Two thirds of landlords have refurbished their properties in the last year, with credit cards being the most common method of borrowing used to finance the projects.
Landlords typically spent £13,000 on the renovations to each home, with the most popular work being repainting, fitting new carpets or flooring and installing new kitchens and bathrooms.
Some undertook bigger projects such as kitchen extensions and loft conversions, along with building a home or garden office to capitalise on the current demand for more space.
According to Shawbrook Bank, which undertook the survey of landlords as part a report into the Changing Face of Buy-to-Let, the trend for refurbishing rental homes has been driven by the pandemic.
It said the last year had provided an opportunity for landlords to carry out improvements because more had experienced gaps between tenancies.
Indeed, 14% of landlords said they chose to renovate because they had an extended period between their previous and incoming tenants. However, the majority of landlords were undertaking necessary work to their property. A third (34%) said that their property needed a renovation.
Short-term borrowing
When it came to borrowing methods, 60% used their personal savings or investments, and 12% tapped into a recent inheritance or windfall. Two in 10 used a credit card and a further 12% used a second charge mortgage in order to finance the refurbishments.
John Eastgate, MD, property finance at Shawbrook Bank, warned landlords who needed to borrow money to make improvements about the potential pitfalls of using unsecured short-term finance.
“Ensuring that properties are up to a good standard and meet the current demands of tenants is a mark of a responsible landlord, however, it’s important that landlords are not putting themselves at risk financially in order to undertake this work,” he said.
“Unsecured short-term finance products like credit cards can come with high interest rates which could leave landlords with substantial debt.
“There are other finance options available to landlords which can often be less well-known but a suitable alternative to short-term credit or using personal savings.
“For example, a second charge mortgage can be a good option for landlords looking to refurbish. We’d encourage any landlord considering a renovation to speak to their broker about their options before putting it on a credit card.
“Renovating your properties can help attract more tenants, secure higher rents and boost the value of the property, but don’t do so at the expense of your own financial security.”
