How can I increase the sale price of my investment property with a renovation?

September, 2017

Thanks to television series such as The Block, revamping a property has become as Australian as kangaroos, meat pies and Scotty Cam. Yet, investors could be burning a massive hole in their bank balances by failing to strategically plan and stage a home renovation.

We’ve all heard the nightmare stories about renovation budgets that have blown out by tens of thousands of dollars in additional building costs, causing financial hardship and stress. However, an investment property renovated in a slap-dash fashion can costs an investor a small fortune when the time comes to sell.

With any renovation or addition, an investor must ensure that it will appeal to future tenants and buyers. Otherwise a poorly considered short-term fix can end up costing a landlord significant money in lost rents or capital gains in the long-term.

As the top value-adding rooms, kitchens and bathrooms are known to sell houses. Pay extra attention to these rooms by replacing flooring or investing in new cupboards for the kitchen, and basins for the bathroom. Moreover, if you own a rental property, you may be able to claim a deduction for the construction costs of alterations, such as adding an internal wall, a kitchen renovation or bathroom makeover, according to the Australian Tax Office. It’s also possible to claim extensions such as a garage or patio, or structural improvements – such as a gazebo, carport, sealed driveway, retaining wall or fence are also tax deductible.

Typically, a kitchen or bathroom renovation prior to a sale will help remove possible buyer concerns that could substantively reduce the property’s sale price. As a rule of thumb, if a kitchen needs, say, $5,000 worth of work, many buyers will take their money elsewhere or seek a substantial discount as much as 10 times this amount. If you agree to the discount, it will take a massive chunk out of your profits.

That said, before renovating your investment property, be sure to talk to your local Raine & Horne agent. Better still invite them to the property so that they can provide bespoke renovation advice with a future, financially successful sale as the goal.