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Renovation for higher rental returns

Discussion in 'Real Estate' started by Muzza, 8th Jul, 2008.

  1. Muzza

    Muzza Active Member

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    What are peoples ideas as far as a renovation goes to achieve a higher rental return? Is it worth while and what renovations would you do?

    The idea would be to purchase an older style house/unit, complete a quick reno and rent for a better return.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    If you can improve the property for minimal outlay and it makes a meaningful difference to the rental income, then it can be worthwhile. Major structural changes are rarely worthwhile (unless perhaps altering the purpose of the property).

    For example: if you were to spend $5,000 and get a $50 pw increase in rent, that's a 52% ROI ... or in other words, it will take you just under 2 years to get your capital back.

    The question is - how long are you prepared to wait to get your money back?
     
  3. Billv

    Billv Getting there

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    Muzza

    I'd do cleaning, painting, replace light fittings, switches, power points, water taps, carpet, and install cat5 cable for internet distribution and for the door phone.

    How much we do depends on the property.
    In some I have also replaced cisterns and installed split air aircons plus electric garage door openers.

    Renos of this type are generally inexpensive, but you do charge a higher rent
    and you generally attract a better calibre Tennant.

    Good Cleaning does change the look of a place so we spend a lot of time cleaning up.

    Cheers
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    Has worked very well for me.

    Not only should you achieve a higher rental, but the value of the property should be increased as well.

    Cheers
    N.
     
  5. Jacque

    Jacque Team InvestEd

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    I work on a minimum ROI of 25% ie: for every dollar I spend on a reno I expect to get back 25c minimum on top in both rent and increased value.
    So far, so good. All renovations I've done over the years have added value and I second Bill's suggestion to get the place as clean as possible. It really is next to Godliness :)

    As to specifics, it really depends on where the property is, who it's rented to and what type of dwelling. For example, I have a Brissy house that doesn't have a bath and I don't intend to put one in yet due to the nature of the tenants who are likely to rent over it's life- students. However, if the same home were in a family dominated area I'd install one.
     
  6. Chris C

    Chris C Well-Known Member

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    Do you do the reno work yourself or do you hire workers.
     
  7. Billv

    Billv Getting there

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    Chris

    Electrical work requires a licenced electrician but I've finished electrical engineering so I do all the work and then get the sparkie to sign off on it
    when he comes in to wire up the new aircon.

    With Plumbing, I believe I am allowed to replace the taps and I am not running any new pipes so it should be ok.

    Painting, cleaning and lock replacement we do it all ourselves
    Carpet we leave it to the experts.

    Also, if you can get the vendor to agree to let you start work before settlement your IP will be ready for lease from day 1.

    Cheers
     
  8. Thudd

    Thudd Well-Known Member

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    I have also found, to my chagrin (and sadness) that what seems to matter is if a reno looks good, not whether it actually is good.