Should I extend my Nottingham buy-to-let?

There’s been a lot of press recently regarding the rise of buy-to-lets and particularly how to maximise the income from property investments. Clearly, if you are considering getting into the game, it’s going to be vital that there’s enough profit in it to make the commitment worthwhile. This led me to wonder whether extending your property investment would affect the rental income enough in the long term to achieve a decent return.

Having more available space is generally thought to be consistent with better quality accommodation, which homeowners and tenants are usually prepared to pay for. On average, the figures suggest that if you added an additional bedroom to a two bed terraced, it will add 10% to the value of the property. Likewise, adding a further bedroom to a three bed terraced will add 9% to the value.

However, before you rush off to the planning department, there are some important considerations to think about.  What would be the cost of making that extra bedroom? The average value of a terraced house in Nottingham is currently £105,100 whilst the average value of a semi detached house is £139,700, therefore to make any money, you would need to keep the costs of your extension between £14,668 and £19,984.

This led me to wonder how much the number of bedrooms affected rental prices and “rent-ability”. I.e. would the construction of an extra bedroom be worth the hassle and expense? Interestingly below, you will see that whilst bedrooms do have an obvious effect on the rent, it’s generally not worth getting excited and calling your local builder.

• ·        19.6% of the one bed properties on the market to rent in Nottingham have a tenant with an average rent of £488 per month.
• ·         28.9% of the two bed properties on the market to rent in Nottingham have a tenant with an average rent of £626 per month.
• ·         32.2% of the three bed properties on the market to rent in Nottingham have a tenant with an average rent of £714 per month.
• ·         10% of the four bed properties on the market to rent in Nottingham have a tenant with an average rent of £840 per month.

So, let’s say you did spend £19k on extending your 2 bed terraced to achieve a third bedroom - and you found a tenant to rent it straight away. Hypothetically, If house prices stayed roughly in line with inflation, you would on average, achieve an extra £134 per month -  meaning that it would take roughly 85 years to make the money back again from the rent alone. Of course, the capital value of the house is likely to rise, but there are never any guarantees in the property market.

If you are a Nottingham landlord and are wondering how to achieve the most from your investment, there is one great tip that will cost a lot less than adding additional bedrooms.  Try sprucing up the exterior, emulsion in all the rooms and install some fresh carpets and curtains. The property will rent faster and your tenants will be happier, meaning you’ll hopefully achieve a long and happy tenancy.

For more advice on the Nottingham Property Market, email me on jaclyn.bartlett @centrickproperty.co.uk