How to calculate rebuild cost for a rental?

The rebuild cost is the total amount of money needed to completely reconstruct a property if it were destroyed by events such as a fire or flooding¹. This figure differs from your property's market value, which considers additional factors like location, transport links, and school catchment areas, rather than just the cost of constructing the building itself. 

Understanding the concept of rebuild cost can help landlords secure appropriate landlords buildings insurance coverage. This type of insurance covers the physical structure of your property, including fixtures and fittings, such as bathroom suites and fitted kitchen units. When obtaining a policy, you'll need to provide the rebuild cost. This determines your premium. An accurate figure can ensure sufficient coverage to rebuild your property in the event of catastrophic damage. 

Understanding your property’s rebuild cost can also help you make informed decisions about your overall property management strategy. For instance, many landlords use a percentage of their property’s rebuild cost to determine their emergency fund. In addition, landlords managing a portfolio might create separate emergency budgets to account for the specific rebuild risks of each property, rather than maintaining a single emergency fund.

Several factors can influence the cost of rebuilding a property, including² : 

• Type of property 
• Number of rooms (bedrooms, bathrooms, and reception rooms such as living and dining rooms) 
• Total floor area (across all storeys) 
• Wall and roof materials (costs increase with non-standard materials e.g. concrete instead of brick) 
• Presence of a basement, cellar, or swimming pool 
• Any extensions or conservatories 
• Garage size (and the number of cars it can accommodate) 
• Solar panels 
• Listed building status. 

The costs of construction materials, labour, and professional fees, such as architect fees, are also factored in.

The simplest way to determine your property's rebuild cost is by using an online calculator. There are several free options available, such as the one provided by the Building Cost Information Service (BCIS) (external link). 

When using a rebuild cost calculator, you'll input various details about your property, including: 

• The type of property 
• The approximate age of your property 
• How many rooms your property has 
• The external floor area (in square feet or metres) 
• The type of roof and floor. 

The calculator will then use this information to estimate your property's rebuild cost. 

Please note that rebuild calculators provide estimates only and may not be fully accurate. 

Alternatively, you can hire a chartered surveyor to calculate the rebuild cost. Although this service comes with a fee, it can provide a more detailed valuation . This option may be preferable if your home is a listed building or has non-standard features, which can cost more to rebuild.

What happens if I don’t get the value right?

If your rebuild estimate is too low, your buildings insurance may not provide sufficient coverage. In the event of a major incident, your insurance provider would be unable to cover the full rebuild cost. This might mean you have to pay the remaining amount yourself.  Alternatively, if you overestimate your rebuild cost, you could be overpaying for your buildings insurance.

Regularly reviewing your rebuild costs can help you budget effectively  and ensure you have the right level of buildings insurance coverage. The value can change over time, especially if you make modifications to your property, such as adding an extension or conservatory. The BCIS suggests that you do this at least every five years.