Many investors use renovations as a strategy for success in property investment.
Some properties require structural change, others landscaping and others a cosmetic makeover through redecoration.
Obviously when looking for the "right" property investors need to take the renovation - and the extent of work needed - into account. The most common reason for a renovation would be to increase rental return. An extra bedroom makes a considerable monetary difference, as does the addition of covered car parking.
A fresh look also increases the return and it goes without saying any improvement will make the property more appealing to a prospective tenant.
Before proceeding with the purchase the investor should consider the following: Does the property have potential? What is the desired end result? How much work is required for the renovation? Is the proposed work within budget? Are there people available to carry out the work? Are you prepared to follow through?
Ten things to consider to increase rental return.
1. Is there equity in the property?
Speak to a valuer to find out if the figures stack up. What is the value likely to be after the renovation is complete?
2. Is the property in a desirable area for prospective tenants?
The aim is obviously to buy a property always in demand meaning less down time and more money in your pocket.
3. Is the property in a desirable area for potential purchasers?
If you decide to on-sell the property, are fellow investors willing to invest in the area?
4. Does the property have street appeal?
First impressions count. Can simple landscaping be carried out to create that "wow" factor?
5. Is there potential to create an extra bedroom?
Dividing large rooms to two singles is a popular trend as is converting one side of a double garage to a sleepout. This opens up potential to a higher rent return.
6. Painting the interior and/or exterior.
Be sure to know what job you are getting. Are you requiring a renovation or a restoration? A tidy renovation will get a higher rental return without huge outlay. A restoration will put the property back to new condition but will cost and may not always be necessary.
7. Can covered decks be added for extra outdoor living space?
Particularly to be considered if the property is targeting a larger family.
8. Does the property offer any heating?
Most tenants consider heating as one of their top priorities. Check out available schemes for funding, particularly the "Hot Swap" in Rotorua.
9. Does the property offer covered car parking?
The rule of thumb is a single garage is worth between $10 and $150 extra per week. If you can't stretch to a garage a carport is the next best thing.
10. Quick kitchen and bathroom makeovers.
There are many economical solutions to modernising the kitchen and bathroom and improvements here greatly increase a property's appeal.
In summary, complete the renovation, find a great tenant at a good rental return, then sit back and reap the benefits.
- Donna Russell is director of property management firm Russell Hardie.