When to renovate an IP

M

mandimoo

Hi guys,

It is coming up to a year since we bought our first IP and I the tenants have given signs that they will be moving on out when their lease expires in 2 months. The property has the original carpet from 1995 complete with big yellow fade marks and stains in some places, the kitchen is very small and not very functional, I have known since we bought the place that before we sell it we will be renovating it.
Originally we planned to do all renovations only when the time comes to sell up (to make sure its all still in perfect condition) but our IP is in a complex of units and I know that the one directly opposite ours which has exactly the same layout but with one less bedroom, was sold for $340,000 (I got ours for $305,000) is renting for $350 per week, and I leased ours out for $320 per week. The only difference between the two is that the one across the driveway is tiled.
I know that if I do a little bit of a reno I can increase the rental income and make it neutral as it is currently slightly negatively geared and also hope to get a 'better' tenant. My question is is it worthwhile to do this now or is it liklely that we would just end up having to get the place renovated again once we are ready to sell?

Thanks!
 
Apologies for my typos I have a 5 month old baby and two other small children and my husband has been gone for 6 days so far, the crying is starting to get to me!!
 
Is the property built in 1995 or was that the last time it was renovated? A 1995 kitchen should still be fine unless its been abused.

How is your paintwork? Does it need repainting?

The \5 cheapest things to improve a property is paint, carpet, light fittings, power points/light switches and blinds. These can really modernise a place and get a good return on investment.

You should be able to recarpet a unit for 1000-1500 so I would do that and also painting as well to get it fresh and as high a rent as possible. Get it revalued afterwards so you can use the new value for an equity release if you want to buy something else.
 
It depends on how long you want to hold the property for.

If you are thinking long term, then I would renovate now to take advantage of increased yield. The added benefit is that many expenses will be depreciated over they years that you hold the property.

If you are thinking short term, then a greater sales price will be achieved if it is freshly renovated.
 
Our original plan was to hold for about 5 years and then use anything gained by it to help us upgrade our own home, but I guess it just depends on when we think the right time has come.
The property was built in 1995 and has not been altered since, everything about it is as it was when it was first occupied and before us only had one owner (an elderly couple - we got it cheap because the old man had to move into a nursing home and his family were trying for a long time to sell it and eventually dropped the price by $45,000 to try and offload quickly - and we bought it that same day!). The walls could use paint, the flooring is definitely in need of replacement and the kitchen though there is nothing wrong with it, it is very small, not attractive at all, has limited storage... basically yes it is perfectly liveable as is, but its only going to be appealing to the lower end of the market. It is one street back from the beach so its location has helped us to achieve a decent rental price compared with other small units in the suburb.
 
I would carpet and paint at least. That's minimal cost and the extra rent should cover the cost.

If you know where to go, kitchens aren't that expensive either. If the layout ans size is terrible I'd change it. If you could just paint the doors and change the handles then you could do that. If you have a photo it's easier to make comments.

If you are going to sell in less than 5 years the kitchen should still look like new. As mentioned you get the depreciation as well.
 
And what do you think is the minimum type cost of a kitchen reno... my hubby just got a nice bonus lol or should we be keeping our cash in our PPOR and get finance for any improvements?
 
Given the tiny space, I wouldnt touch the kitchen if its like the one in the photo. There is not much you could do to increase functionality.
 
Yeah I thought so too given where the window is hast to be the sink location and the fridge has to go where it goes. I wonder if that wall really has to be there..... it could use more cabinet space, the pantry is very small, the laundry which adjoins the kitchen is actually quite large
 
If you want to spend money on renovation you need to ensure that you are going to end up with more than you outlay in perceived value.

Ie if you spent $5k on a new kitchen, is it going to give you more than $5k in additional value? If not, don't touch it.

There is nothing wrong with that kitchen. It is small, but very neat and tidy. You could not really improve it.
 
What you cant see in the photos is the crappy parts of the kitchen (thats why the photos are good haha) like that the bench tops have paint peeling and other damage, above the oven there is a hole burned in the cabinet, there is a big gaping hole (probably for a dishwasher) under the sink and not much storage at all, The pantry itself is only 10cm deep and so although its 'tidy' its not nice. The floor is really old festy lino, if I get the rest of the flooring done I will also get the kitchen floor done too, and I am wondering if getting the kitchen renovated would mean the relatively new flooring would get wrecked?
 
As long as the kitchen is the same it will sit on new flooring. If you change the design however there may be gaps. Best to do the kitchen and floor together.
I was going to say leave the kitchen too. But going by your latest comment maybe get a new one. It's so small it won't cost much. We buy them and install ourselves. That size would cost us less than $2000 (maybe only $1500). But if you get a kitchen mob that comes out and measures etc it will be a LOT more. Depends how handy you are. Because of the weird wall you probably won't be able to get standard cupboards which may increase the price. See if you can find a small kitchen supplier. Take photos in (with measurements) and get a price.
 
Thanks :) My husband is pretty handy and usually does things himself but in this case he wont have time for it which is abit of a shame, a few of his uncles are carpenters though...
 
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