TOP TIPS: How to best renovate an investment property
The decision to renovate an investment property can improve your rental yield and manufacture some equity.
It can also help to attract and satisfy tenants - reducing the time the property is vacant and loss of rent.
Principal of RE/MAX Precision Scott Mackey outlines how renovations can be done cost-effectively and help bring the most equity when renovating an investment property.
Understanding the target market is the key
When renovating an investment property it is essential to know your target market of tenants. Targeting your renovation towards your ideal tenants will ensure you attract more interest. Increasing demand may enable you to charge at the higher end of market rent for the area.
A cosmetic renovation should be functional and appealing
Don't go over the top with your renovation.
The main focus should be making the property look appealing and functional.
Choosing neutral colours and a more classic, basic style will attract a wider range of tenants. It will also protect your property from looking outdated ten years down the track.
A new bathroom or kitchen can add the most value
The rooms that have the biggest impact are the kitchen and bathroom.
A newly renovated kitchen and bathroom can add capital value to your property as well as make it more attractive to tenants.
Be cost-effective and choose value over luxury
A kitchen can be spruced up by replacing the benchtop and sink. If the internal cabinets are in good condition them keep them.
Choose to spray paint the doors with gloss and replace the handles instead.
This would be a much cheaper and quicker option but it would still hold the potential for greater rent.
Regular maintenance can prevent against spending big on major repairs later
Preventative maintenance is important to ensure no major jobs need doing further down the track.
For instance, redoing silicone between sinks and splashbacks can prevent mould and wood rot.
It is better to attack problems before they happen - spending thousands of dollars fixing things won't add to the value of your property. Prevention is better than cure.
How much should you spend?
As a guide you shouldn't spend more than 7% to 8% of the property's current value on a cosmetic renovation, and no more than 3% on the bathroom and kitchen.
The most important thing to remember is to do it strategically. The aim is to add value and increase cash flow - not make it look good just for the sake of it.
You don't want to be doing it if it's only going to be giving you an extra $5 a week.