One of the reason property owners doing renovation is to add value to their investment. However, not all renovation can add value in reality.
It is often that investor making rash decision to do renovation just because they saw an ads on TV. This kind of behaviour won’t do you any good. In fact, it can cost you a lot and you will suffer from financial loss. Renovating sounds easy but it is not in reality. There are many factors should take into consideration before renovating your investment.
Remember that property business is about game number. Your action should calculated and estimated.
So, how to add value to your investment property by renovating?
Renovating is good idea to add value to your investment property. However, there are many factors that can put your renovation into misery instead. Therefore, renovation doesn’t always bring you more money. So you need to know which things you need to do to renovate properly so it adds value to it.
It is highly recommended to not buy in a stagnant market or buy property when the market is falling. If you do renovation in this situation, it won’t add value to your investment property. Renovation is already hard to do during rising market.
If you do it in stagnant market, it could be worse and harder. Important point about doing renovation is the tenants. You should know renovation should fit what the tenant’s needs to add value.
It is also recommended to not over-capitalise.
Over-capitalising your property won’t add any value. Sure, you may add some functional features to the property. However, it won’t just automatically add the value if the improvements are not highly sought after.
For example, adding a pool to the property located in a neighbourhood where pool is not necessary or often used won’t add the value. Sure it adds new features to the property but it just means you should ask for premium rent which is hard to afford for them.
Another one recommendation is to do renovation to visible things.
If you renovate plumbing, electrical works, or wiring and internal infrastructure, don’t expect to add value to your property. They are part of necessity for your tenants. If they need a fix then you should fix it. For example, it is common to have leaky pipes in your property.
You need to fix them immediately and replace if necessary. However, it doesn’t you can obtain higher rental from doing it. Those kinds of renovations are part of service that tenants and potential buyers expect for.
Doing renovation should be planned thoroughly by clear estimation. Structural renovations like adding some extensions to the property may add significant value. However, big renovation project like this requires more time and money.
The process is also longer because you need to handle development approval, etc. it is highly suggested to do cosmetic renovation instead of structural ones if you expect for value to increase visibly.
Renovation is good move if you do it at the right property in the right location within the right market.