Let’s say that word again – BUDGET. This one, simple word is the one that should be paramount in all of your decisions within your project.
It should dictate if you buy an investment property that needs a renovation or not and it should dictate exactly what work should be carried out.
However, an unrealistic budget or a guesstimate will catch you out every time and will leave you with a negatively geared property or a large unavoidable cost that will take many years to recover.
Ask yourself why you are renovating, there should be only two answers.
Firstly, because the property has now become tired, it’s hard to let, and clearly needs refreshing to obtain quality tenants who will respect the property and pay top rents beyond the market.
Secondly, you have a specific area such as a bathroom or kitchen that lets your property’s overall rent ability down and needs to be upgraded to ensure maximum rent is achieved.
If your property doesn’t fit into one of those two categories, don’t spend any money on it. Renovation should always be viewed as a return on investment not a cost to your property business.
Let’s look at what you can do to make sure your renovation costs stay within budget and are the most efficient for your time and money.
You are not going to live in the property, so stay away from your favorite colours and putting things in because you would have them in your home.
Every decision you make at all stages, ask yourself this question; is the money I am about to spend going to enhance the rentability of my investment , increase my rent or add value to my property?
If the answer is”No” to any of these then don’t do it. You will be surprised how well you will do on staying within your budget and completing your project on time.
All too often we hear landlords say to us, “I really think that putting in those appliances will make the place look smart”, or “We put that fence up because we though the place needed it” (no matter that every other house on the street doesn’t have a front fence and it’s a lovely cul de sac where all the kids play on the road together).
Now let’s look at what makes and breaks a good renovation project, both budget and time wise.
I often see houses completely repainted that didn’t need to be and this is a waste of money.
Have the property chemically washed and then take a close look at the exterior, including the weatherboards or brick, windows, doors and the base of the property.
Can parts of it be painted at this stage and other completed later, with you still achieving the correct amount of maintenance and giving you the street appeal tenants will pay more for?
The same applies to garages, carports and fences. Keep your landscaping simple. Your local garden center will give you great hints and tips on how to do these works with minimal costs.
It is possible to renovate kitchen bench tops and units by resurfacing them. When taking into account this option you will also save on plumbing and electrical costs associated with a new kitchen.
However, you need to be very clear about the end product. If refurbishing units, change and upgrade handles, taps and tired appliances where necessary.
If your kitchen is beyond repair, look for outlet stores or large kitchen chains such as” Kitchen House” that provide quick delivery dates and a good product with a warranty for peace of mind.
Bathrooms take the biggest hammering from tenants and lack of ventilation (or refusal to open windows) usually results in the need for work to be carried out regularly.
This is one area that I suggest you spend more money on, in the form of a heat, light and fan.
A heavy duty bathroom fan which runs of the light switch with a overrun will provide some ventilation, thus reducing mould and condensation, and prolonging paint and overall bathroom life. Every property we personally own has ventilation in the bathroom.
If you do need to replace baths, showers and toilets shop around, there are some great package deals out there and DIY stores such as Mitre 10 Mega often have these at great value.
Don’t choose cheap tap ware unless you are confident parts are easily obtained. Costs for plumbers to service are very expensive and outweigh using good quality tapware, such as “Methven” in the first place.
Remember to get more than one quote for building, plumbing and electrical work, and explain clearly to your contactor that you have a budget and you expect their price to be fixed and not change.
Ceilings and Walls
Again, total repainting is often not necessary so clean down the surfaces thoroughly before you make a decision.
Wallpaper can be re fixed and painted over if you understand the process, and ceilings will often come clean with just sugar soap and anti mould products.
Painting quotes vary hugely and so does the quality. In our experience this is the biggest mistake investors make when renovating. Clearly understand what each quote entails and the finished product you will receive.
Always paint with neutral colours that will be available in years to come so that you avoid total repaints and can simply paint one wall in a room when necessary.
Use a contractor that works on investment property and you will not go too far wrong.
I was in another property yesterday where an investor had begun their renovation and was nearly finished painting throughout. I noticed the carpet was actually in good condition, but needed relaying correctly. It was ruined, as was the lino, by paint. The quote for new carpet and lino was $3,100 – a total waste of money from an investment point of view.
Both carpet and lino can be cleaned and does not always need to be changed.
Make sure you protect it during you renovation process. This particular investor was already over budget and wanting advice on how to cut costs to finish the project.
Insulation and Ventilation
Eight out of every ten homes I look at for investor clients have no insulation or ventilation system, and either suffer from cold, or damp, or both.
This is an area where we strongly suggest that you spend money. Not only will your tenants appreciate a healthier environment, it is our own personal experience that those homes that are warm and dry rent more easily and consistently obtain higher rents, especially in winter.
With government grants now available, there is no excuse when renovating not to include this in your budget.
Simple ceiling insulation, or under floor insulation, wooden floorboards or a Smartvent or Healthaire system makes huge difference to a property. We have seen properties painted internally become mouldy in three weeks due to no insulation or ventilation system in place – and that’s in Auckland.
If it’s structural, it’s going to cost.
Whether it’s for a builder, materials or for council consents, it means more time and more money.
Be very aware of what you are taking on and don’t cut corners, or you might just find your house is bending or sagging (we’ve seen it plenty of times before).
If you need to, spend the money and carry out the work properly.
Renovating for investment can be great fun and hugely rewarding, especially when you come in on time and on budget and the property rents quickly and for the maximum it can achieve.
Tenants in general will also appreciate a renovated property and are far more likely to stay for longer and treat it as their own home.
Top 10 checks for your next project
1. If it involves council engage a professional company or don’t do it.
2. Set a realistic budget and stick to it.
3. Don’t personalise ever
4. If you need to paint take a close look first
5. Don’t rip out your kitchen without considering a revamp of what’s there already
6. Buy items at sales or in bulk to get the best price
7. Your garden doesn’t need to feature in “Garden Monthly Magazine” get advice and keep costs down
8. Get more than one quote for all trades and products
9. Ignore insulation and ventilation at your peril
10. If you haven’t got the skill, contacts or enough time use a professional investment renovation company.
Mark Trafford Director “Maintain To Profit”