Renovating to increase your rental income


Is your rental property currently performing to its highest potential? What can you do to maximise it’s performance?





Any smart property investor will be looking for cost-effective ways to increase the return on their investment. Adding some wow factor or making simple changes to a property can work wonders when looking to increase your rental income.


Property investors have the advantage of not being emotionally attached to their investments. This means they can make rational decisions about cost-effective renovations rather than spending hours agonising over “what looks good” and how it feels.


Savvy investors understand that when renovating, it’s better to choose materials and finishes that will appeal to renters without being high maintenance. For example, floor coverings such as tiles are a more effective solution, rather than installing soft timber floors, which can scratch or dent easily. Other changes can be made to make the property more appealing, further increasing the chance of achieving a higher rental return.



How much should an investor spend?


A renovation outlay of around $50,000 roughly equates to an increase of $55 per week in mortgage repayments. The crucial move is to ensure that the rental increase that results from the renovation, exceeds the additional mortgage repayments. In this particular case, the hope is to increase the rental income by around $70 per week, once the upgrades are made.


Before jumping headlong into a renovation project, always run it by your accountant who can make you aware of the tax and depreciation benefits of upgrading your investment. In many cases. the investor can experience an even greater return above the initial rental increase.


If it’s unlikely the renovation will make you a return, then it is rarely worth investing the time or money. More often than not, any money invested into a property will result in an increase in the owner’s equity and greater gains than if the property was left untouched.


There is no a hard or fast rule. Renovating for financial gain can often be a matter of timing. If a short-term gain of an increased rental return isn’t realised, a renovation investment will still likely play out to be beneficial over the long term.


Start the process by having a chat with your real estate agent about valuing your property…


These views are solely the opinion of Andrew Cashin and Ambient Constructions and should not be taken as professional financial advice.