Renovation can be a great way to increase your return on an investment property. Whether you want to renovate an investment property before you rent it out, or you want a quick turnaround to flip your investment back onto the market, there are a few points you need to keep in mind.
Selling on or renting out?
Always understand the demographics for your investment property, whether that is renters or buyers. Make sure you’re meeting their needs with the renovation, not your own. Consider the benefits of the property to determine your target demographic. Is it close to schools, shopping centres, a train station etc?
And always set a budget for the renovation on an investment property. As soon as you go over your renovation budget, you risk overcapitalising on your property, and you’ll eat into your investment returns.
Renovating an investment property to rent
The best way to add value to a rental property is to add a bedroom. The next best way is to add a bathroom. Followed thirdly by adding car parking spaces. Look for these potential renovations when you’re purchasing an investment property to rent.
You can make significant changes to a property and increase the rental price with simple changes. A fresh coat of paint and a tidy low maintenance garden are easy renovations. Even new taps in the kitchen and bathroom save you a full renovation. It’s also better to avoid tearing out all the old parts of an investment property as you can lose on claiming depreciation. Make sure you have a depreciation schedule done before the renovation starts.
Avoid overcapitalising on your personal preferences, as much as you like the lush carpet and the European appliances, they don’t return the rewards.
Renovating an investment property to flip
It can be a greater risk to renovate an investment property with the intention to sell it for a profit. The time you spend renovating the property means you’re not receiving any rental income, and you’re not back on the market. Keep in mind council delays can be unpredictable. If possible, choose renovations to your investment property that don’t require council approval.