There are many ways to add value to an investment property – but it’s important not to overcapitalise.
Looking to hedge against an interest rate hike? There are a number of quick and easy ways landlords can increase the rental value of their investment properties without breaking the bank.
QUICK FIXES
Rethink Residential senior buyer James Thompson says a few simple cosmetic fixes like a lick of fresh paint, new tapware in the kitchen and bathroom and some garden landscaping have the potential to take a property’s rent “very quickly from the bottom bracket to the top bracket without having to do a full renovation.”
He says properties where the kitchens and bathrooms have old, outdated cabinetry can sometimes have rental value added through an out of the box approach to renovation. Rather than replacing the joinery, it is often possible to repaint it and replace the handles for a more modern look.
You don’t need to renovate the entire kitchen to add rental value.
“You can get a handyman to do this kind of work in a day,” he says. “It’s going to save you a lot of money to boost the property price on that effort.”
If airconditioning is out of the question for your property type, the installation of ceiling fans is a relatively cheap option that will improve the liveability of the home for tenants.
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A pet flap on one of the doors of the property can also do wonders in terms of desirability, he says.
“You’re inviting the idea that you’re happy to have pets,” he says. “Having something like this may allow you to get more of that premium end of the budget.”
Rethink Residential senior buyer James Thompson. Picture: supplied
If you have a disused corner or enclave in your property, why not create a study nook or extra storage area? Thompson says if your property is limited in space in terms of bedrooms, a dedicated work-from-home or study area under the stairs or behind a support pillar can be a gamechanger for many renters.
“Study nooks are really in demand these days,” he says, adding a built-in bench, a power point and good lighting is all that is required to create such a space.
BIGGER PROJECTS
While a few simple fixes may be enough to boost rent in the short term, investors looking to significantly increase their cashflow and improve their equity position can add more value by renovating to increase their property’s footprint, Thompson says.
If you do renovate, be sure to keep a tight control on costs.
These bigger projects will require much more investment, so it’s important to do the maths and sense check the numbers against the expected returns.
Thompson says opening up the floorplan of an older home so that an enclosed kitchen flows to the living and dining space while converting a separate rumpus room to a fourth bedroom is one way investors can increase their weekly rent.
Adding a granny flat is another great way to boost cash flow if you have the space and capital to invest, Propell Property managing director Michael Pell says.
“A lot of people are doing that,” he says. “It’s become very popular over the last five to seven years.”
Building a granny flat could deliver a sizeable rental boost. Picture: Nigel Hallett
Subdivision is an option that can bring in capital gains and potentially a second rental income depending on your strategy, he says.
“You could sell one lot off or build another house at the back,” he says.
Depending on an investor’s goals and financial position, another strategy could be to knock down an existing house, subdivide the land and build duplexes.
“That will give you the most capital uplift,” he says.
When adding in extra dwellings or planning duplexes, it’s important to ensure the block has good access, he says.
Swimming pools don’t tend to offer a great return on investment when it comes to rental value. Picture: istock
VALUE WASTERS
Propell Property managing director Michael Pell warns against overcapitalising on the following things when renovating an investment property:
* Swimming pools – why spend $100,000 on a pool when you may only get an extra $50 a week rent for the feature?
* Solar panels – it may be a desirable feature but probably won’t make a huge difference in rental income
* Marble flooring – most renters won’t pay above and beyond market rent for the privilege (unless it’s a prestige property, in which case, they may expect it)
* High-end kitchen – good quality fixtures and fittings are important for longevity but splurging on designer ware and high-end appliances doesn’t make sense financially (unless it’s a prestige rental)
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