Home renovations can seem daunting for landlords, but targeted updates to rental properties are one of the best investments you can make. Simple cosmetic changes and necessary repairs make your property far more appealing to prospective tenants, while also allowing you to increase rents and improve your rental income. Follow this guide on planning, budgeting for, and executing renovations that give you the best return on investment.
Introduction
Well-maintained and updated properties are vitally important for landlords in Australia looking to attract and retain good tenants. With strong competition in the rental market across metropolitan and regional areas, taking on renovations can set your property apart. Beyond just making necessary repairs, smart cosmetic improvements and upgrades to fixtures and fittings allow you to charge higher rents, lower vacancy periods, and minimize costly tenant turnover. As properties age, renovations also keep your asset maintained and may increase its value over the long term.
Planning Your Renovation
Before beginning renovations, careful planning is required to complete the work efficiently and cost-effectively:
Setting a Budget and Sticking to It
- Create a renovation budget based on the updates you want to complete, materials needed, and labor if you plan to outsource to contractors. Build in a 10-20% buffer.
- Get multiple quotes for materials and professional services so you can compare options.
- Focus first on changes that are essential or offer the best return, in case you go over budget.
Considering Logistics with Current Tenants
- Schedule longer renovations requiring construction crews for time between tenants.
- For minor renovations, coordinate access with tenants and aim for quick turnarounds.
- Develop temporary lease agreements if major work spans 1-2 months, including discounted rent.
Identifying Your Target Rental Market
- Research recent rents and vacancy rates in your area to gauge demand.
- Drive by comparable nearby rentals to see standard fixtures, finishes, condition etc.
- Tailor updates to the key demographics and needs of potential tenants.
Hiring Professionals
While small cosmetic updates like painting may be DIY, complex electrical, plumbing, or structural work should be left to experienced tradespeople:
- Working beyond your expertise puts safety at risk and faults can affect property value.
- Hiring professionals avoids buying expensive equipment and materials you may rarely need.
- It allows work to be completed far quicker so tenants can move back in ASAP.
Vet any contractors thoroughly – ask for references from previous customers and examples of their work. Get insurance paperwork and have all details formally quoted before hiring.
Renovation Priorities
Target updates that address pressing issues, increase functionality and comfort for tenants, and make for an all-round better living space. Useful examples include:
Fixing Common Problems
- Eliminating damp and mould with improved insulation, ventilation, and drainage can make spaces drier and healthier.
- Upgrading locks and lighting improves real and perceived safety and security for tenants.
Repainting and Refinishing Surfaces
- A new coat of paint makes interiors and exteriors look clean, fresh, light and spacious.
- Sanding and restaining floors hides existing wear and makes rooms appear larger.
Replacing Flooring
Tenants value floors that are attractive, easy to clean, and durable:
- Dated carpets harbour allergens and stains so should often be replaced, especially in high traffic areas and bedrooms.
- New carpets can be cost-effective but require heavy-duty pads and regular professional cleaning.
- More durable laminate flooring resembles wood but withstands moisture better.
- Tiles work well for kitchens, bathrooms and laundry areas prone to spills.
Presenting the Property
Fixtures, appliances and furnishings may not be exciting renovations but they significantly impact tenant comfort and convenience. Consider:
Choosing Durable and Practical Materials
- Opt for low-maintenance, water-resistant cabinetry and benchtops in kitchens and bathrooms that handle moisture.
- Specify floor tiles rated for high durability and slip resistance.
- Select window furnishing materials like wood or vinyl blinds that are easy to wipe down and keep clean compared to fabric drapes that collect dust.
Updating Old Whitegoods and Furnishings
Replacing aging appliances and furniture makes the property far more appealing:
- New energy efficient fridges, washing machines etc. lower utility bills for tenants.
- Contemporary furnishings seem cleaner and allow higher rents than worn older items.
- Provide unfurnished options too – some tenants prefer to bring their own furniture.
Exterior Renovations
Curb appeal matters, with first impressions important when tenants are assessing a property. Useful exterior updates include:
Increasing Curb Appeal
- Freshly painted or restored exterior walls and trims make better first impressions.
- Well-maintained gardens and lawns suggest overall care for the property’s upkeep.
- Pressure wash paths and walls to remove grime, mildew and stains.
Adding Exterior Improvements
Enhancements to outdoor spaces can further increase appeal:
- Patios, pergolas and decking create additional living areas.
- New outdoor furniture offers spaces for tenants to relax outdoors.
- Energy efficient lighting extends hours the yard can be enjoyed at night.
Tailoring to Target Tenant Demographics
Customizing your rental to meet the unique needs of your expected tenants makes their lives easier and your property more desirable. Useful examples include:
For Families
- Additional storage solutions accommodate larger family possessions.
- Laundry sinks for handwashing delicate garments.
- Secure outdoor play areas for children.
For Young Professionals
- Open plan living suits entertaining peers.
- Stylish, contemporary interior design and decor.
- High speed internet and newer technology perks like USB charge points.
For University Students
- Desks and ergonomic chairs facilitate study.
- Plentiful lighting.
- Durable, affordable furnishings suitable for sharehouses.
Tips for Landlords on Renovating Rental Properties
1: Gather Tenant Feedback
Connect with current or past tenants to ask what areas of the property need improvement or what amenities they’d like to see. This direct feedback is invaluable for planning updates that will appeal to tenants.
2: Future-Proof Improvements
While trendy decor can impress now, it dates quickly. Opt for timeless styles and focus renovations on functionality – good bones in the property layout, fixtures and surfaces handle wear-and-tear.
3: Don’t Over-Capitalize
Avoid over-improving properties far beyond neighboring rentals as costs won’t be recovered with higher rents. Market rents help determine sensible reno budgets.
4: Add Tech Conveniences
Today’s tenants expect amenities like high speed internet, ample charging points, and smart home features (e.g. smart thermostats). These needn’t cost much but give properties a competitive edge.
5: Enhance Storage Space
Maximizing storage capacity with solutions like built-ins, under-stair nooks etc. caters to tenants with abundant possessions while keeping clutter out of sight.
6: Accentuate Natural Light
Fresh paint colors, mirrored surfaces, LED lighting all make spaces brighter. Maximize windows and skylights. Tenants crave light and associate it with roomier interiors.
7: Refresh Between Tenants
No-fuss touch ups keep rentals feeling clean and appealing for each new tenant, limiting major overhauls. Quick fixes include carpet cleaning, repainting scuffs, tending gardens etc. Preserve your reno investment.
Conclusion
Renovating investment properties takes time and money but is one of the wisest investments landlords can make. Following the planning steps, budgeting effectively, hiring experienced tradespeople, and focusing on necessity-based cosmetic and functional improvements allows your property to demand higher rents and lower vacancy rates. Remember to always customize updates based on the expected tenant demographic needs too. With smart renovations, you’ll spend less on property management and see improved rental returns for years to come.
FAQs
What are the most important renovations I should make as a landlord?
Focus first on repairs that address safety issues, building code violations, or potential damage, like faulty electrical systems, old plumbing, roof leaks, etc. Then tackle updates that boost livability and comfort for tenants, like new flooring, refreshed kitchens and bathrooms, better storage, and good lighting. Curb appeal matters too – exterior paint, landscaping and good first impressions get more prospective tenants through the door.
Should I renovate with tenants living in the property?
This can be done for minor updates but avoid major structural changes or noisy demolition. Turn off electricity and water during working hours where essential. Coordinate access and notify tenants about work schedules, parking changes etc. Offer rent discounts for significant disruption spanning more than a few days.
What’s a sensible renovation budget for my rental property?
Typical upgrades run $10,000-$25,000 but costs vary dramatically based on factors like location, property size, materials selected and the renovations undertaken. As a rule of thumb, limit spending to no more than 10-15% of your property’s total value. Focus the budget on changes that maximize your rental income.
How do I fund investment property renovations?
Savings, loans and equity from the property itself help fund renovations. Compare rates on home equity lines of credit, cash-out mortgage refinancing or personal loans. Alternatively, raise rents moderately after renovations to slowly recoup costs over time. Many landlords combine both approaches.
How much can I increase rents after renovating my rental?
Aim for at least an extra 10% over your area’s average rents but ensure rates still align with comparable updated properties. Beyond functional fixes, cosmetic facelifts typically justify 25-50% increases. But extensive high-end custom renovations may exceed average market rents for an area.
