8 top tips for boosting your rental income
Before embarking on a home improvement mission, investors need to understand how their property measures up to those of their competitors.
Blayney Potential Plus director Fiona Blayney says the first step is learning what similar properties in the rental market have to offer.
“Owners could go and have a look at other properties in their current market at the rate above, and even at the rate below,” she says.
Owners familiar with competing properties will have a better understanding of how a makeover may impact their weekly rent.
However, given the strength of the market in recent years, she warns some properties in popular areas may already be at the peak of their rental value.
“You may want to up the rent you charge, but you could already be getting the top dollar for that property as it is. If it was to become vacant, you’d potentially need to do some work to even get the same rent you’re earning now,” she says.
2. Avoid overcapitalising
The most common mistake owners make is going overboard with improvements, according to the director of Renovating for Profit, Cherie Barber.
“They spend way too much money on the renovations because they tend to get emotionally connected to the property. They forget the focus is on numbers,” she says.
Before picking up a paintbrush, investors need to sit down and work out their budget. Ms Barber warns overcapitalising may actually decrease the property’s rental yield.
“You may have been better off not doing anything at all and getting a better rental yield,” she says.
Ms Barber considers a six per cent rental yield a decent return on investment in today’s market.
“It’s always worth knowing what your renovation is going to return you in terms of rental yield before you start renovating,” she says.
Director of Let’s Rent Lisa Indge believes many investors lose sight of their target demographic.
“We have a lot of investor clients who might be used to spending $20,000 or $30,000-plus on a kitchen. But that’s not warranted in a one-bedroom apartment in the inner city,” she says.
Owners need to focus on the needs of their tenants rather than their personal preferences, she says.
Knowing your market can also help you target your upgrades specifically at your desired tenants, according to director of Metro Property Management Leah Calnan.
“You have to look at your market and the type of property you have,” she says.
“If your property is a four-bedroom house and it generally attracts four individuals, then you’re not going to spend a huge amount of money in the garden. You’d be better off potentially putting in air conditioning.”
With this approach, the investor can avoid wasting resources on projects that do little to heighten the property’s appeal.
3. Put on a coat of paint
The easiest way to brighten up a property is a fresh coat of paint, according to Ms Barber.
She believes investors will see a significant return for every dollar they invest in internal paintwork.
Ms Indge agrees, saying tenants place a premium on cleanliness.
“It presents the property as being very clean and that’s very important to tenants. It’s fresh and it just gives the impression of newness,” she says.
This is especially important if the property is going to be vacant, as scuff marks become more obvious in an empty room, she explains.
Ms Barber explains walls can become discoloured over time, particularly in high traffic areas or if previous tenants smoked. Painting can take several years off the age of a room.
While neutrality is important, a splash of colour may make the property stand out in markets with low demand and high supply, Ms Calnan advises.
“Sometimes, adding a splash of colour, a feature wall or something simple but effective will make people remember that listing over another one,” she says.
4. Fix up the little things
While wobbly door handles or loose floorboards are easy for the owner to overlook, tenants are likely to notice these defects. Poor upkeep could be interpreted as a lack of concern by the owner and property manager.
If the owner does not care about looking after the property, why should the tenant?
Ensuring these little repairs are completed makes the property seem well cared for, Ms Indge advises.
Ms Calnan agrees these easy fixes can make a substantial difference to the property’s ambience.
“Changing light fitting is really quite a cost-effective process,” Ms Calnan says.
“Sometimes, changing door handles throughout a property and even kitchen cupboard door handles can be quite cheap but can brighten things up,” she says.
5. Freshen up the kitchen
The kitchen is one of the most important rooms in the house. Improvements in this space are highly likely to increase tenants’ interest in the property.
However, even in older homes, Ms Barber advises investors against a full kitchen renovation unless absolutely necessary.
“That’s a big mistake that a lot of people make when they’re selling or renting their properties. They get in and rip the whole kitchen out,” she says.
A new kitchen could cost the owner upwards of $10,000, she estimates. Yet in many cases, the room can be freshened up for less than $1,000.
Laminate paint, bench top resurfacing kits, faux stone bench tops and tile paint can give new life to a tired kitchen, she says.
Ms Indge believes even updating cupboard doors can lift the marketability of an old-fashioned room.
“If you have a fairly well designed kitchen and it has timber cupboards, you could have those painted to look more modern. If you wanted to go a step further, you could simply have the cupboard fronts changed,” she suggests.
6. Modernise the bathroom
Doing up the bathroom seems like a daunting process, especially if it involves new fixtures or plumbing work.
However, there are many products on the market to give the bathroom a lift without extensive remodelling, Ms Calnan says.
“The older properties where you have lots of coloured baths, or pedestals or vanities, you can get those painted. You don’t need to have your pink bath anymore,” she says.
Cosmetic upgrades are especially important in older houses. Bathrooms from the 60s and 70s tend to have vibrant colour combinations and patterned tiles, according to Ms Barber.
“They looked great in their day, but now they look quite hideous,” she says.
Rather than retiling the whole room, tile paint can modernise the colour palette for less than $60 a tin, she says.
7. Neaten up the gardens
The exterior of the property is the first thing a tenant will see, creating a lasting impression.
Ms Blayney says a quick way to beautify the garden is to invest in more mature, indigenous plants.
“If you spend that little bit more, you get something a little bit bigger and more established,” she says.
Fresh tan bark can also improve the appearance and durability of the garden, Ms Calnan says.
However, she reminds plant-loving owners that not everyone shares their enthusiasm for gardening.
“I think sometimes owners go the wrong way and put in a huge selection of plants, but quite often they die during that time – not everyone is green-fingered,” she says.
Ms Barber agrees, saying many tenants put little stock in the outside appearance of the property.
“A lot of tenants have the mentality of ‘I just want the space that I’m actually living in directly to look nice’,” she says.
While the lawns should be kept mown and the garden free of weeds, owners would be better off concentrating their money on the inside, she suggests.
It’s always worth knowing what your renovation is going to return you in terms of rental yield before you start renovating
8. Throw in some extras
Certain items that may once have been considered luxurious additions are now standard issue, Ms Calnan believes.
“A dishwasher is just expected. Even air conditioning to a degree is just expected,” she says.
She suggests owners who cannot afford these inclusions be strategic about their lease renewals.
“You wouldn’t want your property becoming vacant every summer if you didn’t have air conditioning, particularly in a double storey,” she says.
While Ms Indge believes there is a market for any well-presented property, she says built-in wardrobes and dishwashers are at the top of many tenants’ wish lists.
Depending on the type of tenants attracted to the property, such additions may boost the property’s marketability.
Ms Blayney suggests owners can also consider other ways to set their property apart.
An option to include a washing machine and dryer could be highly appealing to tenants in city areas who tend to move frequently, she says.
Other suggestions for optional extras might be home or garden maintenance services, or regular pool care for suburban homes.
A little time and elbow grease can cause a property’s rental income to jump dramatically. Well-planned improvements designed with tenants in mind will pay for themselves in increased returns.