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Optimising Returns via Refurbishment and Conversions

Professional portfolio landlord and letting agent Adam Lawrence comments

This is the third article in a series of four - if you haven’t read the others, by way of a reminder I am a property investor who primarily buys, refurbishes and holds/refinances, and I buy comparatively cheap suburban stock in secondary locations throughout the UK. I have bought over 200 units in the past eight years - with the majority of those purchases concentrated in the last four years.

This third part in the series focuses on the third critical constituent of any property strategy in my opinion - making properties into the best you can, or optimising them, often via the means of altering them physically. This article does go beyond the scope of just building works, and might better be described as ‘optimisation’, but I have preferred to stick with the industry jargon. I have already discussed supply pipelines in the first article - where you get your deals from - and also the financing of these deals in last month’s article, so refurbishment is a natural progression.

In the natural lifespan of an investment purchase, it makes logical sense that first you would find a deal, and then move to purchase it (or at least, take control of it - which is worth further discussion when talking about this topic). Once in control of it through legal ownership or lease/contract/option, making the asset into the best it can be in terms of performance is the next step that most people take for obvious reasons.

To those skilled in the building trade, and many who gravitate towards property investment have a background in either a trade, or as a surveyor of some kind, this may seem somewhat simplistic. But if you look from the outside in, you might think that this isn’t hard - you have a house, most houses look pretty much the same - you perhaps put in a new kitchen and bathroom, you might have more robust structural works to do, perhaps extensions, damp courses and roofs - but there aren’t significant complexities. I would disagree with that and hopefully this article will demonstrate why I believe refurbishment is worth considering as my third strategic pillar of four.

It is also worth remembering a point that is often made about large projects, undertaken by government - the data shows that the average government project in recent history has gone 66% over in terms of time taken and 75% over budget. There can be political reasons why prices are initially quoted in a low-ball fashion, but not much political capital in saying something will happen far faster than the time it takes. If it can be got so wrong at a very large scale, it makes sense to focus on it at an even smaller scale.

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