Renovations can drastically improve the value of your investment property. Deciding what to renovate is often the tricky part.
The right renovation can help transform a lacklustre property into a quality, cash flow positive asset.
Do your research on your neighbourhood as a first step and make a list of what comparable properties have in terms of features. If your proposed renovation will be markedly out of step with the other properties in the area, chances are you will be overcapitalising.
Most of the time the deal breaker in selling or leasing a property is not fancy Italian floorboards or exotic tapware, it is the everyday crucial features that we interact with.
Here are four upgrades that most often pay you back:
The humble kitchen is mostly a central space where the occupants spend a significant amount of time. A well-appointed, easy-to-use kitchen is a good starting point for any renovation.
Kerb appeal is such an important part of connecting prospective tenants or buyers to your property because it is the first thing they see. A secure and attractive fence and well-maintained garden that offers enticing outdoor living areas are easily achieved and rate highly when it comes to that all important first impression.
As with kitchens, a remodelled bathroom does wonders for the overall appeal of any property. The return on investment on an upgrade to the smallest room in the house is generally higher than almost any other renovation expenditure. The 2021 Cost vs Value survey in Remodeling magazine found that the less that was spent, the higher the rate of return became.
• Energy efficiency
Research shows that energy efficient properties are in higher demand. Real estate with insulation, solar panels and energy efficient appliances achieve higher prices than those without.
Whilst these four renovation ideas have broad appeal, there are other costly improvements that clearly don’t do it for everyone. Here are four upgrades that probably won’t deliver a return:
• Swimming pool
Whilst a swimming pool may catch the eye of a younger cohort, research shows that it rarely if ever pays back the level of investment. Older couples may be put off by the amount of care and maintenance required and families with younger children often cite the hazards outweighing the benefits.
• Wall-to-wall carpeting
There is no question that wall-to-wall carpeting is a statement in a property. Renters however will be wary of the care required to maintain it, and increasingly, many prospective tenants are reticent due to the chemicals and pathogens that may be present.
• Master suite
A luxurious upgrade to the master suite, including the bathroom and walk-in closet can be a sweet indulgence. If however this is completed at the expense of another bedroom or living space, it will be hard to compose a financial reason to undertake it.
• Integrated heating and cooling system
Ducted heating and refrigerated, centralised air conditioning systems are costly to install and unlikely to provide a return. Most renters will be equally happy with a simple, split system air conditioning and heating unit providing localised comfort.
When looking for a return on investment from your renovation, major upgrades to bathrooms and kitchens should also be given a wide berth. Add to this bucket invisible big-ticket items like rewiring and replumbing, and remodelling that removes rooms from your floorplan.
When all said and done, your property’s value could be dramatically boosted by the right renovations. If you have the appetite to spend a bit more on what’s required, the return will be worth your while.
That said, it is possible to make quite an impact on a tight budget too.
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