When you own your own home, renovations are about creativity.
But when you own a rental property, you need think about what’s practical rather than imposing your own personal tastes, say serial renovators Oliver and Michelle Pearson of Waikato Real Estate.
“The number one mistake is getting emotionally caught up in the renovation and adding unnecessary bells and whistles that appeal to your own personal taste,” Oliver says.
The couple have done up four rental properties in their 15 years of business, so they know how to stretch every investment dollar.
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Essential jobs to every house update, they say, are to fix the basics: clean or new carpets, refresh the kitchen bench, and give walls a paint. Tenants, whether they are first-time renting students or young professionals, appreciate the simplicity and overall tidiness.
But, Oliver says, if an upgrade is not going to help increase your rent, then there’s no point doing it.
“Remembering who you are renovating for and hold back from unnecessary spending,” he says.
Keep the interior simple and neutral and don’t invest in fancy kitchen or bathroom appliances. “Don’t get carried away on the personal level and buy all the 'nice-to-have' things in rental properties. You won’t get paid any more by tenants for buying all these fancy things.”
However, that does not mean buying the cheapest option. Cheaper materials or appliances will break a lot faster, so with replacement costs, end up costing more in the long run.
Oliver says rentals have a lot more wear and tear and tenants tend to use the facilities to the fullest.
“People that are renting tend to take less care than you would in your own home,” he says.
He also recommends hiring a project manager during the renovation to ensure it runs smoothly. Rent from the tenants is paying your mortgage and when they are out of the building, time is money.
“When renovating rental properties, as soon as tenants leave, you want to start your work on day one because every day you’re not renting it out costing you money.
“If there’s something you can do yourself that’s low skilled – do it on the weekend and save money. But I don’t think you should take time off work to try and fit the new kitchen top, you are better off paying a professional to do that.”
The Pearsons' cost-effective way to upgrade the kitchen is to replace the bench top and the tile splashback in the kitchen, and freshen the old kitchen cabinets with paint and new drawer handles.
“Sometimes you can even avoid replacing a kitchen top that has a burnt area from a hot pan by using a router to cut out a square section of the kitchen top and putting a nice heat-proof tile in the hole (be sure to use silicon sealer). It looks nice, very cheap, and now you have something proper to put a hot pan on.”
Often kitchens at boarding houses or university flats do not have an oven or a dishwasher but it doesn’t mean that you need install it. Oliver says there is a big market for this kind of living, especially in student towns.
“It only has place for a toaster, a plug-in kettle and a plug-in fry-pan. Investors who have those properties do very well and you have a high turnover of tenants.”
When renovating a rental property do not invest into landscaping or prettying up gardens.
“It’s only really families with children who appreciate a good garden. Otherwise, they will not want to spend their weekends mowing the lawn or tending to plants, so the cost of upkeep will come back to the landlord.”
Make it as low maintenance as possible by using hardy plants, limit the grass and use gravel or other stoned to fill larger areas.
If you have a spacious backyard or a garden it would be a better idea to maximise the cash return of your rental property by adding a second dwelling on it, says Oliver. Check with your council zoning, as you may be able to drop on a granny flat (or ancillary dwelling) that can be rented out for $300 - $400 a week. A brand new 35sq m unit costs about $90,000 with council fees, site preparation and utilities hookup, and interior finishes costs on top.
“They are very popular in Auckland. There’s a market for that, like a single person or couple saving for their own home.”
