From time to time, it might be prudent to renovate one or more of your investment properties.
But renovating an investment property is nothing like completing a passion project on the home you live in. It’s purely a numbers game.
You need to ask yourself the following questions before taking the plunge.
Is your renovation actually worth it? Will it add value to your investment property? Will it improve your cashflow? Could a few tweaks be enough to put extra money in your pockets?
Talk to the professional
Your property manager is your first port of call. If it is their idea that you renovate, they will explain why. If it’s your idea, they may be able to save you from making a costly mistake with some good advice.
Remember, your property manager has the knowledge in the rental market in the geographical area where your asset is located.
They will be able to tell you what similar local properties with new kitchens or bathrooms are renting for and even suggest some ideas for how to do the work in the most cost efficient way. If a kitchen upgrade is going to add a few thousand extra a year in asking rent, then that’s great. If you’re spending the money for no extra rent, that’s a bad investment.
Stick to the jobs that matter
Kitchens and bathrooms are the most obvious and important jobs for landlords to consider as those are the places that tenants will need to use the most and will want to be up to date, clean and maintainable.
There’s no point adding a marble staircase to a property where the tenants are paying a few hundred dollars a week and likely to move out after a year or two anyway.
And you wouldn’t spend $100,000 to add a granny flat if the property was in an area where there was no demand for that kind of rental.
Every project you undertake should be practical, prudent and should meet the market.
If you could transform an additional wet space into an extra bathroom, for example, or turn another space into an extra bedroom, you are improving the property’s fundamentals and would be able to instantly charge more money in rent.
Practical and functional
Tenants are often transient. They don’t expect to live in your property forever and therefore can accept that the property just needs to serve their purpose with everything in working order. So no need to agonise over the patterns of the tiles or rigging up fairy lights in the garden.
They won’t want something that looks nice if it means more work maintaining the place as part of their lease. And they may not share your opinion on what makes a nice furnishing either.
Detaching yourself emotionally from the property is the key to investing, whether it’s location, renovation, or decoration. It’s an investment. If you buy shares in a bank, you don’t then go down to the bank’s head office and start trying to renovate it…why would you? It’s all about how the numbers stack up.
What about repairs?
If your investment property is in need of repairs, you are bound by law to rectify the issues.
Again, your property manager will be able to get quotes for repairs from a number of different local tradies who they know are reliable.
If your property manager is switched on, they will also use the opportunity to have a tradie check for other issues while they are there, to avoid doubling up on callout fees in the future. If they are fixing a leaking tap, they could also check the hot water system, plus issue a water certificate all on the same single callout fee.
Want to find the right property manager? Speak to Blink Property, a team of Property Asset Managers, to see how they can help bring value to your investment properties.
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