When renovating your investment property, all changes should be made with the market and potential tenants in mind, rather than personal preferences.
The priority for any renovations should be areas that need repairs, are due for maintenance, or might be worth replacing entirely. Then it’s time to consider what else could be improved beyond standard repairs and maintenance.
Additions and upgrades that tend to see the best return on investment, in terms of both rental and resale value, include:
- Additional bedrooms,
- Improvements to bathrooms (or the addition of an ensuite),
- Kitchen upgrades,
- Additional parking spaces,
- Upgraded flooring, surfaces, and windows,
- Air-conditioners and/or ceiling fans,
- Aesthetic improvements like updated fixtures and fittings and a fresh coat of paint.
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CASE STUDY
We recently guided an owner on improving return through renovations of their four-bedroom, two-bathroom house.
BEFORE:
Rent: $330/week, Sales appraisal value: $335,000–$345,000
AFTER:
Rent: $420/week, Sales appraisal value: $410,000–$425,000
The renovations equated to $4,680 additional annual income and 9.78% ROI on the cost of the improvements (just under $48,000, inclusive of fees and vacancy).
The works focused mainly on key areas like bathrooms, kitchen, and flooring, as well as small but effective upgrades throughout the property.
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BATHROOMS
- Repaired both leaking showers and replaced both shower screens,
- Resurfaced cracked and flaking bathtub ($429 with five-year warranty vs. $2,500 to replace bath entirely),
- Replaced vanity in ensuite,
- Installed IXL Tastics (light, heat, and vent systems) in both bathrooms.
KITCHEN
- Replaced oven/stove unit and rangehood,
- Added dishwasher,
- Replaced cupboard handles and benchtops.
Before
After
FITTINGS AND FIXTURES
- Installed ceiling fans,
- Replaced blinds,
- Replaced taps, handles, and light fittings.
FLOORING
- Replaced carpet with vinyl planks in the living area, kitchen, and hallway (plank vinyl has a 15-year life expectancy, whereas sheet vinyl lasts about five years),
- Replaced carpet to bedrooms.
Before
After
OTHER
- Repainted internally and externally,
- Added remote access to both garage doors,
- Added a pergola,
- Significant clean-up of yard and gardens.
Key Takeaways
- Renovations can significantly enhance both the rental income and market value of an investment property.
- Key areas for improvement include bathrooms, kitchens, and flooring, which offer the highest return on investment.
- A case study illustrates substantial annual income growth and a robust ROI following property upgrades.
- Essential renovations covered in the study involve bathroom repairs, kitchen modernization, new flooring, and general aesthetic enhancements.
Wondering whether or not to renovate?
If you are looking for more information on renovating your investment property or, looking for general advice to start your property investment journey, get in touch with the Investment Services team today.
