to the fore. It’s important to make sure that a rental property appeals to as many potential tenants as possible. As the landlord, you won’t be living in the property. So you may prefer to shower only – but not everyone does. We advised our client to broaden the property’s appeal by opting for a bath with a power shower and glass screen. This didn’t compromise the available space and will retain more value than a property with only a shower in the room.

Furnished to let

Next, it was time to put in some furnishings and dress the property. Firstly an accent wall was created in the bedroom with designer wallpaper to give it a real wow effect. The design team chose high quality furnishings in light, neutral colours; the key with a rental property is to create a smart, contemporary feel that will appeal to all tenants. Furnishings should be durable and hard-wearing so they will withstand the wear and tear of a rental property and continue to look smart for some time.

A substantial increase in rental income

The project was finished on time, with completion in a record six weeks. The property let immediately for £600 per week. Our landlord has seen his rental yield increase from 2.9% to 3.9%, resulting in the refurbishment work paying for itself extremely quickly. It’s fair to say a rental yield of nearly 4% in prime central London is a real achievement. The new tenant has taken a straight two year tenancy in addition, meaning fewer void periods and a reduction in the outgoings that would be incurred when re-letting the property.

Capital value increased

There’s even more good news in that refurbishment costs can be deducted from the capital gains that our landlord would make on the property if he decided to sell. We understand he has no intention of selling! The apartment has risen substantially in value, from a sales valuation of £700,000 in November 2014 to its post-refurbishment value now of £800,000. Add to that the rental increase of £200 per week and our landlord is a very happy investor. To read more about property investment in Kensington, read our recent blog here.

If you have owned a property for a few years and would like to discuss how a refurbishment could increase its value, please contact our Head of Lettings, Marc von Grundherr on 020 7938 3522. Alternatively, to instantly find out the current rental value of your property, try our free calculator here.