Many investors tackle a reno to get more rent, but that’s not why we renovated most recently; it was to do the right thing. Let me explain.
As I’ve talked about for the last month or so, I had to renovate a property I have in. When I got it, it was in a pretty bad state, so we had to go through preventative renovations.
Before these, it was rented out at $350 per week, but after spending $20,000 on the whole reno, Steve, who operates on our behalf as our buyer’s agent, tells me that the market has come down a bit. The last tenants were a large family who paid for the privilege of being there, so he tells me we should expect $350 at most, if not less.
So, the reason why we're doing this renovation is not to try and get more rent. It's about making sure we can have a property, which is going to be a more attractive to other investment properties in the market. Therefore, we can have a sitting tenant and a sticky tenant that's going to be there for the long term. That way we can realise the benefits of time, and in this case, it's hopefully price growth.
We’ve manufactured some equity here, and we're spending $20,000. What that's going to translate into an increased equity, I can't give you that number, but at a point in time when we review this property and potentially seek to draw down some equity, we'll do so and I'll talk about that down the line.
If we didn’t spend on the renos now, Steve tells me we could end up spending nearly four times as much if we left the property alone.
For example, some of that stuff is just making sure that your balustrades around decks are of the right height, and that costs a lot. Steve tells me there’s no capital or cash flow upside, but as I talked about with Steve, it’s more of a moral responsibility.
I mean, I've got young kids, last thing I want them to do is to climb over it and jump over something. You’ve got to do the right thing, and that's important as a property investor. If you're privileged enough to be able to invest in property, you need to understand that you are actually creating a home for someone else, so make sure that you are doing the right thing.
If you're unsure about what the right thing is, there's plenty of people out there to tell you what the right thing is. You know, you can get licensed builders in and they should be able to do an assessment of your property to make sure that balustrades, for example, are the right height. Even if it's just rather than having horizontal slats or vertical slats on your balustrades, it's an important thing.