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Tips for Renovating Your Investment Property

July 10, 2012

Whether you’ve just purchased an investment property to be renovated or thinking of refurbishing one of your existing properties, keep in mind that that it’s best to approach all aspects of property investment as a business project. These tips will guide you through the process.

First, Check the Regulations

The first step is always to check whether the renovations you’re planning are permitted by your local council’s planning laws. You may also need to obtain building approval. If you’re still in the purchasing stage, your conveyancing professional may be able to help with any general questions that you may have.

Do you need building approval? Building approvals are granted by building certifiers who confirm that the renovations or extensions will be in-line with building regulations
Do you need planning approval? Planning approval comes from your local area council. These are designed to make sure any changes you make don’t negatively impact your neighbourhood.

How Much Extra Rent will it Generate?

Is the renovation or addition likely to generate extra rental income? You may have to do some research to find out.

  • If you use a property manager, ask for their opinion on the issue.
  • Check online for similar properties in the area and compare rental yields
  • Use property reports where relevant

Even if, in your mind, there’s a major drawback to some part of your property, if the changes are unlikely to generate extra rent or add other real business benefits, then you should rethink your plans. Be sure that you’re not seeking these renovations purely on an emotional basis.

Will it Attract Better Tenants?

Will these renovations help your property attract better tenants? Even if the additions are unlikely to result in a substantial growth in rental yields, a renovation may be justified if you’re likely to have lower vacancy rates for the property.

  • Lower vacancy rates
  • Wider pool of potential tenants
  • Longer tenancy terms
  • The Five Per Cent Rule

There’s a five per cent rule that can be loosely applied.

  • The five per cent rule, which suggest that landlords should spend five per cent or less of their property value on renovations, simply means that you shouldn’t overcapitalise on additions.
  • Renovations tend to present significant expenditure amounts when compared with less considerable costs associated with purchasing property such as conveyancing fees.

Consider your renovation project in the context of funding and other balancing factors. If it’ll cost you over five per cent but you can use existing equity to fund the renovation which will raise rental yields and increase occupancy rates, then your renovation project may be worth pursuing.

Structural versus Cosmetic Improvements

Both structural and cosmetic improvements may help boost rental yields as well as re-sale values. Full renovations tend to be larger projects that require more commitment and financial outlays. Lower cost cosmetic improvements can be just as high impact.

  • Kitchen facelift – replacing cupboard and pantry doors
  • Repainting – a simple coat of new paint can make a lot of difference
  • Cleaning the carpet and windows – having these professionally cleaned can do wonders to your property

Keeping Re-Sale in Mind

Whatever renovation you opt for, a boost to re-sale values will be more likely than not. While your immediate goal is to improve your investment property for rent, tailor your renovations with their impact on re-sale values in mind.

 

We at Conveyancing Solutions provide excellent service to every customer. Please call us @ (02) 9387 2111 or (02) 9572 7400 to get a quote!

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