Renovating your investment property may seem like a daunting task, but making adjustments and improvements to your investment can reap rewards.
Here we’ve covered three of the biggest benefits of renovating.
1. Attract and retain quality tenants
Every renter has an anecdote about a landlord who would not make even the most practical or minor upgrades to the property. If you are an investment property owner and your renting days are a distant memory, it might be difficult to think from the perspective of the tenant, but it’s important not be dismissive of their ideas or concerns.
Obviously the best time for renovations such as painting and recarpeting are best done when you first buy the property or between leases, but there are many minor works that renters won’t mind happening while they are there.
Upgrades to ovens, air conditioning and washing machines are always welcomed by tenants. Or you could add features that will make the property more liveable such as a clothes dryer, dishwasher, or quality blinds and curtains.
The flow-on effect of renovating and upgrading is that existing tenants will be happier and more comfortable, and if you are looking for tenants, you will have a wider selection of prospective tenants to choose from.
By showing that you are prepared to improve a property and not just let it fall apart shows respect for your tenants and can result in positive morale which will show through in your tenant’s loyalty and desire to keep your investment in good shape.
2. Increase sale price and capital gains
Renovating your property every few years will most likely improve the price when you sell. Even if you have no plans to sell, it is worthwhile consistently keeping the property up-to-date and in good condition in the event that your circumstances change and you need to sell quickly.
The best way to keep your investment looking fresh is to paint the walls at least every ten years.
Stained carpet and damaged floorboards makes the property less appealing, so invest in a professional clean or polishing. If the apartment is vacant, consider replacing carpet and floorboards.
If you have the means, renovating the kitchen and bathroom will add significant value.
It is also important to maintain the front and back yards if your tenant is not currently doing so.
It is essential that you choose colours, fixtures and furnishings that won’t go out of fashion. The safest bet is to stick to neutral colours or use a consultant to guide you. By using classic colours and styles, your property will appeal to a larger range of buyers, thus increasing the selling price.
3. Improve energy efficiency and reduce environmental impact
Installing solar panels might seem like a drastic and expensive outlay, but quite rapidly your current and future tenants can reap the rewards. This will make the property more appealing to tenants because the rapid rise in electricity prices is causing real financial stress for renters.
In areas with consistent bright sunlight, installing solar is a great option to consider as this can add value to your investment property. Many people, in particular millennials, are becoming increasingly environmentally conscious and are renting for longer. Your tenants can also use an app to see how much power is being produced, and how much they are using, which helps them use power efficiently to reduce costs and environmental impact.
If installing solar panels is not an option, there are other renovations that can reduce environmental impact. This can be as simple as double-glazing windows and providing quality blinds and curtains to retain warmth in winter and keep the home cooler in summer. If you have reverse cycle air conditioning, upgrading these units every seven years will improve energy efficiency.
Keep in mind that any renovations which are completed should increase your depreciation claim for eligible items, which in turn will reduce your tax bill. You may also be eligible to ‘scrap’ any assets you’ve removed during renovations.