Renovate your investment property and get higher rent and increase the capital value and the equity in the property.
Renovating your investment property is a great way to increase your wealth. It is important to ensure the improvements are carried out in a professional manner and are based on good design and structure . It is also important to understand the financial implications to prevent over-capitalising or paying too much for the materials and labour.
Renovation Benefits to Rental Income and General Tenant Satisfaction
While renovation costs will require an initial outlay upfront, the benefit of improving a rental property can secure quality tenants for longer leasing terms avoiding re-letting costs and wear and tear from multiple tenant turnover.
Tenants will pay more rent for a property which has an improved kitchen or bathroom and adding extra bedroom or bathroom will also enable a property to leased at a better price.
Tenants in the rental market of the Northern Beaches and lower North Shore expect at the very least a clean and modern property before paying high rentals. Sometimes it can be as simple as a good interior colour scheme, new paint and new carpet of re-stained floor boards to make the property more appealing.
Renovation to Create more Equity in the Property
Renovating your investment property and adding value can allow you to borrow against the higher value of the renovated property to make your next investment.
Increase the Value and Enhance the Presentation for Sale
Should you wish to sell your investment property or home, spending money and time on enhancing the property’s presentation is paramount to achieving the highest possible sale price. The detail is important and you don’t want to give prospective buyer any reason to reduce their offer.
Some Points Worth Noting before Renovating your Property
You need to be prudent about renovations. The colour scheme in your investment may not be to your liking, but it makes financial sense to replace or change it if it will stop the unit sitting vacant and additionally increase the rent you can charge.
Make a ‘cost-benefit analysis’ of any prospective renovations. For example if a kitchen renovation is going to cost $15,000, and you don’t have the funds available, you will need borrow and pay interest. The benefit is a rental increase of $20 per week so therefore it would not be viable.
It is easy to ‘overcapitalise’ by spending too much on interior design and fixtures and fittings. When replacing taps for instance, for an investment property you do not want a high expense however cheap products may not last.
It is also better to keep your colour scheme neutral.
Investing in renovations can help you boost your income from higher rents as well as help secure fantastic tenants who will love your property like it’s their own.
The art of renovating is to know which renovations are more likely to increase the value of your investment property and bring in higher rental yields. This is where experience is important as there are many examples of over-capitalising or below par finished products.
Sometimes making a few small changes may appease the current tenants who may be willing to pay the extra rent and stay in a property. It’s really important to listen to what your tenants want or it could end up costing you more in the future.
This is where a good Property Management Agent who has time and is willing to listen is valuable.
Blue Pacific Property’s aim is to help property investors make the most out of their property investments in a stress free way. We are the one-stop-shop for all your property investment needs.