Renovating a rental

Paul and Lisa yield success from renovations on their New Lambton rental.

Two decades ago, Paul and Lisa bought an investment property in New Lambton. While continuous tenancy (17 years) meant consistent income, it also meant improvements were never complete.

As a result, the property required significant renovations and could not be leased in its current condition if the property was to become vacant. “We knew we had to do something as the property was pretty rundown,” says Paul.

So, important upgrades were made to boost rental income and position the property for a profitable sale upon retirement, contributing to a comfortable return for Paul and Lisa.

The Challenge

The property was in poor condition, with overgrown gardens, mould issues, and a leaking bathroom. Paul and Lisa understandably faced hesitation due to uncertainties surrounding return on investment, their limited knowledge of the renovation process, time, and lack of connections to people within the trade industry.

“We just couldn’t have done it without the help of Leah Jay, especially trying to organise tradesmen when we didn’t know where to start and how to manage a renovation,” said Paul.

The Solution

Our investment Lead Investment Services Manager, Pippa Rose conducted a Property Health Check to give further insight into the potential rental income and renovation costs. This analysis helped Paul and Lisa to understand the potential financial benefits of the renovation.

Pippa also met with Paul and Lisa to discuss their goals for the property and to develop a renovation plan that met their budget and needs. Confident in our ability to manage tenancy transitions, we issued a 90-day notice in May 2023. Our team provides additional support for long-term tenants, including assistance in finding a new home for the vacating tenant.

With their recent Property Health Check report, they approached the bank for a loan, using it as evidence of the property’s investment potential and future value. “The bank was really impressed with how thorough the Property Health Check was when we took it, which helped us get the loan approved,” says Paul.

With the loan approval locked in swiftly, our Investment Services team kicked off the management of the renovation process. They planned every aspect from start to finish, including crafting a budget, carefully evaluating, and prioritising each element of the renovation, arranging quotes, and ensuring they are like-for-like and appointing a team. They also ensured they outlined a clear contract of the project management process ensuring accountability and smooth execution.

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The Results

While there were minor delays due to the owner’s preferences and supply issues around the Christmas period, we advertised the property three weeks before the renovation was complete. Prior to renovations, the property’s weekly rent stood at $320 per week. Following strategic improvements, we successfully secured a weekly rental rate of $720 per week which is 11.5% ROI, exceeding the PHC recommendation of $650 per week.

On top of that, we were able to secure a fantastic tenant within four days, even over a weekend! This outcome is a win for the owners, securing a professional tenant at a higher rent.

To ensure the owners minimise their taxation payable, Pippa has also arranged a Tax Depreciation Report and has recommended they review their property insurance with the new value of the property, to ensure they have correct coverage. She also provided an updated sales appraisal after renovations were complete.

Through strategic property improvements, Paul and Lisa’s investment skyrocketed in value, jumping from an initial appraisal of $700k – $800k to an impressive $1 million to $1.1 million (a 36% increase)! This transformation, achieved with a total investment of $182k including temporary vacancy, has not only secured a healthy rental income stream and less future maintenance, but it has also strategically positioned the property for a lucrative sale down the line when they choose to retire.

“Personally, I think getting help with these things is important, especially if you’re unfamiliar with the process. Given our lack of experience, it was invaluable. While it was a big cost, it was absolutely worth it considering the difficulty of managing a renovation alone. I would definitely recommend it to others that are in a similar situation to us.”