I am renting out a house to multiple tenants and would like to renovate to add value. How should I do this to ensure that any changes I make will be long-lasting and hard-wearing?
The buy, renovate and rent strategy is a powerful investment approach.
You need to research four things:
1) How strong is rental demand in your suburb for the type of property you have (i.e. rental vacancy rate)?
2) What is the rental rate you can achieve each week?
3) What is the tenant demographic likely to be - e.g. family or student?
4) Once the demographic is known, what are the tenants' needs?
To avoid overcapitalising, aim to spend ideally five per cent and no more than 10 per cent of your current property value (i.e. a rental property worth $350,000 should technically have a renovation budget of $17,500 to $35,000). If your rental return is not going to increase significantly, aim to spend substantially less again.
With the budget you have, make highly visible changes that a tenant can see and appreciate to warrant the higher rent - painting walls and doors, updating floor coverings, improving lighting. Good window furnishings and clean, practical kitchen and bathroom areas are what most tenants want and will pay for. Focus most of your budget on internal improvements and less externally.
Cherie Barber, director, Renovating for Profit