VAT doesn't "care" about whether or not the activity is investment or trading, per se: an economic activity is an economic activity. Likewise, a business entity is a business entity, so the same VAT rules apply to a company as a business entity, as they do to an individual conducting an economic activity. (Usually). Having said that, first supply of a new-build resi would potentially be zero-rated, rather than exempt, the former allowing you to register and re-claim VAT. There are VAT specialists on the forum who would be able to guide you through how much of a pre-existing building has to be dropped (demolished) in order for there to be a new-build.
(But bear in mind that a supply of letting - even of a new build - would still be exempt: you have to sell or +21-year lease to get the 0% route so if you are intending to continue to let the property in the company after refurbishment, then VAT reclaims may not be available to you).
Yes, changing the number of overall dwellings up or down may result in access to a reduced rate of VAT of 5% for construction services - which may include the materials used by the builder to provide those services. Creating an entirely new dwelling either from scratch or within an extension may secure access to 0% for construction services.
If you spend £100k on improving a property, then decorating afterwards would normally also be a capital improvement. It could perhaps be argued that decorating unaffected rooms is no more than ordinary maintenance - but it may not be worth splitting hairs.
Beware the Construction Industry Scheme. HMRC may argue that a project of this scope will bring you within the scope of CIS. Which is frankly a total and utter pain. But on my reading of the legislation, they are probably right.