When looking to increase the rent from your investment property through renovations or additions, it’s important to think strategically about which updates are going to provide the highest returns.
One such conundrum to consider is where best to direct your funds: on renovations that update a property’s tired old features, or on an addition that adds more space and function to the room?
Both strategies can improve the amount of money a tenant is willing to pay in rent, says Andrew Cook from Mint360property in Sydney.
“Researching the rental market, so you have an understanding of who you are targeting and at what price, is imperative before you begin any renovating,” he suggests.
But how do you decide which is going to offer the best bang for buck and deliver a higher rent?
The benefits of a new bedroom
Adding a bedroom is one way to obtain a higher rent. Before you think about going down this path, you need a good understanding of your property’s layout and what you can and can’t do according to council or strata.
“You also want to ensure that the property is spacious enough to allow for the addition, and that you won’t be encroaching too much into the living and dining spaces by redefining that space, as that could have the negative effect,” Cook explains.
“After all, being a superb one-bedroom apartment will be better than being a poor two-bedroom choice. While you may get an increased rental price per week, potential tenants may find it less appealing and you may find it harder to lease, meaning an increase in vacancy.”
Additions tend to be very costly renovations, he adds, especially if it involves adding a new level or wing to your property.
“Ensure you have crunched the numbers before committing to such a big project,” Cook says.
The modern makeover fix
Giving your investment property a modern makeover is a great way to improve the desirability of your property to potential tenants and obtaining a higher rental price.
The good thing about a cosmetic fix is that you won’t be making structural or layout changes, which means that you are able to better control how much you spend.
For instance, you may decide that a simple refresh – such as a fresh coat of paint, new flooring and modern fixtures – is all you need to do, as a cost-effective way of bringing a tired property back to the present.
“Shop around for quotes and pick durable materials and brands that will stand up to wear and tear of tenants,” Cook suggests.
“If your budget allows, you can take it further by installing new kitchen appliances, updating the bathroom vanity, or installing new blinds and light fittings. But keep in mind that what you outlay for these updates won’t always result in a higher rent price.”
The final verdict?
As with most things to do with property: it depends.
The general consensus is that an extra bedroom or living space will add more dollars to your bank balance each month, but if the property becomes poorly designed or cramped as a result, you may have a tougher time finding a tenant.
“An experienced local property manager is a great source of knowledge when it comes to deciding which updates will achieve the desired result,” Cook says.
“They can also put you in contact with builders, suppliers and tradespeople to complete the renovation – and often at a better price.”