Ever wondered if that do-up will pay dividends?
Kishan Lal from Clarke Group Property Management knows how a property makeover can translate to more rental income. Talking with mortgage broker Hamish Patel, he shares some success stories that give every property investor food for thought.
Manurewa 3-bedroom, 1 bathroom
“In today’s market, this property would go for maybe $550,000 – $650,000” notes Hamish. After spending about $50k on a do-up, the transformation is worthy of any TV makeover show, with dingy rooms opened out to create bright, free flowing space throughout the interior. Fresh, light paint work and simple modern furnishings complete the look. “Before the renovation, rent was around the $560 mark, but after doing the full renovation, everything including the roof, he was looking at around $600 – $630” says Kishan. The increase is around $3700 a year in rent, while the interest cost on $50,0000 would be about $2250.
Mangere 4-bedroom, 1 bathroom
Mangere remains one of the more affordable South Auckland suburbs. A property like this would normally sell for $600,000 – $650,000 prior to renovations. “Your tenants would pay about $600 per week” advises Kishan. The renovation swept away cramped orange woodwork from the 70s, replacing it with smooth charcoal and flashes of white and silver. LED lights and neutral paintwork add to the clean, modern feel of the new and improved property. Of interest, a wall was added to divide the bathroom, creating a separate room for the toilet. “It’s one thing to note when you’re doing your renovations, try and think in terms of the tenant, what they’d find attractive.” In a flatting situation, being able to use the toilet while someone else is in the bathroom is helpful. After do-up, the rent was around $700 – $720. For a $50k investment, the yearly increase in rent was around $6250. Interests costs still sit around $2250 (at 4.5%). As Hamish observes, “the $50,000 you spent hasn’t disappeared, because the value instead of buying something like this at $650,000 – $700,000 is probably worth closer to $750,000.”
Otara, 4-bedroom property and 3-bedroom property
These properties are situated on the same lot, both have one bathroom. The total renovation cost for the two properties was $80,000. The fresh new look led to a combined annual rent increase of $11, 900. The interest cost per annum for $80,000 is about $3600, leaving a profit of $8000 per year from the modest makeover. To enhance the street appeal, a large tree was removed, making the entire site sunnier, spacious and more visually appealing.
Top tips from Kishan:
- When you’re doing your renovations, try and start from the letterbox to the front door. Street appeal matters, because first impressions count. When your tenant comes to view the property, the first things they’re going to see are the letterbox and the front door.
- When you try and renovate, for every dollar you spend try and get back two.
- Try to do cosmetic renovations instead of structural, which can involve the council
- Always try to add value, add a bedroom or a bathroom.
- Don’t fall in love with the property, remember it’s a business and it’s there to make you money.
- Get a rental appraisal from a trusted property management company and get their thoughts on what will happen
Contact Kishan – Clarke Group Property Management
Kishan Lal BE(Hons), 021 0240 5380, kishan@cgpm.co.nz
Get the ball rolling with Hamish the mortgage broker
Hamish Patel, 021 625 693
Lets get started
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