5 tips on renovating an investment property for profit
Are you Looking for renovation ideas to increase rental income? Well, there are a lot of modifications you can do to your house to increase its liveability as well as yield, but where do you start?
Renovating an investment property is different from renovating your own home. Instead of renovating to meet your personal requirements, the aim is to meet market requirements and create a home that is neat, clean and functional. The trick, therefore, is to not over-capitalise on personal preferences but focus on practical additions that are on budget and meet the requirements of future tenants.
In this article, we are going to share top 5 tips for renovating your investment property for a handsome yield:
Create a neat first impression – A book is often judged by it’s cover and nailing the first impression can make a big difference to your investment return. So, mow that lawn, throw in some colourful plants, repair that fence, and add a fresh coat of paint to the exterior walls to make a neat impression on prospective tenants.
Once you have nailed the exteriors, give your home interiors a complete overhaul with a lick of inexpensive off-white paint that is easy on the eyes as well as your wallet. As most homes are viewed vacant, a neutral paint on the walls gives the impression of light and space and also makes it easier for people to imagine the home with their own furniture.
Renovating an investment property also calls for attention to minute details such as the fittings and fixtures in your house. Before you plan a viewing, make your house more attractive by repairing any broken faucets or taps, introducing new shower heads and door knobs, fixing the locks on doors and windows, and exchanging the grubby floor mat for a good quality carpet.
Build something extra – Everybody loves something extra and tenants are often ready to shell a lot more for little extras in a home that can make life more convenient.
Whether you swap your dining room for an extra bedroom or change the old laundry into a second bathroom or build an en-suite, constructing an extra room almost always offers the best return on investment.
According to experts, an additional bedroom will add the maximum value to your property followed by an extra bathroom and a parking space. According to Susan, a mortgage broker, if you have a big yard, you could also consider building a granny flat to boost your rental yield by allowing multiple tenants on the property.
Another interesting addition could be to install solar panels to maximise your rental returns. For less than $5,000, you can install a 5kw solar panel that is good for the environment and will drastically bring down your tenants’ power bill, allowing to charge a little extra in rental each week to recoup your costs and make some profit, too!
Overhaul your kitchen – Remodelling your kitchen or sprucing it up with a few thoughtful changes could instantly boost the value of your house. No, you needn’t splurge on expensive fittings. Instead, invest in inexpensive surfaces and functional equipment to maximise your ROI.
For example, installing a dishwasher would cost you under a thousand bucks but add a lot of functionality to your home in addition to lasting you for at least a decade.
Update your bathroom – We tend to spend a lot of time in the bathroom and spending some time and money to create a modern and aesthetic space could be a real value addition to any investment property. Inexpensive additions such as a recessed wall shelf for knick-knacks, a floating vanity for storage, and good quality tapware can make a lot of difference to the look and feel of your bathroom.
To get started, focus on replacing anything that makes the room look dated and create smart interiors using bright lights, large wall mirrors, and horizontal tiles to make the room look spacious and airy.
Create an outdoor entertaining area – A gorgeous gazebo or a tiny sit-out in the courtyard could increase the appeal of your house manifold. Tenants in all age groups are particularly fond of outdoor entertaining areas that can be used for organising get-togethers or to simply wind down after a long day at work. With a small investment, you can extend your verandah or tile a small space to create a sit-out or a play area that will be especially attractive to the family tenant market.
Getting the work done
Renovating an investment property can significantly boost your returns. However, it is important not to overcapitalise while renovating a property as that could negate any profits you are going to make in the future.
Some experts suggest not to spend any more on a room than the value of that room as a percentage of your property’s overall value. It is also imperative to consider the expected returns vis-à-vis the investment to evaluate the profitability of the project. If you plan to make some changes to your rental property, consider getting in touch with an appraiser to determine the value of your house before setting a budget for renovation. Regarding the funds, you can choose to avail a personal loan or take high-interest rate debt on your credit card, or, if you have made some repayments on your home, you could use the equity in your home to renovate. Currently, several banks are offering low rates and discounts to new borrowers and refinancing your home loan to a lower rate could save you a considerable sum of money in the long run. Speak to a mortgage broker to understand your options better.
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By Vidhu Bajaj,
HashChing Content Writer