Basics of Property Renovation for Increasing Investment Value

January 31st, 2024

An Introductory Guide to Property Renovation for Boosting Investment Value

Renovating investment properties can seem daunting, but strategic upgrades done right can significantly boost your rental income and property values. At Empire 8 Property, we want to provide an introductory guide to renovating properties to maximize your investment returns. Whether you are looking to renovate before selling or renting out your property, follow our tips below for completing projects that give you the highest value for money spent.

Understanding the Importance of Strategic Renovations

Before diving into renovations, it’s crucial to understand how they can increase the earning potential of your investment property. The right renovations make your property more desirable to tenants, allowing you to charge higher rents. They also boost resale value if you decide to sell the property later.

The increase in value depends on factors like the property’s location, type and current market conditions. For instance, renovating dated kitchens and bathrooms in an inner-city apartment can increase rents and sale prices significantly. Outdated family homes far from the CBD may need extensive work to realize good gains. Research sales and rents in the suburb to determine which projects will be most profitable.

Always keep the target tenant or buyer in mind. Will the area attract young professionals or families? Does the property suit owner-occupiers or investors? Making renovations appeal to who will live there maximizes your rental income and sales revenue.

Setting Clear Goals and Budget for Your Renovation

Before hiring any contractor, you need crystal clear renovation goals and a practical budget. Determine what you want to achieve – for example, increasing rental yields by 20 percent. Establish an approximate budget you can afford, including contingencies for unexpected costs.

Having clear goals lets you focus on renovations that matter most. If the aim is boosting rental yields, cosmetic facelifts like painting may suffice. Intending to sell at a higher price may require more significant structural changes. Match projects to your targets, so you spend where it counts.

Do thorough research on the typical costs for each upgrade. Kitchen and bathroom renovations often top the list. Build in contingencies for cost overruns – work can uncover unforeseen structural issues, delays and compliance needs. Stick staunchly to your budget to protect your bottom line.

Choosing High Value Renovations

All renovations are not equal when it comes to return on investment. The most expensive projects don’t necessarily boost your property’s value equivalently. Focus on the renovations buyers and tenants want most:

Kitchen – A renovated kitchen can considerably increase rental income and resale value. Replacing cabinets, benchtops and appliances with modern, high-end options provides an excellent return.

Bathrooms – Similar to kitchens, bathrooms sell properties. Ensuites, spa baths and high-quality fixtures have appeal.

Flooring – Polished timber or new carpet update dated properties. Quality floors also handle wear-and-tear.

External Painting – Curb appeal matters, so modern color schemes spruce up exteriors.

Layouts – Adjusting internal configurations to create open-plan living suits modern lifestyles.

Roofing – Replacing old roofing boosts curb appeal while reducing ongoing maintenance costs. Consider contemporary materials like Colorbond.

Landscaping – Simple garden upgrades and feature plants create welcoming street-fronts.

Highlight the property’s strengths while rectifying weaknesses. For example, opening up a cramped kitchen drenched in natural light. Replace what actually needs fixing rather than modernizing for fashion’s sake. Get the property structurally and functionally sound before cosmetic facelifts.

Hiring the Right Renovation Team

Even with the best renovation plans, projects can go awry without the right contractors. You want qualified tradespeople who get work done on time and on budget. Do thorough research, get recommendations and evaluate options carefully.

Check all contractors hold current licenses, insurance and workers’ compensation certificates. Review examples of their previous work and talk to past clients. Ask for a detailed written quote for the exact agreed scope. Make sure you understand how they will keep you updated on progress and any issues.

For complex renovations, a licensed builder or project manager may be advisable to coordinate all tradespeople. For multistage projects, get fixed price quotes for each step. Make payments contingent on work milestones and final inspections, holding back 10% as leveraging for rectifying defects.

The lowest quote often isn’t the best choice if contractors cut corners or lack experience. Be very wary of door-to-door salespeople pressuring you to sign deals on the spot. Verify their credentials and shop around. Quality work from people you can trust is key.

Renovation Timelines and Tenant Considerations

Understand that renovations take time, often longer than initially scheduled. Some projects like kitchen and bathroom upgrades can take months, especially if coordinating between multiple trades. Cosmetic facelifts may be quicker if well-planned.

If you have tenants, check lease terms to see if renovations are permitted internally. You may need to provide proper notice before entry. Try and time external facelifts between tenancies where possible. Keep tenants informed about work, and minimize unreasonable disruptions.

Be prepared to pay compensation for periods when parts of the property are unusable. You don’t want your best tenants leaving due to prolonged renovations. For major structural work, it may be better to have the property vacant. Factor potential loss of rents into your budget.

Boosting Functionality and Aesthetics

Renovations should make properties more liveable while also looking great. Work closely with designers and architects to get layout and functionality right. Some smart upgrades include:

  • Opening living areas to maximize light and create modern, free-flowing spaces.
  • Adding ensuites or extra bathrooms if space allows.
  • Creating seamless indoor-outdoor flow onto decks or yards.
  • Improving storage through built-ins, under-stair spaces etc.
  • Repositioning rooms like bedrooms for better orientation and acoustics.

Cosmetic upgrades like new lighting, paint colors and fittings give properties a contemporary facelift:

  • Repainting with neutral, on-trend color schemes adds appeal.
  • Stylish pendant lights and downlights make rooms brighter and modern.
  • New door handles provide detailed touches throughout the property.

Giving a dated property a fresh, light and contemporary look helps attract top rents and prices. Focus on neutral tones and quality finishes that will retain appeal long-term.

Adding Value Through Sustainability

Eco-friendly features like solar power, water tanks, insulation and energy-efficient appliances have growing appeal for tenants and buyers. Although installing sustainability measures represents an upfront cost, it pays back through utility savings.

Tenants are increasingly looking for low-carbon footprint homes to reduce their costs and environmental impact. Energy and water efficiency upgrades can enable you to charge slightly higher rents.

Measures like ceiling insulation, window double glazing, LED lighting and water tanks save thousands in the long run by slashing power and water bills. Solar panels can generate electricity costing just cents per kWh.

Sustainability renovations boost your investment value by lowering outgoings, reducing management effort and meeting demand for more eco-friendly properties. They represent a smart, future-focused spend.

Planning the Renovation Process End-to-End

Meticulous planning and preparation is crucial to complete renovations on time and within budget. Here are key steps in the renovation process:

  1. Set detailed scope and budget targets. Get input from designers on optimal changes.
  2. Research and compare qualified contractors. Lock in the team and get all quotes.
  3. Finalize designs, council applications, and contract terms.
  4. Plan the build timeline week-by-week with the project manager.
  5. Arrange alternative accommodation if owner-occupied.
  6. Remove contents from renovation areas. Backup items you’re retaining.
  7. Builder and trades do preparatory demolition and structural work.
  8. Progressively complete all tradeswork like electrical, plumbing, plastering.
  9. Oversee the finishing touches – cabinets, paint, fittings etc.
  10. Arrange final council inspections. Rectify any defects.
  11. Clean and remove all building mess and waste.
  12. Style rooms with furnishings, then photograph the finished renovation.

Having experienced project managers will ensure everything stays on track and handle any hiccups. Build contingencies into the schedule to allow leeway.

Maximizing Returns on Investment

Completing renovations is one thing – maximizing your rental income or sales value from the upgraded property is just as important. Some key tips include:

For leasing, obtain professional rental appraisals to set the right weekly rent based on the market and your renovation investment. Consider furnishings or small bonus incentives to secure great tenants quickly at optimal prices.

When selling, set an asking price at the upper end but realistic for the suburb. Employ stylists to furnish and stage the property in line with current trends. Create lifestyle marketing content like video tours to generate buyer interest. Time auction campaigns and ad placements to get the most enquiries.

For both leasing and sales, present the property’s best face. Tidy garden beds, touch up paintwork, fix any lingering defects. Consider an interior decorator to style each room and highlight the upgrades.

Having the property looking its absolute contemporary best will maximize the rental yields or sales price you can achieve after completing renovations.

Avoiding Common Pitfalls and Mistakes

While the above tips aim to set your renovations up for success, it’s also important to be aware of potential missteps. Some common pitfalls include:

  • Having unclear goals and no fixed budget ceiling from the start. This often leads to uncontrolled overspending.
  • Choosing the cheapest option rather than the best qualified contractors. This results in shoddy quality.
  • Not checking council regulations. Work without approval can be ordered to be removed.
  • Trying to manage tradespeople separately without a coordinator. This risks miscommunications.
  • Making changes mid-project. Variations throw out scopes, budgets and timeframes.
  • Not allowing enough contingencies for delays or unforeseen defects. Things rarely go perfectly to plan.
  • Rushing final finishes or styling. Presenting the property professionally maximises returns.

By planning meticulously, hiring quality tradespeople and managing the risks, you can avoid most pitfalls and realize the full value from investing in strategic renovations.

Conclusion

Renovating investment properties while tenants are in-situ presents challenges but done right, can boost your rental yields and capital value substantially. Follow our introductory guide above to successfully plan and complete projects that maximise your rental income or sales price. Take time to establish clear goals, thorough scopes and budgets. Engage experienced tradespeople and managers to execute flawlessly. Attention to detail in final styling and marketing completes the process to realise optimal financial returns on your renovation investment.

Empire 8 Property has experience managing high-quality investment renovations across Brisbane to increase the earnings of our clients’ portfolios. Contact us for obligation-free advice if you are considering renovating your investment property!

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