Need some ideas for renovating your investment property?
The secret is to remove emotion from the process - this is different from renovating your own home. Instead you need to think practically and use fittings, fixtures and materials that are not only functional, but look good and are going to stand the test of time.
You also need to be careful not to overcapitalise and spend too much on your reno. Remember every cent you spend reduces your ROI, and making the maximum return on your investment is your top priority.
Take the time to put yourself in a tenant's shoes and think what features they'll need and appreciate. If families are your target market, then installing a bath is a must, as is air conditioning in a north facing property.
As you can see all this makes planning your investment property renovation a must.
Planning your investment property renovation
The first step is to identify what you want to do to your investment property, specifically the scope of works. Then research the cost of this - taking into especial account the materials and labour involved.
You can then start to create a budget - preferably detailed in a spreadsheet to work out what you have to spend and how you'll be funding the project. This is especially critical if you are undertaking a large reno, with multiple contractors, materials and timelines.
Be aware that any structural works, that involve as knocking down walls or stripping out whole kitchens and bathrooms are inherently expensive as they are labour intensive.
The kitchen is a crucial room in any home, and an investment property is no different - so make sure this space is practical, has everything you could possible need - like plenty of powerpoints - and is made of durable materials that can stand a beating.
Crucial elements for a modern kitchen include rock solid cabinetry that's built using a moisture resistant carcass, as well as plenty of benchtop space for food prep and serving.
Benchtop materials range from natural stone and engineered stone (expensive) to laminate (mid-range), and all have pros and cons. Laminate is sturdy enough to withstand daily use but is unlikely to last as long as the other two options, though these are both more expensive.
Flooring should be practical - with laminate, cork and tiles as some surfaces which tick the value/durability box.
Now let's look at the other crucial room in any home - the bathroom.
Everyone loves having a clean, practical bathroom to retreat to, so make sure your investment property has an inviting space for your tenants - they'll really appreciate it!
Renovating a bathroom is all about making the most of what you have - and focusing on cosmetic upgrades like installing new shower screens, swapping out the vanity or changing out the tapware. These changes alone can alleviate and freshen up a tired space, and make it feel totally new.
If you have to rip out wall and floor tiles, keep in mind costs will escalate, but if you choose ceramic this can help keep your budget in check.
Need to do something more ambitious, like adding a room or extension?
If you're considering adding a room or extending the property in any way, be aware of the cost implications, as well as the timeframes involved. Structural works are often expensive simply because of the labour involved, as well as the red tape of getting approvals for your project from the local council.
Professionals like architects also charge accordingly for their time, as do builders and all the other skilled tradies - like sparkies, plumbers and tilers. For this reason, you'll need to get accurate quotes and work out how long your property will be sitting idle, and not earning any income/rent, as this will impact your ROI in the short term.
If the cost and hassle of structural works has put you off, the good news is that there are plenty of budget renovation ideas to help you refresh your property without blowing your budget.
Budget renovation ideas for your investment property
Major renovations can suck up a fair chunk of your budget, so it makes sense to be budget conscious when planning your project.
Here are some budget renovation ideas to inspire your next project:
- The most budget friendly way of refreshing any property is to paint the interiors. Opt for a neutral, light colour that makes the space feel spacious and airy.
- Compromise on kitchen and bathroom fittings and fixtures by sourcing copies of more expensive brand name items, like freestanding baths, lighting or vanities.
- Instead of retiling your entire bathroom - walls and floors - simply resurface them at a third of the cost.
- Don’t move any plumbing in your kitchen or bathroom, as rerouting this will be expensive and time consuming. Rather, keep your sink/bath/shower/basin/toilet where they are, and avoid this unnecessary expense.
- Opt for a tiled splashback instead of glass in the kitchen, as glass is expensive to buy and install.
- Refresh any room with new blinds, curtains or shutters. This is a great cosmetic option which is also relatively cost effective.
- If your kitchen needs new cabinetry go for a flat pack. There are excellent options from IKEA, Freedom and other furniture stores.
You can also save in other ways, like becoming a member of Renosave, Australia's #1 Renovating Discount Card. A membership with Renosave will help you save by giving you access to exclusive discounts, offers and savings on home renovation products and services that you would normally have to pay full price for!
What are the tax implications of renovating an investment property?
As an investor, you need to be across your tax obligations. Major renovations, such as refurbishing a kitchen or bathroom are classed as capital improvements by the ATO.
You can claim these as capital work deductions, but not in the year you carry out the works. Instead these are deducted over a number of years on a sliding scale, depending on when your property was built.
Best to consult the ATO site, a tax adviser or accountant if you are unsure of how all this works.