5 Tips to Add Value through Renovation

September 27, 2011

Tips & Ideas

We cannot deny the facts of nature, but we should certainly try to improve on them.
— Mihaly Csikszentmihalyi

A valuable lesson I have learned is knowing exactly what will add that extra value or result in an increase in rental without going overboard. It is vitally important not to overcapitalise. It also pays to be aware that there are some things which may make a property look better, but will make very little difference to the return and are therefore not worth doing. You are, after all, involved in property investment nz to make a profit, e.g. if spending $10,000 is only going to increase the rent by $5 per week, it’s just not worth your time and effort. By the same token, if a $10,000 renovation is only going to increase the value of the property by $10,000, what’s the point? The trick is to know the ins and outs of renovating, which is all part of being as knowledgeable as possible about the area you are looking to invest in.

Tips for Renovating

  • Stick to the same price bracket – By operating this way I don’t have to get to know two separate markets. It’s all too easy to be tempted to renovate a more expensive property in an attempt to make huge profits. The trouble is that if you make a mistake and overcapitalise, or the market moves, you won’t be able to sell for a profit not least because no one will buy at the price you need to get
  • Revolve your deposit – When I renovate I’m always looking to get the rent and valuation as high as I can so I can revolve my deposit out as quickly as possible. The great thing about renovating lower cost properties is that they don’t need a lot of money spent on them in order to add a significant amount of value, while a high-end property might need $50,000 spent on the kitchen alone.
  • Talk to the experts – seek the opinion of my property manager, my real estate agent, and my valuer regarding what will add value to a property. All of them are very experienced and always give excellent advice. Coaches, such as the ones at PropertyTutors Ltd, are also great sources of information as they have many successful renovations under their belts.
  • Do a decent job – just because I am working in a lower cost suburb does not mean that I do a shoddy job. To many of my tenants my houses seem like mansions compared to the majority of available rental properties. It doesn’t take much more than for a property to be clean and tidy. You’d be amazed at the dumps out there for rent – houses with rotting carpet, holes in the walls, and filthy to boot. It’s not that hard, or expensive, to make my properties stand out well above most of the others, which means that I get exceptionally high rents for them. Doing a decent renovation also means I quickly gain a good reputation with real estate agents and property managers, who will recommend my properties to buyers and tenants over and above others that are on the market.
  • Cost the Renovation – OK, so we already know it’s important not to overcapitalise. However, while knowing how much value a renovation is going to add is all very well, you also have to know how much it is going to cost. Here’s how I do it, using my property managers, who are experienced at advising me about how much – or how little – renovation work to undertake. Each of them has a team of maintenance people who undertake all necessary repairs and improvements.

So think carefully and crunch the numbers before renovating, use the expertise of others to focus on what will give you the best returns and maximize your investment. Always consult your mentor and listen to their advice.

The above post is based on the book “The 15 Million Dollar Man” by Sean Wood, to read more click Property Investment and download 2 free chapters.

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