Adding value to an investment property can be a fine balancing act. On one hand, there are many things that can be done to improve the property, enabling more rent to be charged or for it to attract a better sale price, but on the other good investing is about making the numbers work; it’s important not to spend too much and over-capitalise.
Investment properties increase in value over time through inflation, due to house price rises, infrastructure development in the area, a shortage of rental properties or increased demand in the area, or when work is put in to improve the property. Of these, the easiest for the average investor to control is the last. A bit of work on the house or apartment can dramatically increase its appeal. It is not hard to make a rental property stand out: those that are in good condition and well-tended will attract interest – allowing you to charge more rent.
Before you begin any work, get in touch with property managers in the area and find out what tenants are looking for, and which houses are renting quickly. If there is a high demand for properties with aircon systems, alarms, heat pumps, or dishwashers, find out how much extra rent would be able to be charged after the installation of each – some improvements may quickly pay for themselves. When buying y last property, it had aircon but the seller said it had not worked for years. However, I was able to fix it with a few cheap parts sold online. My excellent tenants told me that was what attracted them to the property as it is unusual to find rental properties with aircon. A good property manager should also be able to advise on what aspects of the property will appeal to would-be tenants and put them off – then you can prioritise what work is to be done and when.
If you are going to spend more than a couple of thousand dollars on doing the property up, get a designer’s help. They will be able to advise on what will have the most impact, and how renovation work can be done cheaply.
Start at the gate and consider the property’s street appeal. Tenants who can take pride in their homes are more likely to treat the house well – and be there long-term. Replace the letterbox if it’s needed, keep trees trimmed and the fence painted. If there is space and regulations allow, pave off an area for off-street parking or have a carport installed.
Give the house a coat of paint. Often, if the walls are in reasonable condition and a light colour, you can get away with one coat. A light, neutral shade throughout will lift the house and make it seem clean and fresh. It will also be easy for tenants to add their own character with their furniture or paintings on the walls. Curtains can be replaced cheaply and make a big difference to the look of the room. If there are timber floorboards, take up the carpet and have them polished – it is a one-off cost but will stop you having to replace the carpet every few years, or have it cleaned between tenants.
Don’t overlook the importance of cleanliness. In between tenants give the house a deep clean, or pay a professional to do it. Treat mould and give the house a good airing. Make sure it feels warm, dry and healthy and maximise the amount of natural light coming in. If a property starts off clean, it is more likely to stay that way. Clear out belongings left under the house or in the garage by previous tenants. Install insulation and a heat pump, if there is space in the budget.
Work on the garden – it should have some space for outdoor entertaining, whether it is a deck, paved barbecue area or lawn space. Emphasise any indoor-outdoor flow. Keep the garden low-maintenance but attractive – if there are plants that need pruning or special attention, pay a gardener to tend to them a couple of times a year. Install a trellis or plant trees around the perimeter of the property if more privacy is needed. If there are small patches of grass that are likely to get worn down by foot traffic or neglected, particularly at the front of the property, replace them with stones or white chip. Potted plants can quickly add low-maintenance colour.
The kitchen and bathroom are the two rooms which attract the most attention in a house but they can be expensive to improve. Keep them clean and in good condition but avoid any expensive remodelling projects. Work with what is there – have the benchtops resurfaced and replace things like the shower door to make the room seem tidy and new. Add a splashback for a bit of colour and replace the handles on the cupboard doors – these can be bought at The Warehouse for a few pounds each. Keep everything neutral and basic, to make it easier to update in the future.
In situations where there are flatmates sharing a house, space in the kitchen and bathroom is often at a premium. If there is a lack of storage space, install some shelves.
Consider the security of the house – locks could be installed on the windows and if there has been a succession of tenants through the property, locks may need to be changed.
If there is space, create another bedroom. This will drastically increase the amount of rent you are able to charge. In some cases, this can be done by moving the washing machine and dryer out of the laundry into the bathroom, or by putting up a couple of walls in a large living area, or installing a sleepout in the garden. Install wardrobes if there aren’t any and check whether there are enough power points and phone jacks in the rooms.
Keep abreast of market rents to ensure that what you are charging for the property is fair and representative of its condition. Conduct your business in a professional manner, dealing with tenants’ inquiries regularly and staying on top of any problems. Tenants are more likely to pay more for a property that is easy to live in – and stay, eliminating the costs that come with replacing them,