Renovating for profit

Renovations that add re-sale value to a property don’t always also add rental value as tenants may have different, short-term needs than people planning to live in an owner-occupier for a long time.

A brand-new swimming pool with solar heating and a matching marble birdbath may be lovely to have, but will it add a proportionate amount of value to the property? And will it get you a hundred dollars extra a week in rent? Not likely.

When you have an investment property, it’s good to focus on the types of renovations that appeal to both renters and future owners. And when you are investing at the affordable end of the market, like most of our Blink landlords, it’s the simple things that will make a difference and keep you in the game for equity and cash flow.

Here are a few fundamentals to consider.

Air: The other important type of ‘flow’

Australia has a diverse climate. In most parts of the country, it can either be stinking hot, freezing cold, or an inconvenient mixture of both. Having air conditioning, or at least quality ceiling fans, is as important in a hot, humid climate as having mesh on your fly screens.

Our property managers have found that air conditioning is one of the first things prospective tenants ask for. In some cases, they won’t even look at a place without it, so give them what they want. Smaller split system air conditioning can be installed relatively cheaply and you can expect to make the money back in extra rent before too long. And in most cases it will be tax deductible.

My kitchen rules

A kitchen makeover is one of those basic jobs that will generally add value to a property. If you want to sell your asset, a new kitchen could pay for itself and then some in resale value.

But if you plan to hold onto your property and don’t want to spend up big on a brand new kitchen, consider some of the things within it that could be desirable for tenants. Installing a nice fridge and dishwasher and including it in the lease will please renters, because they won’t have to worry about buying their own when they move in and taking them with them when their lease ends. Less hassle equals more cash.

A standard fridge and dishwasher can be bought and installed for not much more than $1000 each and can be expected to each last up to 12 years on average. So even if they score you an extra $10 a week in rent, it will still be worth it.

Outside the kitchen, installing built-in wardrobes in bedrooms will add storage space, which is highly regarded by tenants and purchasers, while throwing in an internet connection is also valuable in the age of working from home and streaming TV shows.

Great conversion rates

Much like the kitchen, the humble bathroom is a very important room for Australians. A full facelift is a great bang for buck renovation for value adding, but if you don’t want to go the whole hog, there are other tricks to try.

Say you have an existing wet area, such as an internal laundry, convert it so it also doubles as a second bathroom. This renovation can be tricky as the plumbing may need to be redone, but once you can say a property has two bathrooms, its rental and overall value will increase significantly.

Sunny side up

Australia is basically one big solar panel and advancements made in the space mean the price of having solar power installed in your property, plus the ongoing costs have decreased significantly in recent years.

Future purchasers and renters will surely be impressed to find out their energy bills will be negligible thanks to your solar power, especially with the rise and rise of bill prices to contend with.

For a nationwide average of just over $5000, including the federal government’s STC rebate (a financial incentive issued in the form of Small-scale Technology Certificates) you can have a 5kW solar panel system installed at your investment property.

An average Australian solar system will nowadays pay for itself in savings within 6 years, after which energy bills will no longer be a concern.

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