Its a simple debate: If a reno increases a houses value by say $100k from $400k to $500k. Then all ongoing capital growth will be on the higher renoed figure. Say 7% growth compounding on $500k ongoing or 7% growth compounding on $400k ongoing.
This is the way i look at renos re rent and i think its the correct way. Here's an eg:
Say it costs $50k to do a reno on a $500k house. Using a LOC at lets say 6% IO, that's about $57/week interest for the $50k.
If that reno increases the rent by say $75 per week its a success.
You can do the same thing for the capital increase due to a reno.
This is the way i look at renos re rent and i think its the correct way. Here's an eg:
Say it costs $50k to do a reno on a $500k house. Using a LOC at lets say 6% IO, that's about $57/week interest for the $50k.
If that reno increases the rent by say $75 per week its a success.
You can do the same thing for the capital increase due to a reno.