Renovating your tired Property is the very best investment in Residential Real Estate

Renovating your tired Property is the very best investment in Residential Real Estate

You are probably aware that the cost of building new and renovating existing properties has been more expensive lately due to several, probably temporary factors such as tradespeople shortages, higher costs for materials and appliances relating to Covid and International difficulties.

However, there are recent improvements in the situation, prompting me to have another look at the advisability for landlords considering renovating a tired kitchen and/or bathroom.  The benefits of doing this are manifest.

The most obvious is that the facelift will deliver a significant increase in the rental return for the owner. In fact, the capital spent in improving a rundown property will typically produce a threefold return compared to buying a rental property.

A conservative rule of thumb is that for every $10,000 you spend on a renovation, the property will achieve an extra $20.00 per week – which is $1,000 per year, meaning a 10% return on the $10,000 investment. Right now, the net return, before interest costs, you are achieving on the current value of your property will be between 2% and 3%. And remember, your costs for council & water rates, strata fees, insurance, accounting, repairs etc stay the same – so Gross equals Net. Ok, not precisely, as the agency management fee does go up proportionally with the rent.

The other benefits are significant. Firstly, your property is easier to lease and you should attract a ‘better tenant’.  The money spent will permanently increase its sale value and ensure the property is easier to sell as well.

It’s best to partner with a specialist kitchen/bathroom building company that can manage the whole project – arranging Strata approval, Council approval if required and assist with the selection of PC items and appliances (or choose them for you). In this environment, the actual construction should be completed within five weeks.

Getting there needs planning. Firstly, obtain an estimate of the likely budget.  Typically, in Sydney, kitchens will begin at $20,000 and can get to $35,000. Bathrooms will usually be in the low to mid $20,000’s.  The approvals can take months, so is best to start during a tenancy and be fully prepared to swiftly begin work when the property becomes vacant.

Marriott Lane facilitates this process for its Landlord clients. Contact us for more information.

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