When do you decide to improve IP

Discussion in 'Adding Value' started by paguatao, 17th Jun, 2015.

  1. paguatao

    paguatao Member

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    We've finally got some good tenants in for almost 2 years. They don't complain, we self-manage. Usual issues of maintenance over the last few years such as fixing things, fix aircond, replace gas HWS, bathroom exhaust etc, install soakwells.

    Replaced carpets recently as they were in a state and we wanted to improve the look of the place, repainted as well.

    Got a list of things at the back of my mind, cost is issue (would rather do small bits at a time than say a complete kitchen reno). But when and how do you decide to do improvements to your IP? Is it when you think you can get a bit higher rent, or attract better quality tenants?

    No rent increase for over a year now (360pw), but looking around, its a fairly good rate.

    Some of the small things I'm thinking are like - install ceiling fans in bedroom, install BIRs and door. Would really like to put more cabinets in kitchen but kitchen overall needs an overhaul. Bathroom is average too.
     
  2. wombat777

    wombat777 Member

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    I wouldn't do anything unless your tenant asks. You have a good tenant and you think the rent is acceptable. Many tenants don't like the hassle associated with repairs and maintenance.

    Maybe put some cash aside for a warchest to pay for upgrades if your tenant moves out.

    In your situation, I think the only other reason you would do upgrades is to support an improved valuation so you can draw more equity. That's my opinion anyway. Just make sure the changes will actually improve the valuation.
     
  3. travelbug

    travelbug Member

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    That's a lot of things to do in just 2 years. Are you sure self managing is right for you? I thinjk you are over managing and spending more than you would if you had distanced yourself from it. If I hear from tenants more than once a year I'm complaining (silently of course). ;)

    I would not keep doing random things while a tenant is there. Unless they specifically request something (or it's a repair etc) I don't bother generally.

    One tenant I have was there when I bought. In 6 years we have replaced the vanity and taps (water damage). Nothing else.
    Another one I put the rent up $20. Tenant said carpet is old, walls haven't been painted for over 5 years. I haven't touched it in 5 years. So I say OK $15. If he moved out I'd have to at least carpet and paint. Not worth the cost for $5 a week.

    I did put a kitchen in one while the tenants went on holidays but i knew I was going to sell it within a year so saved me kicking them out to put it in before I sold.
    So work out what you'll get back for the money you spend. If you spend $1000 and get no extra income then why bother?
    Treat it like a business not a nice little house that makes you feel good if you are working on it all time.
     
  4. LeoT

    LeoT Member

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    IMO improvements should only be made for a handful of reasons.

    1. Obvious repairs that need fixing asap.
    2. If your research shows you that for a small spend, it can yield a worthwhile increase in rent. then it might be worth it.
    3. If your research shows you that a cosmetic reno would nicely improve the value for revaluation so you can extract the equity to further invest. (in effect you get an almost free reno cos on reval you can take out the money to reinvest.):)
    4. Improve a place prior to sale (if research shows that a reno will yield a worthwhile increase in value)

    Those are the ones which come to mind.
     
  5. paguatao

    paguatao Member

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    Quick overall of what we've had to do in the last 8 years of holding the property, not just in the last 2 years.

    I think no.2 is the only relevant one for now ... but thanks for all the good advice :)
     
  6. chilliblue

    chilliblue Member

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    Unless it is urgent and required under the agreement, improvements should really be done when the market demands it. I.e when try to lease out, attain more rental etc.