When you invest in property, at some stage you are going to need to renovate. This can be both an exciting and daunting time for property owners. Here we tackle some of the important things to consider. From creating a budget you can work with to picking the right fixtures and fittings, getting the overall organisation and project management right is key. Let’s take a look..
Determine a budget and the available deductions
Without doubt, renovating a property will almost always result in some larger than normal expenses for your property. You will definitely need to put together a budget before you get started. It’s also a good idea to determine which expenses can be fully deducted in the current financial year and the other expenses that will need to be depreciated over several years.
Property management companies work with an abundance of tradespeople and will be able to assist with obtaining quotes and scheduling the work. Check in with your property manager to see if they can assist with your project.
Make a project list
You will need to complete this step when you’re putting together your budget. Make a list of all the parts of your rental property that you want to upgrade. There is a general rule of thumb to spend approximately 3 to 4 per cent of the property’s value on kitchen upgrades and under 1 per cent on the bathrooms. And don’t forget to budget 10 to 20 per cent for contingencies. This is just a guide though, and you might budget completely different to this!
When you’re thinking of the improvements on your list, consider what will give the property an edge over comparison properties. Think about if the rental market was to go through a slow period, what might make your property more rentable than others in the neighbourhood. This doesn’t have to be high cost, and might just be that it has flashy tapware upgrades that differ from standard, or an above average sized oven etc. Property managers deal with a large number of tenants and prospective tenants and can be of great help in providing information on what features other local properties have as well as what prospective tenants actually want.
Talk to the body corporate early
If your investment property is part of a strata title, it can take a while to get approval on potential works from some body corporates. Talk to the body corporate and put your case forward early. Include rough timelines for the renovation, your plans for the property, any safety precautions you need to consider and note when noise disruptions may occur.
Keep neighbours informed
Let neighbours of the property know that renovations are taking place and when noise disruptions may occur. This can be done by writing to them or if it the property is part of a strata title and there is option to do so you could display a notice in the building’s common areas or the Body Corporate in some circumstances may advise residents.
Choose materials that will last long term that will cut down your vacancy period
Each time you renovate, you need to plan for a vacancy period where you will not be collecting rent. When you replace items in your investment property, try to think of what will last a longer period, to cut down the amount of times your property will be required to be vacant over the life of your investment. For example:
Any new kitchen benchtops should be heat, scratch and stain resistant.
Go for a hardy carpet unlikely to pull and opt for dark carpet colours that are less likely to mark.
Paint quality is important and getting this right will see it lasting years longer than cheaper options.
Get the renovation schedule right
When accepting quotes for different works, try to book work in a specific order. For example, if you are replacing ceiling fans or other electricals do this before an internal paint.
Always leave installing new carpet until the end of the renovations to ensure they remain undamaged during other works.
Be mindful of any ordering delays when it comes to materials you have selected for your investment property and how this may change the organization of your project.
Renovating your rental property is a great way to increase the value of your investment, attract higher rental prices and ensure you find quality tenants. Remember, most tenants want a blank canvas to work with when they move in, so keeping everything neutral and fresh is important and you will thank yourself in the long run for doing so.