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From: Michelle Riley

Hi All,
Could you advice if it would be advantageous
to make improvements to newly bought negatively geared IPs.
One IP could use a 2nd loo and shower.
The kitchen is very basic with an old upright,no frills.A paint job wouldn't go astray.
The other would look much more appealing
with floor tiles as opposed to vinyl.
Bathroom vanities are very shabby.
I've noticed those pre fab ones don't hold
up well over time.
I realise the ideal for some people is to a buy a property that needs nothing doing and sit back and wait.
I thought perhaps with improvements I would attract a better type of tenant,a little more rent and a little more equity.
How ever I'd have to use borrowed funds
which would increase payments.
Any thoughts?Michelle
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Reply: 1
From: Fiona W

Hi Michelle,

We have bought a couple of units which are both negatively geared. Our units have tenants in them, so we have decided not to do anything to them until the tenants decide to move, then we are going to revamp the bathrooms because they are both very old, but just with something basic, but looks fresh and new. Our second unit didn't have a tenant when we bought it, so we spent two days painting it and that's it. We get $10 a week more than the other one (same block) just because a lick of paint made a huge difference! I think if you're not careful, you can overcapitalize and spend a few thousand dollars, for maybe $5 or $10 a week extra. I certainly wouldn't bother unless you can't get tenants...

-Fiona (Multimillionaire-2-B)
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Reply: 2
From: Michael Yardney

Michelle, I agree with Fiona that you must be careful not to overcapitalize, but a well considered renovation can add value to your property in 4 ways: -.
1.Increased rental return. A new modern property is always more desirable than an old run down one, and many people are willing to pay a premium to live in this type of property.
2.Increased Depreciation. With older properties you can’t claim as many depreciation benefits as with a new property, however, after a major renovation, you will find you are able to claim much more depreciation than before..
3.Increased property value. This is obviously one of the main reasons why you would go to the effort of renovating a property. Renovations add value in 2 ways. Firstly the property is worth more because it is clean, looks good and is freshly painted. Secondly the property is more valuable because it can generate more income through higher rents.
4.You will have additional equity. This leads on from Point No. 3.

When you look for a property as a potential renovation try and find one that only needs cosmetic work such as painting, new kitchens / bathrooms etc, rather than one that requires structural work and certainly not one that requires “hidden” type work such as in new plumbing or wiring, as these are expensive works and as they can’t be seen don’t add much value. Often a property that has been renovated 20 years ago is worth considering as a lot of the hard work has been done and now it needs bringing up to date with cosmetic touches.
Michael Yardney Metropole Properties
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minor renos

Reply: 2.1
From: Michelle Riley

Thanks so much Fiona and Michael.
Seems like a paint job is the biggest smallest way to increase value.
Fiona,I have to find new tenants for one
property.It's a small house with a much nicer yard than the interior which is rather tired.
The other one has a lease but the
tenant has two kids a cat and dog.This duplex has been knocked around.The wear and tear is obvious.I just hate the vinyl,it's
very dated.
We don't have many of the ideal tenants in
my town.It's very transient.Lot's of young
people and group sharing.
Besides all this I find it so difficult to
not make something look more appealing.

Michael,I'm considering the aspect of creating increased equity by making improvements.It seems it could be a catch 22!
If you borrow extra for minor renos then your
total debt has also increased?Does this balance out?
Cheers Michelle
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minor renos

Reply: 2.1.1
From: Michael G


As for vinyl, my friend once fixed that with a small kitchen, he placed grout over the vinyl and titled it with 30cm x 30cm titles, it came up quite nice. Though it wasnt exactly level (I think that was caused by the original floor in the first place), but it did make it look much better.

Also to the others, what's Geoff's website URL?

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minor renos

From: Cathy Whitfort

I think the website you mean is

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minor renos

From: Dave :)

Thanks Cathy,

This is a great site..full of useful links too. Definitely worth bookmarking if you're into PI.


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minor renos

From: Gee Cee Cee

Hi Guys

I think you certainly have to look forward to who your customers are.

A lot of the time you are only (Pardon the snob value, Filling in for the Housing Commission with these type of investments.)
You can throw heaps of money at your units but at the end of the day every time someone leaves, or is thrown out you have to throw another wallet full to do the same work again.

Bargains that look good on the surface can just turn into BIG headaches if you are constantly hindered with problem tenants.

At present one of my tenants has just vacated and I have now added new paint, carpet, stove, & security flyscreen door. Around $3k of expenses. (Rent up by $20 p.w.) & people lining up to move in.

I will gradually do the same with the other 5 townhouses.

Fortunately the area is NOW finally looking upward.

The rail line is only 400 metres away and is being electrified. All about there is development in infastructure and estates.

I bought cheap 5 years ago knowing that this was coming .

Now I am able to pick & choose tenants. as i add value the tenants are much better.

Keep this in mind.

Just my ravings

Gee Cee

Gee Cee
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