The question of whether or not to renovate your investment property is one you will have to consider if you have had an investment property for a while and need to give it a facelift.
You’ll also need to think about this if you are looking to buy one, but are wondering how much work it will need – and how much to spend before leasing it to a tenant.
A renovated and freshly painted property will appeal to a wider pool of tenants. What’s more, many of your costs will be tax deductible. In saying that, renovating a rental is different to renovating your own home.
Some things are more important than others. As with any property, lots of light, a good layout and good storage are all essential. When you are looking for an investment property, know that these three factors will all make it appealing to both tenants and buyers, should you come to sell. But don’t worry too much about designer finishes or personal details. Your investment property should be a blank canvas for your tenants to make their own.
What to renovate and how much to spend
Ideally, you shouldn’t be spending more than ten percent of your investment property’s value on renovations. Remember, you don’t want to overcapitalise. As you want to appeal to the widest possible range of tenants, think about neutral finishes over individuality.
Here are the areas you should focus on:
Kitchen: New benchtops and appliances will greatly improve a dated kitchen, if you don’t want to rip it out completely. Painting or replacing kitchen cupboard doors will also update your kitchen without a huge outlay of money and effort. Ensure there is plenty of storage and bench space, as kitchens are the most hardworking room in a home. Most prospective tenants will be looking for a functional kitchen.
Pull-out drawers are a better use of space than deep cupboards. And open shelves can add much-needed storage without too much expense.
Skip the integrated appliances in a rental — you want things that can be removed and replaced quickly, should the dishwasher or fridge suddenly break. Always buy the standard size for appliances so you can buy a new one easily.
Bathroom: Again, consider some new fixtures, such as tapware, basin, and toilet. Regrouting old tiles will also make a big difference. Or try porcelain panels as splashbacks — they will protect against mould.
Flooring: Fresh, neutral carpets or repolished floorboards will make a huge difference to a dated apartment. You can also find a cost-effective vinyl or linoleum solution which looks great and stands up to a lot of foot traffic.
Other areas to focus on
Details: Freshly painted off-white walls, new curtains and blinds, and new light fittings are all worth investing in to make your property look well-cared for and inviting to tenants.
Storage: some integrated storage can make a big difference to a property. Think about adding some built-in joinery to bedrooms, should your budget allow for it.
In a high-end area, it may be worth spending a little more on luxury finishes to boost your rental earnings when you renovate your investment property. Talk to your agent about what tenants in a particular area expect, and what the market is like. Then plan your renovation and budget accordingly.
Financing your renovations
Some renovation costs are tax deductible over the course of your investment property — see our blog on tax deductions here. But you should ideally have money put aside for your renovations when you purchase the property. It’s not a great idea to have your property untenanted while you save up to renovate, nor is it a good idea to put all the costs onto your credit card. Always have a realistic idea of costs, and then add on ten per cent for peace of mind.
Talk to us
As experienced property managers, we know what tenants expect in inner Sydney. Talk to us if you have an investment property, or are thinking of buying one, and would like to know about how to renovate your investment property. We also offer property management services, should you want to hand over your property to experienced real estate professionals.