Top 10 value adding renovation tips
Boosting a property’s value via renovation is the Holy Grail for many investors, but can be easier said than done – so here are our top 10 value adding renovation tips.
Friday, March 31st 2017, 1:00PM
by Miriam Bell
Be they investors or owner-occupiers, New Zealanders have long had a deep love of renovation. But for investors, renovation work presents solid financial opportunities.
An effective renovation job on an investment property can boost capital gain, increase the potential sale price or make it more attractive to tenants thus upping the asking rent and cash flow.
So we asked two successful investors-renovators – Ronovationz coach Roy Adams and “The Invisible Millionaire” author Jonathan Bidmead – to share their best tips on how to maximise the value in a renovation.
1. Effective capitalisation
Don’t over capitalise is the most frequently heard mantra on renovation. Roy Adams said this is an obvious risk, but under-capitalisation can also be a risk.
“With a high value property, if the renovations are of substandard you are effectively undervaluing the property as higher value for the property could have been achieved, if the renovations were better.”
Related to this, the location of a property should influence the expenditure. For example, a property in Remuera would require a higher outlay than a similar property in Otara.
2. Maximising the basics
Whether selling or renting, an investor needs to consider whether they would like to live in their property themselves. No matter how modest a property is, it needs to be clean, fresh and comfortable – and look like it.
Adams said that to achieve this the most cost-effective renovation jobs you can do are to give a property a fresh lick of paint throughout and lay some carpet. “A new paint job and carpet and paint cover a lot of visual area and therefore make a huge impact. Better yet, they are not expensive and can be done for $7,000 – $10,000 (paint $4,000-$7,000; carpet $3,000-$5000) together.”
It’s also worth noting that sometimes just washing the exterior of house can bring the paintwork back to life and dramatically improve its appearance.
3. Make or break upgrade
Upgrading the kitchen and bathroom are key to a good renovation job. For Adams, they make the difference as to whether a buyer or a tenant will fall in love with the place or not and are always taken into account by valuers.
While redoing kitchens and bathrooms can be a big ticket item, they can also be done cost-effectively. A kitchen can be purchased and installed for $7,000 (excluding appliances), Adams said. “Even just replacing a kitchen benchtop – which is around $1,000-$2,500 – can be an effective renovation.”
It is also necessary to think about any regulatory requirements when upgrading these spaces. For example, if you opt for a tiled shower, as opposed to an enclosed shower, you will need council consent due to the water proofing required.
4. Give the outdoor area a facelift
First impressions do count! Yet too many people overlook or neglect the presentation of the outside area of their property.
Tidying up the section and water blasting or painting the fence make a big difference to that crucial first impression. To make the garden look better, you don’t need a landscaper, Adams said. “Just put down weed mat, cover with river stones and plant a few grasses.”
5. Meet a standard
Mismatches always look bad. So it might sound obvious, but make sure everything in the house is renovated to the same standard, he said. For example, don’t put in a new kitchen, bathroom, paint, carpet, and then leave the old toilet in place.
6. Don’t rely on DIY
While New Zealanders are notorious for their love of DIY, Adams recommends that, in most cases, it is better to get tradespeople to do the necessary jobs.
“Do not attempt to save costs by stripping the wall paper or painting yourself. It is likely that you will hold up the job and whatever you save on not paying a painter, you will be paying in holding costs. Also, the finished product probably won’t last the distance unless you have professional painting experience.”
Further, it pays to remember that, under the law, for plumbing and electrical work you have to use a registered plumber and electrician.
7. Always do the numbers
Adams’ final tip is that it is critical that you make sure you do your numbers properly before embarking on a renovation project. “You want to ensure that for every dollar spent, you will get at least two dollars in valuation - so that you can top up and get your renovation money back at the end of the job.”
8. Little beauties
Don’t overlook the smaller components of a property. Jonathan Bidmead, said little things can add a surprising amount of value.
“Replacing all the old power switches, doorknobs and the like in a property with matching new ones. Or spending a bit of money to upgrade the front door and entry way. That’s a good one because it is what gives people their first impression of the property.”
9. Work to your strategy
A crucial point to consider is that the renovations you do can depend on whether you are renovating a property to sell or to rent. For Bidmead, there is a big difference between what the best renovations are to do in each situation.
“From a rental perspective, there are things that don’t cost much money but will be very attractive to tenants and allow you to get better rent. For example, putting in a dishwasher is attractive for tenants. As is putting in a burglar alarm and security system. People will pay a premium if they think a property is secure.”
10. Warming up
In recent years, there has been a growing focus on the need for properties to be warm and dry. To this end, putting insulation and a ventilation system into a property makes it a far more attractive living proposition and adds value.
When it comes to rentals, putting in a heat pump is a great thing to do, Bidmead said. “Yes, it might cost about $2,000 but, in the scheme of things, it’s not much in terms of the value it adds for a tenant. It improves their experience of your property and will boost the rent a tenant is willing to pay.”
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