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What landlords need to know about the rise in property improvements

Contrary to much of the UK’s media narrative, conditions of privately rented homes have vastly improved recently. In fact, figures indicate that there has been an impressive 21% decrease in ‘non-decent’ PRS properties across Britain in the last decade- championing the efforts made by landlords. It’s true that social housing may be facing its challenges, however, we must not disregard the efforts made by many in the private sector. In this blog, we’ll explore why landlords have increased the standards of their properties and answer the question -  how do property improvements benefit landlords?

Private rented sector improvements - the facts. 

Private rental sector properties have come a long way in the last 15 years! Investment from landlords has led to larger, more energy-efficient dwellings and contemporary designs. The 2023 report by Paragon Banking Group has highlighted a number of interesting improvement statistics in their survey of over 500 landlords:

  • ‘Non-decent’ privately rented homes have fallen from 44% in 2008 to 23% in 2023. 
  • The number of privately rented homes with an EPC rating of between A and C has risen by 165% since 2011.
  • 81% of landlords upgrade every property they add to their portfolio. 
  • The average size of a home in the PRS has increased over the past decade to 75 m², up from 74.1 m². 

5 reasons why landlords are improving the quality of their properties

Landlords are choosing to improve the quality of their properties for various reasons. In the survey by Paragon, landlords have outlined 5 key reasons why they have chosen to invest more in property upgrades. 

1. 83% of landlords want to provide good quality homes for their tenants. 

Most landlords have the well-being of their tenants in mind, prioritising providing quality homes to individuals and families nationwide.

2. 82% of landlords want to make their properties more appealing to tenants 

Appealing properties can reduce void periods, increase rental income, and create a stable tenant base for long-term lets. 

3. 66% of landlords want to increase their rental income 

As a landlord, you'll want to be sure that your hard work pays off - and one of the best ways to guarantee success is making smart investments into your property. Upgrades are an easy way to turn potential profits into long-term income!

4. 58% of landlords want to increase capital value 

As a landlord, investing in your property can have major benefits. Not only will you increase the sale price of your asset when it’s time to part with it, but doing so could also help offset existing debts and create additional capital value! Make sure to keep reading - our next section covers why this is an excellent decision for landlords.

5. 47% of landlords want to make their property more efficient

After years of speculation, it’s likely the government will announce that rented properties must meet a minimum energy rating of C by 2025. With this looming deadline in mind and rising energy costs across Britain, many landlords are already making the necessary improvements to ensure they remain compliant with EPC laws while providing tenants with more efficient homes.

Why landlords are increasing their capital value

Although money isn't the only motivation for landlords, financial gain from property investment is still a significant factor in building wealth. Landlords have much to benefit from by increasing their capital value and taking advantage of the returns available to them such as:

  • Higher resale value: Increasing the capital of a property can increase its resale value, which can generate a higher return on investment when the property is sold.

  • Refinancing: Increasing a property's capital can make it easier to secure financing or refinance existing debt.

  • Renovations and upgrades: Increasing the capital of a property can provide funds for renovations and upgrades that can attract higher-paying tenants or increase the property's overall value.

  • Future investment opportunities: Increasing a property's capital can provide funds for future investment opportunities, such as acquiring additional properties or expanding existing ones.

It’s clear from the figures that not all landlords are money-motivated, in-fact in most cases it’s not their number one priority. However, we must not disregard the importance of financial gain from property investment, and landlords have a lot to gain when it comes to growing capital value.

How landlords are funding improvements 

In the survey, hundreds of landlords were asked the same question: how do they finance property improvements? Keep reading as we reveal the three primary methods.

1. Property cashflow 

Property cash flow refers to the amount of money generated from a rental property after all the operating expenses have been paid. A staggering 75% of survey respondents chose this as a way to fund property improvements. 

2. Savings 

For landlords looking to refurbish a property, using their savings is the second most popular choice - 51% opting for this option over taking out short-term finance options. Saving in advance seems to be an attractive prospect as it allows them to avoid paying interest rates on financing.

3. Releasing equity from another property 

Many landlords are finding that releasing equity from another property is a more advantageous option than taking out personal loans, as it often carries lower interest rates. In fact, this method of obtaining additional funds has been voted one of the choices for almost one-quarter of landlords in the survey.

Undoubtedly, the rise in property improvements shows that landlords are working harder than ever before to provide quality housing, especially as energy performance requirements changes loom. If you’d like to book an EPC or learn more about how you can keep your property updated, get in touch today.

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