In this day and age, a $20,000 renovation budget won’t get you terribly far. So where should you put your hard-earned dollar?
I’m a big believer in the “goal drives the strategy” approach. What’s your goal? Is it to increase cash flow, increase equity, sell or is it simply
Once you are clear about your desired outcome, then chat with the respective parties involved.
- If your goal is increasing cash flow, ask your tenant what they would pay more for.
- If you want to increase your equity position and add value, chat with your valuer. Why not take them out to lunch and pick their brain? It’s cheap
- If you plan to sell, ask a few real estate agents or your listing agent what their buyers are after. Don’t assume that you know what will work:
be open to advice. You don’t have to take it, but you do want to be making an informed decision.
The traditional renovation always includes the kitchen and bathrooms, but you need to be able to validate your decision. Will the investment of a $10k
kitchen give you a multiplied return on the investment or should you just replace the faces?
Another factor that you may like to consider is rentability. Rundown homes tend to attract rundown tenants. If you want to attract a house-proud
tenant who will take care of your property, pay on time and in full, then you will need to have a home that attracts that type of person. You may
get away with old carpet, but a couple of coats of wall and ceiling paint will likely lift the house and make it feel more like a home.
Best Bang for Your Buck
With a small renovation budget, look for the biggest bang for your buck and remember to consider the street appeal. A $50.00 letterbox and a painted
fence may help to get your property let more quickly, as most prospective tenants will do a drive-by first. If your mailbox looks like it’s been
in a fight with a tiger, get rid of it. Last year I sold a property down a right-of-way, and I convinced the other owners to pay for some of the
paint to repaint the fence. I did a cheap and cheerful job and even replaced some mailboxes at my cost. Why? Street appeal: if the place looked
like a ghetto (and it was a ghetto) nobody would come any closer. A few hours work and a few hundred dollars paid big dividends for me,
as I sold the house for top dollar.
Whilst not directly a renovation, last year I was exploring the option of adding garaging to a development. Based on research I carried out, it seems
a garage may increase my income by $20-$30 per week, whereby a room would increase my income by over $100 per week. Because I am not looking to
sell, and cash flow is more important than garaging, I won’t be adding garages.
Talk to the Experts
In a similar vein, I had a conversation with a registered valuer about tiling the bathroom. Should I tile the floor, shower and walls? It’s looking
pretty after all. The short answer was no. I have therefore decided to part-tile the walls only. This will cost me a whole lot less and still create
a ‘wow factor’ without breaking the budget, and it will help to avoid potential maintenance issues down the track. Doing up the bathroom, even
a little, will help to command a high rent.
In closing, if you’re clear about your desired outcome, you ask for advice and implement your $20,000 renovation based on data, you won’t go too far
Toby Yorke has been investing in single-family homes since the late 1990s and has owned multiple dwellings in a variety of cities around New Zealand. He recently consolidated his portfolio and is working toward early retirement using property investment as the vehicle.
ABOUT THE AUTHOR
Toby is a long time APIA member and a frequent contributor on the APIA Facebook Group.