Looking for ways to add value to your investment property, by increasing yield, resale value or both is critical.
The yield on your property investment is one of the most important performance indicators and measures to improve its appeal to tenants is a great way to increase that yield.
If those measures also provide increased capital gains on your investment along with tax benefits then you’re onto a winner.
Renovations that increase a property’s rental appeal as well as its market value include a new kitchen or bathrooms, an additional bedroom, providing off-street parking or a garage and additional storage solutions.
Beware of over-capitalising and taking your property off the market with major renovations. The purpose is to make money. Carefully do your sums before rushing into any renovations.
Garage to bedroom conversion:
While a garage is a valuable addition, the space might be worth more to you and your tenants as a bedroom.
However, beware that there’s more to a garage conversion than just taking your car out and laying down some carpet.
Usually you will require council approval by way of a development application. You might be required to replace the garage door for a human door while you’ll need to address fire ratings, setbacks, minimum ceiling heights and have the whole lot certified by a building inspector.
Buyer’s should beware that many people do not convert their garage legally and that should be factored into the purchase price and potential rent.
If you purchase a property that has an illegal garage conversion, you cannot legally rent out that converted room. As always, it pays to have a good building inspector and solicitor advising you.
The housing boom has seen many states streamline the approval of granny flats in a bid to increase access to affordable housing. Regulations vary state to state and even council to council so research is key. As a rule of thumb you’ll need minimum land size of around 450 square metres and your granny flat should be no more than 60 square metres. It also must adhere to the building code.
A well designed granny flat in parts of Sydney could return up to $600 or even $700 per week in rent.
As usual there are a number of factors to consider, including but not limited to construction cost, council fees and design and landscaping to minimise the impact on the existing dwelling.
The big sibling to granny flats, a duplex conversion separates the title into two saleable assets and is essentially a subdivision of the existing property.
For the right property, duplex conversions can provide excellent returns however they are usually more complex than adding a granny flat.
Considerations include but are not limited to the land composition, size and frontage, local zoning, infrastructure and title. Engaging a town planner and other specialists is recommended.
Makeover and Marketing:
Adding new carpet, paint, appliances or furnishings can freshen up your property and increase its appeal to tenants.
Likewise, having professional photographers who understand the importance of lighting to capture the property at its best, along with a good property manager who is responsive to tenants will help attract and retain good tenants.
At 63 per cent, Australia has one of the highest rates of pet ownership in the world, according to a 2016 Pet Ownership report.
Thirty eight per cent of households have a dog and 29 per cent have a cat – figures that are rising – however a 2016 REIA survey of landlords found that 39.3 per cent would not allow pets and another 28.4 per cent were undecided.
By considering a pet in your investment property you could earn more rent and secure better tenants who stay longer – because no one else wants them.
We’re not suggesting you accept three wolfhounds in your brand new apartment, however the report’s reference to a rise in “fur babies” and the greater percentage of smaller dogs (37 per cent are between four and 10kgs and 31 per cent are between 10 and 25kgs) is to your benefit.
Raise the Rent:
So you have a good tenant. Yes look after that tenant, perhaps with some of the value-adding measures outlined in this article, but do not hesitate to raise their rent in line with “market value”.
You may be worried they will leave, however as long as you are charging market value then any property they are considering moving to will be similarly priced as your increased rent.
Important Note and Warning: This information is general in nature and should not be considered personal tax advice. We highly recommend you discuss these concepts with your accountant, property investment adviser and investment finance mortgage broker jointly to ensure any considered concepts are suitable for your personal financial situation, as one effect of the concept may negatively impact another part of your plan.