15 May Is any improvement going to improve the value and return on an investment property?
In today’s show Shannon Davis, from Metropole Property Strategists, answers the question of whether all improvements add value and return to a property.
Kevin: I often wonder – as you probably do, too – whether any kind of improvement can improve the value and return on your investment property. Is that the case? Let’s find out. Shannon Davis is from Metropole Property Strategists and runs the Queensland operation.
Shannon, would that be right? Any improvement is going to improve the value and return on an investment property?
Shannon: I don’t think the case is that simple, Kevin. I think many renovators and people trying to add value get it wrong in many cases. I think the biggest crime probably is just over-capitalization.
Kevin: What are going to be the best bangs for buck in your opinion?
Shannon: If we’re adding for rental yield, modernizing and adding modern conveniences to the property will add to your rent definitely – things like air conditioning, dishwashers, electric remote controls. All of those things will add yield to a comparison property that doesn’t have that. I would also add built-in wardrobes to that list of improvements. But if you are setting your house up for renovating for sale, it’s a different strategy again.
Kevin: Okay, let’s look at that separately. Getting back to the point you made there about putting in dishwashers and so on, if I were to do that and say it were to breakdown, am I therefore required to replace that?
Shannon: Yes, it is. If the property has been advertised with that feature, then the onus is on the owner to replace that. Look at extended warranties if you can as the best value for money, because a lot of appliance repairmen actually charge a call-out fee and sometimes by the time the call-out fee and the part are added, it doesn’t make sense for the investor to get it repaired.
Kevin: Is there a big difference between doing up a property to get the best return from a tenant in a house as compared to a unit? I guess they are two different types of things. In a house, you would expect to get a family, but in a unit, you’d probably expect to get maybe a couple of students or a couple of singles.
Shannon: Yes. I think having that demographic knowledge is really important so that you are doing the right things for the right type of people who are likely to be in that property. For instance, in an apartment, maybe a gourmet kitchen isn’t the best use of resources. People will be living smaller and busier, and maybe that’s not what the demographic will be requiring. But in a house, if you had a kitchen without bench space and pantry space, then that would be a big drag on the property, whereas in an apartment, it wouldn’t be so much.
Kevin: Some of the simple things like thinking about a family moving into a home that I might own that I want to rent out, if I do something like putting in fencing all around which will make it secure for the kids but also allow them to have a pet and then also making it a pet-friendly rental – does that make much of a difference?
Shannon: Yes, definitely. I think the biggest crime for a house is having it unfenced, because as you mentioned, the demographic is likely to have children and/or pets, and both of those will give peace of mind if it’s fully fenced. They are the most difficult properties to rent out when they’re unfenced and unsecured.
Kevin: Another question for you, another one of my pet hates is rental properties with pools. What is your opinion of that?
Shannon: I think they’re mostly avoidable. I think the top-end, the executive type rentals, most of those people do require a pool if it can be fully serviced, but if it’s a medium or average type rental, I wouldn’t be deciding on for the extra ongoing costs and I’d be looking for investment properties without.
Kevin: The bottom line if you’re going to be improving a property to give you a better return is think about the type of tenant who will be attracted to it and then what are the things that would turn them on.
Shannon, I want to thank you for your time. Shannon Davis from Metropole Properties in Brisbane. Thanks, mate.
Shannon: No worries, Kevin. Any time.