Before the works
| Monthly rent | £1,650 |
|---|---|
| Collected annual rent at 95% occupancy | £18,810 |
| Management fee at 10% | £1,881 |
| Service charge and repairs provision | £3,500 |
| Mortgage interest | £7,500 |
| Normal pre-tax annual cash flow | £5,929 |
Year 5: the refurbishment
| Works cost | £25,000 |
|---|---|
| Time without rent | 4 months |
| Rent collected during the year | £13,200 |
| Management fee | £1,320 |
| Service charge and routine repairs | £2,500 |
| Mortgage interest | £7,500 |
| Year 5 cash flow including works | −£23,120 |
Doing nothing would have produced £5,929 in this simplified year. The refurbishment therefore creates a Year 5 cash-flow disadvantage of £29,049—not merely the £25,000 invoice.
From Year 6: higher rent
| New monthly rent | £2,050 |
|---|---|
| Collected annual rent at 95% occupancy | £23,370 |
| Management fee at 10% | £2,337 |
| Service charge and repairs provision | £3,500 |
| Mortgage interest | £7,500 |
| Post-works annual cash flow | £10,033 |
| Annual improvement over doing nothing | £4,104 |
Ignoring tax, financing changes and the time value of money, the additional annual cash flow recovers the Year 5 disadvantage in approximately 7.1 years—during Year 12.
What if the property is sold in Year 10?
By the end of Year 10, the refurbished case has generated approximately £8,529 less cumulative operating cash than doing nothing. If the works also add £20,000 to the Year 10 sale price, the additional proceeds after 2% selling costs would be £19,600.
That conclusion depends heavily on the assumed £20,000 sale-value uplift. If a buyer pays no premium for the works, the refurbishment remains behind at the Year 10 exit.
Inflation can help—or hurt
A rent uplift stated five years in advance should be separated from ordinary rental growth. Construction costs may also rise before the works begin. Model the refurbishment as a specific Year 5 adjustment, while applying different annual growth rates to rent and recurring costs.
How much extra rent or sale value is needed—and by when—to recover the works cost and the rent lost while the property is empty?
The works cost, rental uplift and possible sale-value uplift are illustrative assumptions. Actual outcomes may differ.