Four out of five (81%) landlords upgrade each new rental property they add to their portfolio, according to Paragon, improving overall property standards in the private rented sector.

And they expect to see capital and rental gains as a result of their investment.

The buy-to-let lender’s survey of over 500 landlords found that they expect to see a 19.8% increase in the property’s value after completing upgrade work. And a 16.5% increase in expected rental income.

Over a fifth (22%) spend over £25,000, with 18% investing between £10,000 and £20,000 in property upgrades.

Prefer to refurb

The research found that 40% of landlords prefer to purchase property in need of refurbishment, with 21% opting for properties that are ready for tenants to move into.

The private rented sector has experienced a significant improvement in the standard of homes over the past 15 years, correlating with the growth of buy-to-let finance, which Paragon’s new report, Raising the standards of privately rented property, examines.

In 2008, 44% of homes in the sector were defined as non-decent according to the Government’s English Housing Survey. Today, that figure stands at 23%.

The addition of good quality homes has diluted the presence of poorer stock; In 2008, 1.8 million privately rented homes were classed as decent, rising to 3.3 million in 2021 – an 83% increase. There has also been a reduction in the number of properties classed as non-decent – falling from 1.4 million to 990,000, a 29% reduction.

Richard Rowntree, Paragon Bank’s managing director of mortgages, said: “Landlords have helped improve standards across the private rented sector over the past 15 years and the upgrading of stock they purchase is central to that.

“The vast majority of landlords will look to upgrade each new property to boost the capital value and the potential rental income. However, they also do this out of a genuine desire to provide a good quality home to their tenants.”

Motivation for improvements

The vast majority (83%) of landlords said they improve their property to ensure they are providing a good quality home to tenants, with 82% doing so to make the property more attractive to tenants.

Two thirds (66%) upgrade property to improve rental income and 57% look to increase the capital value. Meanwhile, nearly half (47%) upgrade property for energy efficiency reasons.

Painting and decorating is the most common improvement that landlords typically make (95%) followed by installation of a new bathroom or kitchen (78%) and boiler (also 78%). Six in 10 (60%) also add new windows, whilst a third of landlords (36%) also make improvements to gardens.