Refurbish, rent and hold investors
How to calculate the full cost of a buy, refurbish, rent project
Refurbish, rent and hold investors
To calculate the full cost of a buy, refurbish, rent project, add together six groups of cost: the purchase (price, stamp duty, legal and survey fees), the works, a contingency, the cost of finance while the property is being worked on, the holding costs while it is empty, and the costs of letting and refinancing. Then set that total against when rent will actually start and how much you expect to borrow at the end. The figure that matters most is usually the cash you will have left in the property once any refinance completes, and that depends on a lender's valuation, which nobody can promise in advance.
Below is a checklist you can work through, followed by a full illustrative budget.
Most project budgets start with two numbers: what you pay for the property and what the builder quotes. Both matter, but on a typical project they leave out a meaningful share of the cash you need. Finance costs, months of council tax and insurance on an empty property, certificates, letting fees and refinance fees all arrive before the first rent payment. If they are not in the budget, they come out of your reserves.
Work in stages, in the order the money leaves your account.
Contingency is a budget line, not an afterthought. Older properties often reveal problems once walls and floors are opened up: damp, wiring, joists, drainage. There is no official percentage. Many investors use between 10% and 20% of the works cost and go higher where the survey flagged unknowns. Whatever figure you choose, make sure the cash is genuinely available.
If you buy with cash, your finance cost is the return you give up on that money. If you borrow, list every charge:
Rates, fees and terms vary by lender and change often. Get a written quote, and speak to a mortgage broker or FCA-authorised adviser before relying on any figure.
These run from completion until a tenant moves in:
Income is the other half of the budget. Map out a timeline: completion, works, snagging, marketing, referencing, move-in. Rent usually starts weeks or months after the builders leave. Until then, every month adds holding and finance costs and earns nothing.
When you set the rent figure, base it on comparable properties that are let now, in a similar condition, in the same area. Avoid assuming a premium for a high-spec finish unless local evidence supports it.
Many buy, refurbish, rent investors plan to refinance onto a buy-to-let mortgage based on the property's value after the works. How much you can borrow depends on:
So the cash left in after refinancing is an estimate with a range, not a fixed number. Budget for a lower valuation as well as your expected one.
The figures below are fictional and for illustration only. They are not a forecast for any property or market.
Assumptions
Project budget
| Cost group | Item | Amount |
|---|---|---|
| Purchase | Purchase price | £150,000 |
| SDLT (higher rates) | £8,000 | |
| Legal fees and searches | £1,800 | |
| Building survey | £600 | |
| Purchase subtotal | £160,400 | |
| Finance | Bridging interest (£105,000 × 0.85% × 6 months) | £5,355 |
| Arrangement, valuation, legal and broker fees | £4,350 | |
| Finance subtotal | £9,705 | |
| Works | Builder's quote (incl. VAT) | £30,000 |
| Building control and certificates | £1,200 | |
| Contingency (15% of quote) | £4,500 | |
| Works subtotal | £35,700 | |
| Holding | Council tax, insurance, utilities (5 months × £305) | £1,525 |
| Letting | Tenant-find fee | £600 |
| Refinance | Arrangement, valuation, legal, broker fees | £3,300 |
| Total project cost | £211,230 |
Notice that everything other than the purchase price, the builder's quote and the contingency adds £26,730: SDLT, legal and survey fees, certificates, finance, holding, letting and refinance costs.
Cash left in after refinancing: two valuation scenarios
Both assume a lender who will lend 75% of the valuation once the property is let. The refinance repays the bridging loan and rolled-up interest. Cash left in = total project cost minus the new mortgage.
| Scenario A | Scenario B | |
|---|---|---|
| Lender's valuation (assumed, not predicted) | £200,000 | £185,000 |
| New mortgage at 75% loan-to-value | £150,000 | £138,750 |
| Cash left in the property | £61,230 | £72,480 |
If the contingency is not spent, cash left in falls by up to £4,500. If the lender will only lend against the purchase price plus works, or the valuation comes in lower, more cash stays in. In this example, 75% of the £150,000 purchase price would be £112,500, leaving £98,730 in.
Income check (Scenario A)
A thin monthly figure like this is common once the mortgage is refinanced to release cash. Whether it suits you depends on your goals, your reserves and your tax position. If you need help with the cash flow side, see how to calculate rental cash flow.
Work through this before you make an offer, and again before you commit to the builder.
Purchase
Works
Finance
Holding
Letting and refinance
Income
Tax treatment
The full project cost is not the same as the costs you can deduct from rental income. HMRC's Property Income Manual (PIM2030), which applies across the UK, says the cost of refurbishing or repairing a property bought in a derelict or run-down state is generally capital. Factors include whether the property could be let before the work and whether the price reflected its condition. Capital costs are not deducted from rent, but some may be taken into account when you sell. Keep every invoice itemised by job so an adviser can separate repairs from improvements.
Once you have your checklist totals, run the numbers through the PROXERA deal analyser in BRRR mode. It shows total project cost, the refinance amount and the cash left in the deal after refinancing, alongside monthly cash flow. Put your contingency inside the refurb cost and include finance and holding costs, then rerun it at a lower valuation to see the range. When the project finishes, use the same figures to compare your forecast with the finished rental.
Run your project through the deal analyser in BRRR mode
For more on planning and holding refurbished rentals, see the refurbish, rent and hold guide. If you are still deciding whether buy-to-let fits your plans, read is buy-to-let worth it in 2026.
Free online tool. Buy-to-let, HMO, BRRR, short-term let and rent-to-rent modes.
There is no official figure. Many investors use a percentage of the works budget, often somewhere between 10% and 20%, and go higher for older properties, structural work or anything not yet opened up. The right number depends on how complete your survey and builder's quote are. Treat contingency as money you must have available, not as money you hope not to spend.
Building work is normally standard-rated, but HMRC's VAT Notice 708 (UK-wide) allows a reduced 5% rate for renovating or altering residential premises that have not been lived in for 2 years or more, if the conditions in section 8 are met. Evidence of the empty period can include council tax or electoral roll records, or a letter from the council's empty property officer. Ask your builder and a tax adviser before you budget on the reduced rate.
Not always. HMRC's Property Income Manual (PIM2030) says the cost of refurbishing or repairing a property bought in a derelict or run-down state is generally capital, not a deductible repair, particularly if it could not be let until the work was done or the price reflected its condition. Capital costs may still count when you sell, for Capital Gains Tax. Keep itemised invoices and take advice from a tax professional.
Budget for a range, not a single figure. The new mortgage depends on a lender's valuation, its maximum loan-to-value and its own criteria, including how long you must have owned the property. Plan so the project still works for you if the valuation comes in at or near your total cost.
Information, not advice. This article is general information. It is not a personal recommendation and does not constitute financial, investment, mortgage, tax or legal advice.
