What does an effective renovation look like?
If you're buying investment property, sometimes renovations can be a great way to get the most out of it. The right additions can increase the base value of the home, as well as boost its appeal to prospective tenants. It's like killing two birds with one stone (or one marble countertop!)
But the trouble is, it's hard to know what's appropriate for your property. We've looked at how overcapitalisation can impact investment property, but what does an efficient and effective renovation actually look like?
One for the long term
If you want a renovation to add value, think about how it'll impact the home in the long term. This isn't just for the tenants or a buyer down the line, it's for you too! Thinking about the short term alone will probably set you back.
Remember, the New Zealand government has recently introduced taxes for investors that re-sell a home within two years of buying it if it isn't their main home, so renovations that suit you could help you live there and still make a healthy profit in the long run.
One with a contingency plan
Sometimes the cost of renovating will be big, especially if you're putting in work on an old home. For example, Refresh Renovations thinks a budget of about $20,000 is appropriate if you're completely redoing a bathroom. On the other hand, Resene often runs case studies for renovations that only needed a bathroom budget of around $500. Regardless, you've got to have a rainy day fund for when things go wrong.
For instance, what if you pulled up the floorboard in a bathroom only to find the piping underneath needs to be completely replaced? Adding another ten to fifteen per cent to your budget could be a good idea to make sure those 'little surprises' don't prevent you from completing the work.
One that reduces the cost of living
Something that any tenant or prospective buyer will love is a home that doesn't break the bank in terms of power and water bills. With this in mind, updating insulation in an investment property could be a surefire way to ensure an effective renovation.
This might not just cut down reliance on electric or gas heating, but it can also create a healthier home environment. It also gets you in line with the Healthier Homes bill - or you might want to take advantage of the subsidies available under this legislation.
Whatever you do, make sure you're doing it with professional help and a well-thought out plan. As for funding an investment property? That's where we can step in and help you out.