The 12 Month Rule With Refurbishments

I’m always asked, “as a general rule of thumb, how much should I spend on refurbishments”?

It’s a good question and one that’s got a really simple answer. You should spend as much as it will take you to pay it back within 12 months or less using your profit rent (plus however much you’ve got in your contingency or reserve fund.

There are a couple of reasons for this:

1 It means that you will be completing the refurb to the standard required for the rental income you are commanding.

2. You won’t be over-committing if the market changes within 12 months; so you know you will be able to afford it.

So, if your property is looking a little tried use this as a quick guide. Set your budget first- 12 months profit rent + your contingency plan and maintenance reserve fund for that property and then instruct your contractor to stay inside the budget.

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