As medical professionals we are often guided toward residential property investment. It is recommended due to negative gearing as a tax saving mechanism and a tool to grow an asset base. As a first time investment property owner at the age of twenty I made a number mistakes. This was both with my property and my tenants. Over 26 years having owned numerous residential and a few commercial properties I have come to the conclusion that property investment is worthwhile and profitable. You can avoid many pitfalls by understand them before you invest.
We all want the properties we invest in to increase in value over time. Even positively geared properties should increase in value at a rate greater than CPI and depreciation. The key to increasing the value of your investment property is through careful improvements, avoiding overcapitalising by setting a fixed budget for your upgrades.
Increasing the value of your investment property could be as simple as the list below:
It is amazing what a coat of white shade of paint will make to a tired and aging property. After a few years of tenancy, the walls, skirtings and doors of any property become marked, scratched and dirty. Sugar-soaping the walls prior to painting and adequate preparation time will save additional coats of paint. Having a professional finish is ideal. DIY paintjobs can be an effective, cost efficient way to mange a tight budget when wanting to improve the overall look of a property. You need not be Picasso. DIY jobs uncrushed and careful, can be as good as (and sometimes better than) paying a professional painter. If you are time poor select your painter on personal recommendation and insure that they are licensed and registered with the painters’ board.
Tired, damaged and soiled carpet is going to not only detract from a potential buyer but also deter good tenants. Speak to tenants with pets about wanting to upgrade some or all of the flooring and ask how they could best keep the flooring to a high standard. Replacing carpet with hard floors may be a viable option. Another option is to use heavy-duty commercial grade carpet that is good for wear and tear, and washes up nicely with a good steam clean. DIY is much more difficult with carpets and having them professionally laid reduces wastage, lifting and creasing. Hard floors come in DIY packs. Unless you are handy with power tools it might be better to leave this to the professionals. You can save money by removing the old flooring prior to having the new ones put down.
Grout and wet areas
Re-tiling can be costly on a tight budget but a good clean up of grout may be sufficient to brighten up the wet areas. Grout often becomes stained and cracked over the years. Give the flooring and walls a good clean – using a strong ammonia or bleach and allowing the grout to soak before scrubbing with hot water should reveal the true grout colour and condition. If salvageable, use some elbow grease and energy and save money. If the grout is in a poor condition grouting tiles can be undertaken or grout paint can be used. The latter a short-term fix up that I personally detest as in a few years it lifts and peels, but it is a handy way to add a clean-up on a pre-sell if investing in new grout is not an option.
Blinds, curtains and shades that are torn, dirty and outdated detract from the look of a room in an instant. Removing old fittings, filling the wall holes and replacing with easy clean slat blinds is an effective way to upgrade a room. These are easily installed and available from suppliers such as Bunnings for standard size windows.
Paying to have professional curtains made and installed can add value and appeal. DIY is not the way to go especially in living and lounge areas that might need full-length and cord retractable curtains. There is no harm it getting a few quotes to see how it fits your budget. Removing the old ones and and dry-clean might be the limitations of your budget.
New style doors are cheap (as little as $39 per door). Don’t forget locks and handles will also need to be upgraded which doubles the price. TheY come unpainted so you will need to factor in the painting and installation. A good estimate for an internal door installed is about $200. On a 3-bedroom house this usually equates to 8 doors including your storage/linen cupboard. It could be $1600 well spent on modernizing a dated property.
There is nothing worse than looking to rent a property that has no storage space. With the popularity of IKEA there are plenty of options for adding built-in storage. Storage is effective and budget friendly. A carpenter is not needed no needed as these storage units are DIY and easy to install. This is a great feature when selling a property and will be well appreciated by the new owners.
Lighting and power outlets
Orange overhead hanging lights are great if you have a retro theme for the entire house in a trendy way, with the matching shag pile carpet, patterned wallpaper and mustard bathroom – not in a semi-modernized house! Simple light fittings, white or clear, fluorescent and down lights – feature lights – can be purchased and baton based fixed lights or hanging light shades can often be DIY installed Simple light shades start from as little as $11 and glamorous lighting to the thousands. Think simple, plain and energy efficient!
A neat tidy garden, easy care, water saving and holiday friendly makes for an appealing rental and investment property. Start by a simple cut, trim and clean up. Get rid of rubbish, old building materials, dead plants and those “just in case it breaks” spares unless they can be neatly and safely stored. Simple paving, a shade-sail or patio will not only add additional entertainment and family space but value to your property. Think relaxation, small child-safe water features (or skip the water feature and set up feature gardens instead). Outdoor speakers that bring the indoor outside adds a special touch and outdoor lighting is a must. Decks should be clean, neat, sanded and oiled. Brick paving pressure cleaned and weed free. You may consider giving the exterior a coat of paint depending on your budget.
Workshop and Tool storage.
Many more modern houses have limited space and often don’t have room for a workshop or shed in the yard. Working within the confinements of the garage can be tricky but setting up good garage storage and workbench could make the difference for a good tenant with handyman traits. There are many options for storage including overhead, hooks and rails and lockable cupboards. Think safety, poisons and power tools when setting up a workshop or shed area and reap the rewards without spending a lot of money.
The kitchen and bathroom are the most expensive to renovate in a house. Forethought and budge considerations should be taken into account when looking at upgrades. The obvious would be to gut the old rooms and start fresh. Bathrooms cost at lease $10’000 and at least this for a kitchen you may think twice.
If your kitchen cupboards are in good condition but the tops are drab and stained replacing the bench tops and tiling could give a new fresh look. Appliances and sink will give the kitchen and entire new look. Depending on the cost of your appliances a revamp could cost as little as $5000. If this is outside your budget then think Ikea overhead cupboards for extra storage. Paint the walls and add some fresh white tiles to tidy up. Light fittings and clean neat flooring (even simple vinyl) can refresh everything for less than $1500. DIY the kitchen as most of it is time and hard work rather than the skills of a tradesman. Tiling in a kitchen is often simple and can be undertaken with patience and care.
Bathrooms are somewhat more difficult to spruce up – but on a tight budget adding storage space, a new shower curtain, paint, a good cleanup of the tiles and modernizing lighting will be a good start. Consider 3-in-1 lighting, heating and fan – this adds a nice touch to the cooler climates, and perhaps even a heated towel rail for a bathroom with limited ventilation.
The next step for bathroom renovations is expensive. Consideration needs to be taken to what value it will add to the house before starting to chip those old tiles off the wall. Obviously a hideous bathroom that has mildew in the walls and ceiling, leaking taps and shower is not how a nice investment property should be presented. If you have landed a doozy of a bathroom when you brought the property you can learn from this and check out the bathrooms first next time you invest.
Energy saving features
Solar power aside, there is a number of features that can be added to a house that are relatively inexpensive that scream “invested investor”. Green waste garden compost, energy saving lights, window tinting, window shutters/blinds, water tanks and off-peak power meters to name a few. Investing in these show you not only have an interest in the environment but your concern reaches to your tenants and properties. If you are super keen in attracting these tenants you could offer seeds or seedlings twice a year to keep a replenished vegie garden.
Home alarm systems can be installed relatively cheaply. You do not need expensive monitoring to appeal to a tenant. This is especially important if the suburb you have purchased is not the lowest of crime rates. Security screens start at about $400 per window. Start by putting them on the main bedroom would be best for tenant safety and comfort. When old screen doors need replacing consider security screen upgrades (sliding doors from $900). Front doors should always have a good deadlock and security screen. A peephole is another great security features as well as automated lights to the front porch and drive areas.
Crossovers and verge area
In an investment property this is part of the “first impressions” so make any money you spend on the outdoors part of the first impression. Drive down the street and look at verge areas that are easy care, low maintenance, low water and try to replicate that in your verge area within your budget.
The white picket fence that was once the feature of the cottage can be an eyesore when it is tired and flaking. Time and money well spent in preparing and painting a fence can add value. The all important first impression is often the fence itself. Boundary fencing that needs replacing or repairing should be addressed and under the dividing fenced act. You should be splitting the costs with your neighbors so let them know you are getting quotes for repairs or replacement before it goes ahead. Ask them preferences in order that the decision-making is joint and therefore the cost jointly shared without a disagreement.
Long-term happy tenants adds value to your investment property. If you are thinking about selling let your tenants know well in advance. Inform them know you would like to sell it as an investment so they can stay on. Home opens can be awfully inconvenient so be sure your agent is considerate and works with the tenants. A happy tenant will sell you house for you but having it clean, neat and presentable.