Most people buy an investment property with the goal of achieving the best possible returns through rental yields in the short term and capital growth in the long term.
Rental properties in good condition with modern features generally attract better tenants, and you can also achieve higher rentals with this type of property. Another advantage is that better quality rental properties are in demand, so there is less chance of your property standing vacant for long periods.
One way to maximise your returns is to carry out strategic upgrades. This will enable you to boost your property’s value over and above what you could achieve by simply waiting for it to appreciate over time.
As with any property, location is a key factor when deciding where to buy a rental property that will provide good returns.
Most tenants prefer to rent in a sought-after - preferably established – neighbourhood, close to good schools, shopping centres and other important amenities like sports centres and gyms.
Good security is another important criterion for prospective tenants, so a good choice would be a townhouse in a complex with 24-hour security, which is also close to popular amenities.
When deciding which renovations to do, you need to be sure not to overcapitalise. Neighbourhoods generally have a definite threshold for rentals and sale prices beyond which buyers and tenants are unwilling to pay more. If you renovate your rental property in a middle-income suburb to luxury status, you will not likely recoup your capital expenditure.
- Take into consideration the current value of your property along with other properties in your area.
- Find out which home features are most sought after as well as those that tenants consider undesirable.
- Keep in mind that you are renovating to attract suitable tenants, and don’t allow personal preferences to override practical decisions.
If you are on a tight budget, the following renovations will still have a big impact:
A fresh coat of paint will make your property look clean and bright, and adding a spot of colour here and there will make your property stand out from the crowd without adding to the cost. Innovative use of colour can also create the illusion of space and light in small, otherwise dark rooms. Warm colours like orange and yellow will add warmth, and atmosphere and a long narrow room will appear wider if the two longer walls are painted in a slightly lighter shade than the ends.
Updating existing light fittings can instantly change the mood of any room. For example, poor lighting can make a room appear dark and cramped, whereas a well-lit room appears welcoming and spacious. If your budget allows, install additional wall lighting for a contemporary look.
Outdated kitchens and bathrooms can detract from a rental property. For a quick upgrade, replace door handles and fittings like taps, shower heads, mirrors and toilet paper holders. If your budget allows, new floor and wall tiles will have a big impact. If cost is an issue, adding a colourful backsplash behind the hob or above the bathroom basin is relatively inexpensive but will add appeal.
Worn flooring can significantly age a property. Remove and replace wall-to-wall carpets and refinish or paint wooden floors. If your budget allows, replace old tiled floors with vinyl flooring.
Most tenants don’t want to spend their weekends gardening, so make sure that if your rental property has a garden, it is easy to maintain. Spruce up outdoor areas by planting some low-maintenance shrubs and plants. Make sure that lawns are level and easy to mow, with no fiddly areas that take up too much time to attend to.
Poorly executed renovations are far from impressive and often cost more in the long run when you have to call in a contractor to fix your mistakes. So, unless you are an expert, it’s best to leave renovations to professional contractors from the start.
If you do decide to tackle upgrade projects yourself, make sure you understand the scope of work that needs to be carried out. You also need to be sure you will have the necessary time to dedicate to the project.
With a little forethought, planning and research, you can add substantial value to your property. Estate agents with experience in your area will be able to advise you on the best way to go about achieving your goals.
Writer : Sarah-Jane Meyer