How do we get properties above market value?
If you’ve bought an investment property for below market value, congratulations on getting a great deal, but it does mean there will be a challenge ahead.
A purchase price below market value means chances are it may need some work to get it above market value when it comes to rent.
Because it is an investment asset, you don’t want to break the bank by installing a marble birdbath or home cinema. You may not want to go all out on a new kitchen or bathroom either, but there are some minor changes you can make that will have a major effect on your property’s appeal to tenants.
You may not know where to start, but that’s where a good property manager comes in handy with experience and advice.
Let’s get one thing straight, if your property has shabby carpet or paint peeling off walls, you are not adding value by re-carpeting and re-painting, you are simply getting the property to an acceptable state to meet market expectations. Presentation, or lack thereof, is the main reason properties don’t rent quickly. If people are visiting your property and have the wrong kind of wow factor reaction, you need to take action. Re-carpeting every seven years and re-painting regularly is the least you can do to keep your property up to standard.
Also, think about the climate. Some of the properties under Blink Property management are in Queensland, where it’s HOT and you need proper ventilation! So unless you have a ceiling fan in every room and fly screens on every external door and window, a lot of tenants won’t even turn up to your open house inspection. That’s the bare minimum, but really you should have air conditioning too, at least in the living room.
Now that you are at least worth market value, there are a few things you can do to get maximum benefit from minimum expenditure.
Let’s go back to presentation. Kitchens and bathrooms are two of the most important features of a property. If they look tired or outdated, it will turn people off.
Think about it, you go into a bathroom with a shower curtain and water swelling marks on the vanity, plus old orangey-brown tiles…are you going to want to rent that property? Probably not.
But a few tweaks will make a big difference. Replace the shower curtain with a glass door, spray paint the tiles white and replace the vanity and you will have a bathroom that looks completely different, without having to spend tens of thousands of dollars on a new one.
The same applies for a kitchen. You may not have $20,000 for a new one, but you may have $5000 you can spend on some new appliances. A slick new fridge and dishwasher will change the look and feel of a kitchen and also mean tenants don’t have to buy their own and move them in and out of the property.
In Qld, if your investment property is individually metered, you can charge tenants for water usage and it’s classed as income.
All you need is a valid Waterwise Certificate, which shows your property meets the mandated standard for water efficiency. Some people are put off by spending several hundred dollars to get that certificate, but you might spend $1000 on water in the year otherwise, so it’s a no-brainer.
Note however that this is not an option for strata properties.
Some investors get too caught up in their preconceived strategy to raise the rent every year and ignore the fact the market is dictating otherwise.
The market has slowed recently, with more vacant properties for tenants to choose from. Meanwhile, there are development projects happening all over Australia, which means your property is suddenly competing with an influx of brand new apartments boasting ducted air conditioning, balconies and modern features.
Extra supply of properties puts downward pressure on asking rents, which makes having good long term tenants extra valuable. In a tough market, a long term lease at the right price can be as good as adding value. There’s no point holding out for an extra $10 a week, if your property is empty for weeks or months.