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House Renovation

10 Ways To Increase Your Rental Return by Renovating & Upgrading

How exactly do you plan a rental renovation?

Planning a rental renovation is very different from renovation your home. A rental renovation is not an emotional investment where you consider the needs and wants of your family members. A rental renovation is all about investing your money in the right upgrades and renovations to get the maximum return on your investment.

You want to add value so you can get a better rental yield and also be able to resell it at a good profit. The materials you choose and the areas you renovate are considerably different from when you renovate your home. It is important to understand this difference so you do not over invest in your renovation.

In this article we will first discuss the following:

  1. What exactly is rental yield
  2. the reasons you should invest in a rental property renovation
  3. whether a rental property renovation is the right thing to do for your current finances.

Finally we discuss in depth the 10 different ways that you can add value to your home and most importantly how you can increase your rental yield. Rental property renovations need a bit more planning than your normal home renovations as you want to be able to get a good return on investment.

Having the right plan is important before you invest into your rental property.

What exactly is rental yield?

If you are a property investor in Auckland, you are either looking at getting the maximum rental yield for your property or renovating to sell for a maximum return on investment. For the purpose of this article, we will be talking about ways in which investors across Auckland can maximise their rental yield through rental property renovations.

Rental yield is one of the most important figures for any landlord. It is basically the rent that they can charge for their investment property. You cannot however charge any number that you desire. The rent a landlord can charge is always in proportion to the value of the property. This is easily explained with an example of a luxury two-bedroom apartment that can yield $900 per week

whereas another 2-bedroom apartment in need of some sprucing up might yield only $450.

At every stage of your investment, you will have to carefully consider your rental yield. What is your realistic rental income versus mortgage payments? Many lenders will require you to show that you can at least get 125% of your repayments in rental income.

Not every renovation is the same or as important to your tenants. Some types of renovations offer more rental value than other renovations. Kitchen and Bathroom renovations are the top two renovations to add value to your property.

However, exactly why do you need to renovate your rental property?

Why should I renovate my rental property?

So it is really worth renovating your rental property? The answer is yes. Even simple renovations to your rental property can bring higher quality tenants who are willing to pay more for a comfortable modern home. They want a home that is functional, has all the modern amenities and is easy to clean and maintain.

Differentiate your property from other competitors by putting some thought into your renovation. Make it attractive for potential tenants and for future buyers.

Expert Tip: Do not renovate your rental property as you would your home. When you are renovating your home, you personalise your renovations according to your taste. However, your taste could be vastly different from your renter’s or buyer’s taste. If you personalise your property, then it could put a potential renter or buyer off the property.

When renovating to rent, choose materials that are easy to clean and maintain. This will make life easier for tenants but more importantly it will ensure that you have lesser wear and tear. Do not choose the most expensive hardwood flooring because you love it. Instead choose laminate flooring to mimic hardwood floors which are of a great quality, easy to clean, and fantastic for your budget.

Top 3 Reasons for renovating a rental property

  • Improve energy efficiency: Adding energy efficient appliances such as induction cook-top means lesser electricity bills for tenants as well as a great selling point when you plan to sell in the future
  • Increase property value: By renovating in a thoughtful manner you could add value to your property which would attract higher rent or fetch a higher yield when you plan to sell the home.
  • Improve renter satisfaction: Include good quality appliances for your renters. Good quality appliances such as dishwashers etc would mean that they will increase renter satisfaction and also there will be fewer fixes that you have to make throughout the tenancy.

Now how much is too much to spend on rental property renovations? Let’s look at budget planning for rental property renovations.

Is a rental property renovation the right thing to do financially?

Research is important when renovating either your home or investment property. But when you decide to renovate your investment property it is even more important to do some thorough research about the market. Your first step would be to see whether you are charging low, median or higher rent as compared to the average rent for similar properties. If you are charging below the median rent then getting the property renovated to add value would be a great idea. However, if you are already charging way above the median rent then renovating to add value would not be great return on investment.

Here are a few questions to think through:

  • How much will the property cost to renovate?
  • How much will it allow you to increase the rent if renovating?
  • How long will it take for you to pay off your cost of renovation with your new rental increase?
  • How much can you increase the rent of your property realistically for people to want to renovate your property.

Once you have conducted your research, it would be good to contact a renovation company for advice related to the areas that could renovated with the goal of adding value to your property.

Do your research and get several quotes from various companies compare them in terms of what they offer and the costs. Choose a company that can give you a fixed quote in order to avoid future budget blowouts. Also as this is your investment property, you do not want to spend too much time on the property managing things. Choose a company that can provide a Design to Build service while providing a project manager to over see the entire renovation from beginning to end.

10 Improvements to increase rental value of your property through rental property renovations

A lot of landlords see minor upgrades as an expense rather than a long-term investment. Experts suggest that keep the formula simple. Invest in small upgrades that add convenience to a tenant in order to attract a more interest for your property, higher quality tenants and better rental yield. In the long term you will more than make your money back. Following are a few minor upgrades to add convenience:

1. Increase the comfort of your home

Heat pump installation

Adding a heat pumps are an energy efficient alternative to furnaces and air conditioning. Summers and Winters in NZ often require either fans or heaters. If you install a heat pump in your home, you are bound to differentiate your home and attract tenants that are willing to pay more for this convenience. You can either get single units for each room, multi-level split units for multiple rooms or ducted heat pumps for central heating. Moreover, central heating will add value to your home when you want to sell in the future.

Insulation for your rental property renovation

A well-insulated house does not only provide health benefits but is also important to ensure the longevity of your property. A house that is not insulated will encourage the growth of black mould which is detrimental to the structure of your home. Black mould can seep into your walls and cause them to crack which in turn weakens the structure of the house.

Homes which are not insulated further deter good quality tenants and retainability of good ones. A home that is not insulated will not attract families as they can prove to be an unhealthy environment for families. Families usually are better tenants who will look after your home better that students etc.

Ensure the longevity of your property and increase rental yield by insulating your property. It should never be mistaken as an expense but an in investment.

Kitchen renovation in Hillsborough

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In the above project, the client had a leaky roof which was fixed and then followed by a full Kitchen renovation. The kitchen was renovated with Kitchen renovated by using materials that were low maintenance, durable and easy to clean. Laminate floors, Acrylic cabinets and engineered stone benchtop used. See full case study

Make sure your electric wiring is in good shape

Having your electric wiring in good shop might not translate into higher rental yield but it should be something you should check regularly. If your electric wiring is old and you have not checked it in a few years then it would be good to get a professional to carry out an assessment to ensure that it is in good shape. Bad, damaged or old electric wiring could be detrimental to the safety of your home and tenants. The sure signs of bad or damaged wiring could be frequent bulb blow outs or a fire.

2. Kitchen upgrades and Kitchen renovation

Gone are the days when a kitchen was a secluded room at the end of the house. Kitchen now is a very integral part of everyday living. Open plan kitchens are not just a trend but a way of living. Apart from structure and layout, easy to clean materials are a must if you want to attract good tenants and retain them. You should also use materials that are not hard to maintain such as hardwood flooring as you cannot guarantee whether your tenant will take good care of it.

Expert tip: Rental properties should never be renovated according to the owner’s personal taste. Too much personalisation can deter tenants as well as future buyers. When renovating an investment property use classic colours and low maintenance materials. Classic colours allow tenants as well as future tenants flexibility to mould the house to their tastes.

We have listed a few ways that you can get the most out of your kitchen renovation if you want to get a higher rental yield or add value to your kitchen.

  • Flooring Use Laminate or Acrylic if you are redoing your kitchen floors. Laminate and acrylic flooring are low maintenance materials which are easy to clean and cost effective. They can imitate any other type of flooring in terms of texture and looks which make them a highly versatile material. Unlike most cost-effective solutions, they are also very highly durable which means that they increase the longevity of your kitchen floors. In case you do want to change this type of flooring in the future you can do so at a fraction of cost compared to hardwood flooring.

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Property renovation in Avondale (see full case study) – Laminate flooring to imitate hardwood flooring

 

  • Cabinets and Drawers Changing or replacing your kitchen cabinets is a great way of refreshing the look of your kitchen. Most people think that it is cheaper to just change cabinet drawers rather than replacing the entire kitchen cabinet. This is far from the truth. This is because it is easier to manufacture entire kitchen cabinets rather than finding the right cabinet doors to fit your previous cabinet structure. The cost of manufacturing new kitchen cabinets, doors, drawers, drawer runners and shelving can range from $5,000 to $12,000 depending on the materials you choose as well as the size of your kitchen

It is also important to choose the right type of materials for your investment or rental property. Use Melteca for your kitchen cabinets to ensure durability and low maintenance compared real wood. Melteca is a highly versatile material which can imitate texture, look or colour of any other material. Melteca is also easy to clean and cost effective compared to real wood. This ensures longevity but is also easy to replace if you want to in the future due to low costs.

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Kitchen renovation in West Harbour (see full case study)– Acrylic gloss finish cabinets custom built for low maintenance 

  • Open plan Layout – Open plan kitchens are not just a trend but a way of living in our society today. If your kitchen is secluded at the end of the house, then it would be a good idea to call a professional to see how you can incorporate it into the living space. Breaking a couple of walls that separate your kitchen from the living room will create an open floor living that will generate more interest and a higher rental yield for your home. This will also add more value to your home if you plan to re-sell in the future.

 

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Kitchen renovation in Blockhouse Bay – Before walls were knocked down to make it an open plan space.

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Kitchen Renovation in Blockhouse Bay(see full case study) – After we knocked down the walls and made it into an open plan space

  • Energy efficient solutions – Install an induction cooktop for a safer and energy efficient solution for your property. While it is not mandatory by law to have a dishwasher, it would prove to be a differentiating point in a competitive market to have one in your rental property.

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Full rental renovation in Hillsborough (see full case study) – Induction cook-to installed in this rental property to add value

3. Bathroom Upgrades and renovations

Bathrooms are the second most important thing that rentals and buyers look at after kitchens in a house. Bathroom renovations and upgrades add considerable value to a home and increase the rental yield of a house. Our project managers have put together a few things that you can upgrade in your bathroom to get a maximum return on your investment:

  • Get your bathroom waterproofed, heated and well ventilated – Moisture is an enemy to your walls and structure. Professionally waterproofing and ventilating your bathroom will ensure the longevity of your property while adding comfort for your tenants. Waterproofing and ventilating your property will save you a considerable amount of money in the future in terms of damages

 

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Rental renovation in Hillsborough (see full case study)– We upgraded all fixtures and used low maintenance materials with minimum personalisation. This was an old and run down house but the owner wanted to renovate with the intention of charging above median rent.

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Property renovation in Hillsborough – Client replaced flooring, basin, shower and toilet with new fixtures. A few changes can make a world of difference in any bathroom. See full case study

 

  • Installing new Fixtures – A bathroom with dated fixtures will hardly yield high rent or even a good price when you plan to sell your investment property. Update your dated bathtub for a modern shower to generate more interest for your rental property. Dilapidated bathrooms often deter tenants and buyers alike. Upgrade your toilet, vanity and bathtub in under $12,000 to increase the value of your property as well as rental yield.

4. Painting for your rental property renovation

Painting your house is a great cost-effective way of increasing the appeal of your property and preserving it. Painting a home increases the perceived value of a property which in turn increases its rental yield. Painting walls that have started looking drab will breathe a fresh life into your property which will attract a considerable amount of interest for renters and buyers alike.

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Rental Property Upgrade – Before we painted the entire room

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Rental Property upgrade – After we painted the room

If you have wallpapers on some of your walls, then this would be a good time to remove them and paint your walls. When you are renting out your property it is good to remember that you should be using solutions that will be able to sustain the most amount of wear and tear.

Full Painting in Greenhithe

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Property renovation – We painted the entire house to add value to the property

Hence when painting your investment property, it would be a good idea to get it done with professionals and use oil-based paints. Oil based undercoats and paints are able to withstand a higher amount of wear and tear compared to water-based paints. Oil based paints are more expensive than water-based paints, but it will prove to be a better investment for your money and time.

5. Increase Curb Appeal for your rental property renovation

Aucklanders love to have an outdoor area where they can entertain family and friends during summer. Having a nice deck or outdoor area greatly increases the value of a property and also attracts higher interest from high quality renters. A nicely renovated outdoor area is the first impression your renter or buyers gets of your property.

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Deck renovation in Cockle Bay (see full case study)We replaced the old deck with a new one as it was dilapidated and unsafe for current use. The property had a lot of unused area around the house so we created a large deck to add value and convenience for clients.

Hence it is a good idea to invest a little money on renovating your deck or patio to a good standard. Deck renovations are inexpensive and a great return on investment for your property whether you are looking at getting a higher rental yield or increasing the value of your property before selling.

6.  Minor Landscaping

First impressions count when renters or buyers first see your property in Auckland’s competitive market. The right renters will care if your property is well maintained from the outside. Make sure you keep the garden mowed; the trees mowed and plant a few plants for some added exterior appeal to your property.

When it comes to selling your property, a well landscaped exterior can add between 5.5% to 12.5% to the overall price of your house. While interior design trends might fade, a garden only matures with age which adds additional value to your property. The best way to add value through landscaping is having a plan. An incoherent plan or landscaping can in fact deter tenants and buyers.

Come up with a plan before you start your landscaping project. Take some professional advice, do some research and then commence your project.

7. Change the flooring of your property

Carpets have traditionally been the choice of flooring for living areas of most Auckland homes. Carpets however are difficult to maintain and start to look stained and dirty quite easily. Before we renovate homes, we always ask our clients what their reason for renovating is. This is because this will greatly impact the type of flooring you choose as well as your budget.

As mentioned above, rental and investment properties should make use of low maintenance materials for their renovations. If you have a carpeted rental property which has started looking old and stained, then it is not going to generate much interest in the rental or even buyer’s market.

To increase rental yield, it would be a good idea to rip your old carpets and renovate your rooms with a good quality laminate flooring. Laminate flooring is low maintenance and highly durable which will extend the longevity of your floors. They are also cost effective which means that even if they get ruined during a bad tenancy, they will not be expensive to replace. They also come in various, colours, textures, and designs which means that you can make your rental property aesthetically beautiful generating higher interest.

8.  Small Aesthetic changes

If you are unable to invest in upgrades or renovations for your property, then think about making small aesthetic changes to your property. We have put together a few inexpensive ideas that you can implement to differentiate your property from competitors.

  • Replace old curtains and blinds with new ones to breathe a fresh life into your rooms. Old curtains can also make a room look shabby which is not what you want if you are looking for a higher rental yield.
  • Change your old stove top for a newer one. Kitchen is on top of the list for most tenants when they go for a house viewing. If you do not want to invest in a full kitchen upgrade, then it would be a good idea to change a few things to make the most out of your investment. An old stove top will deter potential tenants. A good quality stove top will only cost you $500 but even a $10 increase in rent/week due to this would get a good return on investment. The most popular and efficient stoves today are induction ovens. You can also opt for gas depending on your preference.
  • Change old taps in your bathrooms – Old yellowing and cracking bathroom tap-ware can deter tenants even if it might seem like a small thing. Spruce up your bathroom by changing all tap-ware in your bathroom without breaking the bank.

 

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BEFORE and AFTER(see full case study) – Replaced flooring + Bathtub + Taps and Painted the entire bathroom.

  • Trim and Maintain your garden and landscaping to ensure that your property is in a good and presentable condition. First impressions matter so keep your exterior neat and tidy before viewings.
  • Change your kitchen bench-tops from old Vinyl to engineered stone bench-top. This can instantly lift your kitchen up and notch and dramatically change its look. Engineered bench-tops are versatile in design and texture so you can play around with it to add to the aesthetics of your kitchen. Engineered stone is very cost effective, durable, easy to clean and will last you a very long time.
  • Clean before your viewings. It pays to hire professional cleaner to make sure that your property is presented at its best light. Clean the windows, dispose off outside debris, wash the exterior of your home and clean the interiors to attract good tenants who will be willing to pay more for your property. The idea is to sell a dream to the renters of a place they can call a home. Polish your hardwood floors to add some more shine and glamour to your floors.

9. Furnish your home for expatriates as renters

Auckland has many expats living here who come to the country for a few years and then leave. They usually look for a stress-free tenancy which is mostly paid by the company. Their ample rent allows them the freedom to pick houses that are well maintained, aesthetically pleasing and furnished well. High end rental property renovations should include furnishing the house as well to attract expats.

We would not recommend you furnish your property if you do not want to invest much money into your rental. Most renters in Auckland do not want furnished houses as they already have their own or they do not want to pay more for a furnished house.

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Property upgrade and Renovation in Saint Heliers (see full case study)– Client wanted to renovate to add value before either renting as a luxury apartment or even selling.

If you want to attract expats, then you must be able to invest a good sum of money into revamping it. Expats do not want to bother with the hassle of buying furniture as they would be moving in a few years. In saying that, they also will not compromise with a house that is garishly furnished or have inferior quality. This does not mean that you must carry out a full renovation and get the most expensive furniture.

The key is to furnish it with some good quality furniture and a house that is tastefully decorated. You can double your rental yield if you invest some money into upgrading and decorating your property. Tell your agent that you are aiming for expats and take some advice before you begin redecorating. You can get up to $1500 per week for a 2-bedroom home if you upgrade and decorate correctly. Some examples of such houses are luxury apartments in the CBD.

10. Add a dishwasher, washing machine and dryer

Installing a dishwasher, washing Machine and dryer are not mandatory by law but they add great comfort for renters. Rental property renovations should be about including basic amenities to attract good quality tenants. More and more people are looking for properties that will make their life better without any hassle. This is all about getting a higher rental yield that you are currently getting. What tenant will not pay more for a house that has three comforts compared to a house that doesn’t?

Also, remember that you are not competing with every house in the market but a market that is of your choosing. You want to attract renters that are good, will stay for a long time, can pay more and will keep your property in a good condition.

Should i renovate my rental property?

One of the main reasons for renovating rental properties is to save on the ongoing maintenance cost. Renovating your rental property also means that you can attract higher quality tenants and get a better rental yield per week which in turn gives you a better return on your investment.

How can i get higher rent?

Yes you can get higher rent through renovations and upgrades. People will only pay higher rent for a property if it has modern amenities and comfort to be able to justify the rent. Read our full article to see the type of upgrades you can do to get higher rent.

What are the best rental renovations for my investment?

The top rental renovations are Bathrooms, Kitchens, Flooring, Painting and comfortable upgrades like adding a heat pump. The aim is to spruce things up and add a level of comfort that most people are looking for.

If you have any questions about upgrades to add value for better rental yield or explore other options then – feel free to get in touch with the team at Superior Property Services – 0800 199 888

Disclaimer: These cost estimates are based on quotes we’ve sent to past clients and jobs we’ve completed ourselves. This article is offered as a general guide only. The views and information expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency in New Zealand. Any person who relies upon any matter contained in this guide does so entirely at their own risk. 

 

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References:

House Renovation

Guide to Renovating Rental/Investment Properties in New Zealand

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Are you trying to make up your mind about renovating your property or make improvements in advance before a new tenant moves in? or perhaps your renovating to increase the equity in preparation for selling?

When it comes to property investment, it is recommended you review your finances from time to time. Refinancing, at a better mortgage rate could help achieve a higher return. You may also want to contact your accountant or tax specialist to see if you qualify for any or further tax benefits.

Should I be spending money to renovate my rental properties, is it worth it?

In this article, I help you understand the maths behind improving your property and why undertaking renovations on your rental property could be financially beneficial, but also why you shouldn’t be renovating as well.

Some rental owners think that renovating their property isn’t financially worthwhile.

Common views from rental/investment property owners:

  • It is just a rental property. Even if I put in new fixtures and chattels in it, they will wear out anyway. Why bother?
  • I don’t understand much about the renovation. I’m not certain about where to begin or whom to talk to so it’s a bit of a risky investment.
  • If I make improvements in my rental property, it will be even better than our own home!

These are all valid points and not wrong to some extent, however we’re going to dig deeper to see what the data says. We will also address some of these questions in this article and hopefully provide you with enough information to make an informed/data driven decision that ultimately puts you financially better off.

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Calculating the potential ROI of your rental property after the renovations

A simple and quick way to do so is to approximate the annual rent increase after renovations are done. Then divide that into the renovation cost.

For instance, imagine you spend $7,000 on making improvements to your kitchen between tenancies. We don’t mean setting up a brand new kitchen, but renovations such as repainting walls and cupboards, new floors, replacing bench top or acquiring a new stove.

Consequently, you can obtain a higher rent, probably about $30 every week.

  • By attracting higher income earning tenants
  • To retain existing tenants with the upgrade (after the increase in rent)

You can determine your return by calculating your yearly rent increase (52 weeks x $30). Then divide your answer into the renovation cost ($7,000). You should get 0.22, and you can multiply this by 100 to get a percentage (22.28%) – and that is your return on investment, which will pay for itself after 3-4 years (assuming you’re not increasing rent further, and you’re not selling).

Real estate investors are always looking for a high return on investment (ROI) when buying rental properties. Higher returns can be achieved and influenced in many ways. Real estate renovation is one of those ways.

Renovated rental units justify a higher rental rate – but it’s important you’re spending on the “right” renovations. There are a couple of other factors behind real estate renovation:

  • To maintain or improve the value of the investment property through necessary repairs or replacements
  • To increase equity
  • Rental property improvements to attract better-qualified tenants
  • Tax advantages
  • Reduced maintenance
  • Lower vacancy rates

 

Five things you need to know before you consider renovating your rental

  1. When undertaking renovations on your investment property, avoid looking at it like it’s your own home, it should be a data-driven decision. What you want for your home is not necessarily what your investment needs to ensure best return.
  2. Create a strict budget and research thoroughly and ensure to create room for contingency for unexpected costs – it is common with renovations – for example, if you’re renovating the bathroom, you may find that there is water damage in the subfloor which is common with the older properties.
  3. Choosing the right renovations should not only increase the property value but also the rent.
  4. Good renovations are “bulletproof” In the long term, a durable renovation will outdo a fancy renovation.
  5. Don’t forget to consult your accountant, finance specialists and local renovation company (project manager) – get all your ducks lined up and make an informed decision based on data.

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Renovations that add value in the property

I want to make improvements to my property to add value. To achieve this, I plan to spend $15,000 to paint the interior and replace damaged carpets to increase my property value by $30,000 and similarly raise weekly rent by $30.

Sounds good in theory! But it doesn’t always plan out that way. We can definitely speculate the return on investment, and the increase in rent (but is that what the tenant wants?).

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If you are looking to renovate to add value, instead of looking at the “end result” first – begin with focusing on what you are in control of which is choosing what to renovate. By choosing the right renovations to begin with (within your planned budget) backed by data – the end result of the renovations is a given. Rental property owners tend to make the mistake of assuming what they think should justify increase the value or rent, but this subjective thinking leads to making the wrong decisions.  Be careful where you get your advice from as well, everyone seems to have an opinion on what they think you should do to your property.

So we’ve put together a list of renovations that proven to add value and justify increasing rent.

  1. Kitchen renovations

According to Realtor.com, kitchen and bath remodels offer nearly an 85% ROI, making them sound investments whether renting or selling. In lower income locations, renovating the kitchen can be extremely expensive and not worthwhile. However, there are simple kitchen cheats that you can use to ensure kitchen makeovers are cost-effective and still create an appeal. One of these is purchasing second-hand cabinetry online and using stain-block on your old cabinetwork. Perhaps even consider replacing the kitchen cupboards and draws assuming the carcass of the kitchen is still in good condition. For mid to high income locations, a full kitchen renovation is definitely worth considering because it would appeal more to the target audience. But with both options, consider the value of your property and make sure not to overcapitalise.

  1. Street appeal

Although this appears overly simple, re-staining your fence, painting the roof and installing a new letterbox can give your home a new look that appeals to buyers and renters alike. This kind of renovation is best suited during spring when the weather allows you to paint outside, and your paint will dry quickly because of the warm weather. If you’re looking at selling the property, painting the home is the most cost-effective way to give the home a spruce up.

  1. Bathroom renovations

A bathroom renovation is widely considered to increase the value of home significantly and it’s been stated by Business Insider that it can be up to a 70% return on investment. Whether a renovation is structural or simply cosmetic, an attractive bathroom will always appeal to the savvy buyer. But again, the decision to make minor alterations to the bathroom or to fully renovate the bathroom comes down to the location of your property (it would resonate with the target audience, eg Location with mostly growing families would prefer to have a bath), and to ensure you’re not over capitalising. Get the right lighting – Plenty of light is essential for a bathroom, but so is a warm and cosy glow. Check your lighting and see what you can change to make your bathroom appeal to your type of buyer.

  1. Gardening & Landscaping

A smart garden appeals to everyone, and it all narrows down to your audience in the location (families, working professionals, or flatting situations). One thing to note is always go for plants that don’t need much gardening time or maintenance – don’t expect tenants to look after it (if they do, great!). These may be natives that are endemic to your area. Always ensure that your garden’s front lawn is tidy and trimmed. Also, berms ought to follow suit.

  1. Floor Renovations

Carpets in old rentals act as hind outs for various crawling insects, including such as ants. While a carpet can be costly, there are cost-effective options to acquire one.  One of these is purchasing in bulk. You will buy them at a reduced price, and you can use the extra carpets across your multiple rentals.

The most common floor renovation for rentals is converting from Carpets to Laminate flooring for multiple reasons such as:

  • Laminate flooring is much more durable, which means it will last longer then carpets (which leaves marks). After a while, carpet will start to fray and show obvious signs of wear. Although landlords can request for the carpets to be cleaned, it’s not going to stop it from general wear and tear. It’s important to note, landlords cannot get compensation for fair wear and tear, and distressed carpets usually fall into that category.
  • Tenants are becoming more health conscious and carpets are much more prone to attracting and clinging onto dirt, which means they get dirty quickly and need to be cleaned regularly. So it’s preferable to both buyers and tenants that if they’re choosing a property, laminate flooring would be ideal.
  • Laminate flooring is easy to clean and maintain, the process only requires a very moderately damp cloth and a sweep. For a thorough carpet clean, a specialist vacuum and shampoo is required, and it becomes more of a problem when there is spills/stains (which in some cases don’t come out)
  1. Painting

Always seek professional painters to do the job – it seems like something that can be done by yourself but if not done properly, it’s very obvious and visible. Here’s an article that outlines whether you should DIY or Choose a Professional Painter. The most common painting project clients undertake is interior and exterior painting (not so much roof, normally a roof wash is sufficient), or replacing wallpaper to painted walls.  Painting the property is one of the easiest and most cost-effective way to improve the perceived value of the property especially if surfaces look tired – it is also value added to potential buyers and renters. Check out blogs from Superior Painters (North Shore) for more information on painting your rental property.

  1. New curtains and Blinds

Normally something easily forgotten – but it does make a difference. To give your property a refreshing impression before selling or renting it. Installing/purchasing new blinds and curtains can be as low as $2,500 for standard 3 bed home (8 windows).

  1. Call in your mates

While you can have someone to provide their services in your house within a day, you can accomplish the same tasks or even more in much less time with your mates. Besides, you will have more fun doing it together.

  1. Let there be light

Light shades offer decent and stunning looks in your rooms, but they can get pretty dingy after some years. Although it is relatively simple to get a replacement, you can restore their new and fresh look by performing an effective scrub. A common choice we get from home owners and rental property owners is replacing all the lights in the home to LEDs, for the following reasons:

  • LED lighting uses less energy (90% less energy)
  • LED bulbs last much much longer (landlords are responsible for replacing)
  • No need to change the fitting
  • LED bulbs are coming down in price every day!
  • And lastly, LED lighting is the preferred choice for all new builds now

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What is the cost of renovating a rental property?

We need to be certain that the costs of carry out a renovation will be recovered in the long run through increased capital and rental appreciation.

The cost of renovating a rental is different (due to requirements) compared to if you were renovating your own home because:

  • Choice in materials – you’ll lean towards durability and what is cost effective
  • Features and extra amenities will be limited, functionality will be more important
  • Design will not be on top of the list, for example, you would rather choose to go with an acrylic shower base than a full tiled shower/bathroom.
  • Choice in fitting/product supplier will be on the lower end (but still good enough quality to be durable and long term) – although in saying this, taps, shower heads/fittings and mixers, always choose the better quality option over the cheapest.

Here is a break down of costs you can expect to pay for different renovations:

Note: Copied from our article on: How much does it cost to renovation in Auckland for 2019

TYPE OF HOUSE RENOVATION COSTS COST RANGE
Heat pump $1,500 – $3,500
Renovation Management $1,200 – $3,000
Electrical $2,200 – $4,400
Plumbing $2,700 – $4,200
Builder $15,000 – $25,000
Joinery (windows) $4,000 – $7,000
Insulation $1,000 – $3,600
Roof $4,400 – $9,600
Interior Renovation costs $40,000 to well over $100,000 (dependant on size of home and specs)
Renovation Costs Bathroom Starting at only $8,500 for a basic alterations to an average spend of $18,000 – $22,000 for a full bathroom renovation.
Renovations Costs for Kitchen Ranging from $2,000 to $5,000 for minor alterations (changing cupboards and draws) to an average spend of $22,000 – $28,000 for a full kitchen renovation.
House Extension cost $100,000 +
Recladding cost $150,000 +

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Common mistakes made when renovating an investment property

In most cases, the renovation of investment properties is regarded as an unfailing plan that guarantees an increase in rental returns.

While this seems straightforward, the truth is it’s not always the case because when operating in an unstable market, the monetary gains of improving a property may be outweighed by equity loss.

Here some mistakes that are made by renovators of investment property.

  1. Ignoring market trends and audience in the location

Some people who have owned investment properties for over a decade tend to think that they are in an advantageous position to carry out renovations. But what they might not know is the market keeps on changing. Such changes range from interior designs, property value, to tenants’ tastes. Thus, you are likely to miss out on your projected returns by ignoring current market trends. So before renovating your property, undertake research on recent sales of property, analyze current trends in the market, and consult those in the property industry business. A good example is like people leaning more towards properties with LED lighting (as mentioned above).

  1. Failing to monitor the rental market

Monitoring rental markets are often not in the priority list of most property renovators. But property prices keep of changing, and if you don’t monitor their trend, you might be left with vacant properties to fill after prices fall. If you have old properties, you need to keep monitoring the rental market to ensure they remain competitive.

In saying that, if the market is flat lining and not appreciating in value – it might be a good time to renovate to increase it’s value if you are intending to sell/ or increase rent.

  1. Tenants living in the property

If there are tenants residing in the property you are renovating, it will cause rental income loss if they need to move out while renovation works takes place. You may also be responsible for their belongings (storage cost), electrical bill, and water bill.

To avoid all these issues associated with tenants living in the property, make renovations plans in advance and plan out the renovation in stages to minimise loss rent – try to avoid having the tenants move out or do it when they are away on holiday. For example, if you’re renovating the bathroom, hire a porta-loo for them to use for the time being (negotiate a reduction in rent as a compromise as it’s not exactly ideal). Make appropriate scheduling for delivery of renovation tools and materials to minimise issues with the tenants.

  1. Overcapitalising

There are cheap alternatives that smart renovators use to minimize costs while providing added value to their clients. But cheap renovations doesn’t always mean the best return on investment, it may even be detrimental (dependant on the location of the property and the target audience).

You need to recognize the amenities and services that drive tenants’ demands. Some alternatives will drastically minimize cost and end up with a finish that delivers projected value and results.

  1. Refinancing to renovate

You are likely to get into arrangements that don’t pay off, for instance, by extending your home loan to cater for your property improvement. This is because a huge portion of your returns will go into loan payment.

If you must borrow to carry out renovations, you need to be confident that your improvements will bring about higher rental returns. This will help you to evade risky situations of making zero returns, considering the unstableness of the market. We’ve put together an article exactly for this, on how to finance your renovation via loan – courtesy of Linda from Loan Market.

 

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7 questions to ask before starting renovations on your rental property

  1. How will renovation influence my rental returns?

This should be the first question you need to consider before considering any renovation. Understand your reasons for conducting a renovation and what you’re expecting in return financially.

For example, renovating a devastated three-by-two house can increase the weakly rental rate by $50. (at a minimum, always use minimums to determine affordability – not what you think it’s worth) –  Your weekly rental rates might shoot from $320 to $380. In a year, you will realize an extra $2,600.

Remember to be realistic with your estimations and projections. Don’t invest less and expect huge returns.

  1. Repair or replace?

Never replace things that can otherwise be repaired or fixed. Since renovation is an expensive undertaking, you need to save it for those areas that require it.

In case you are working with a limited budget, and you still want to increase your returns, try these:

You can give your kitchen a new look by replacing countertops and handles, and replacing the cabinets/draws. Replace carpets and repaint walls to give the home a new freshness to it and give the impression of it feeling new.

Instead of thinking about replacing your kitchen sink or bathroom vanity, just cut costs by replacing the tapware (makes a bigger impression, if the cabinet is still in good condition)

  1. What you should renovate (important)

Focus on vital and functional areas like the bathroom and kitchen, where tenants are likely to spend much time. Restoring these areas will have a huge impact on the daily living of tenants and rental returns as well. Is renovation vital to tenants?

Not every renovation work is important to your tenants. Some restoration will only enhance the resale value and not the rental value. For instance, a new toilet may appear good in the house; a tenant may regard it as just a toilet.

For your rental property to appeal to tenants, focus on aspects that are regarded highly by tenants. This includes having additional space or room and installing a heating pump for cold seasons.

  1. Which material do you plan to use, and are they practical?

Although maximizing your property’s ROI is vital, you need not compromise on quality. Cheap fixtures and repair materials are prone to wear and tear fast, and you will be called to replace them sooner than you expected (focus on long term return/cost)

Besides, analyze the prices for different materials as they are likely to vary from one hardware store to another. Ensure that the materials you have chosen are suitable for your rental. About renovation materials, think more about their durability and not just costs. You will maximize your ROI by using long-lasting materials and it’s not an area to cut costs.

  1. Is it too little or too much?

You shouldn’t overcapitalize the upgrades. In other words, keep it simple. The majority of the tenant will not bother to know how much that you invested in the renovation. They just want to have it functional so that it can fulfil their needs.

Be flexible in terms of considering cheaper but quality accessories. Also, think about the locality of your rental property and determine whether your upgrades would warrant an increase in rent (is it important to your target audience).

  1. Is it a legal obligation to your tenants?

In New Zealand, rental laws are continually changing. From installing smoke alarms to making sure your property is healthy and safe, you should comply with all the legal obligations about rental properties and focus on these first before any other renovations/alternations.

It is worth noting that all forms of renovations should reflect and conform to the set laws as well – so make sure you’re using companies that are able to provide certificates/warranties. Rent increase also needs to conform to established stipulations. This includes giving advance notice prior to the increase.

We hope this guide has been helpful, and it gives you enough information to make an informed decision about renovating. Do let us know if you have any questions, and we would try our best to answer every question posted. Lastly, don’t forget to share your experience and tips that’s not mentioned here that you think will be valuable to those interested in renovating your rental property.

 

 

Please note: Whilst all information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact on the accuracy of the information. The information may change without notice and Superior Renovations is not in any way liable for the accuracy of any information printed and stored or in any way interpreted and used by a user.

 

To wrap up

Should I renovate my rental property?

Depends on what you’re trying to achieve and what you’re renovating, not all renovations are equal and all delivers different returns on investment – including a number of variables to take in consideration such as location, target audience, financial circumstances, current market trends etc

What renovations can add value to my rental property?

Kitchen renovations, renovations to increase street appeal, bathroom renovations, New Curtains and Blinds, and Lighting are amongst the most common renovations.

What are common renovation mistakes made with rental properties?

Ignoring market trends and audience in the location, Failing to monitor the rental market, Tenants living in the property, Tenants living in the property, and Refinancing to renovate if they can’t afford to.

How will renovation influence my rental returns?

Understand your reasons for conducting a renovation and what you’re expecting in return financially. For example, renovating a devastated three-by-two house can increase the weakly rental rate by $50. (at a minimum, always use minimums to determine affordability – not what you think it’s worth) – Your weekly rental rates might shoot from $320 to $380. In a year, you will realize an extra $2,600.

 


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WRITTEN BY SUPERIOR RENOVATIONS

Superior Renovations is quickly becoming one of the most recommended Kitchen Renovation & Bathroom Renovation company in Auckland and it all comes down to our friendly approach, straightforward pricing, and transparency. When your Auckland home needs renovation/ remodeling services – Superior Renovation is the team you can count on for high-quality workmanship, efficient progress, and cost-effective solutions.

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