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Renovate To Rent Or Sell

Mark Honeybone outlines two different kinds of renovation.

By: Mark Honeybone

31 March 2018

So, you’re a new investor and deciding to renovate your first investment property. Initially you have to decide whether you are renovating to sell the property or to rent it. It is an important decision as the renovations should be quite different.

Renovate To Rent

I don’t suggest doing nothing just because you are tenanting a property, however, this renovation will involve less work.

When you renovate to rent, you should look at the below fundamentals:

  • Make the property warm for the tenants
  • Protect your investment. Dry, no leaks
  • Maintenance issues
  • Provide some niceties for the tenants – make it inviting.

The two main reasons for renovating to rent are: first, to protect your asset by limiting any future maintenance issues, and second, to make it homely for good tenants. A well maintained, tidy and nice-looking property will attract better tenants and ensure a higher rent.

Renovate To Sell

In most cases, this should be quite different to renovating to rent. There is much more to consider when renovating to sell, such as: what the location is like and who your target buyer is.

These will determine whether you’re putting in a carpet for $59 p/sqm or $200 p/sqm.

What you are trying to achieve here is an understanding of what your buyer will need in the area you’re selling. Will they need a double garage, no parking, a deck, two bedrooms or five bedrooms?

Here are some of the most critical points when renovating to sell:

  • First Impressions: This is the first and usually the only impression someone will have of your property when they view it, so make it count.
  • Any Additions? If you can add a room, make a bedroom larger or create an additional lounge, this will usually get you a better price and/or better rent appraisal.
  • Get the chattels right. Depending on the type of house and the location, you want to make sure you have the right chattels installed. If you are in Fendalton (Christchurch) or Remuera (Auckland) you may want to avoid lower-priced appliances and get quality ones, instead, to reflect the area’s standard.
  • Don’t leave unfinished work. Buyers will notice that, and it’ll affect your selling price.
  • Make sure everything works. There is nothing worse than viewing a home for sale and a drawer handle falls off when you touch it or you see that lightbulbs are missing.

Point to Note: Several years ago I witnessed a building company constructing a house. A quality home, probably one of the best-built properties in New Zealand when it comes to what was under the GIB and paint.

What I couldn’t believe was this building company used the cheapest door handles and light shades for the property. They had videos showing how solidly the property had been built but failed to provide quality finishes. What a shame.

I also want to share a real example of the topic discussed in this article.

I recently bought a small place in Te Atatu Peninsula.

My initial thoughts were to renovate and sell it thinking it would be a great first home once tidied up. However, after buying it for a well-negotiated price, I decided to keep it.

My renovating budget went from an initial $28k to about $10k. The property already had a new heat pump and solar panels as well as a fairly new kitset kitchen.

So here is the list of what the property will have once it’s renovated:

  • New seals around the windows so no water can get in
  • Damage from previous leaks fixed
  • Walls and windows painted
  • New carpet
  • A few boards on the deck fixed
  • A few fixes in the bathroom (including a glass door over the bath to replace the shower curtain).

The budget, of around $10k, will make the property tidy and liveable for my tenants compared to the higher estimated budget of renovating to sell.

Property Ventures is a licensed Real Estate Agency that specialises in Investment property throughout New Zealand. They also have the NZ Property podcast/YouTube series where Mark interviews the property experts from around the country helping hundreds of thousands of investors. He can be contacted at [email protected] or 0800 NZPROPERTY (697767) Or watch the Podcast/YouTube video at www.propertyventures.co.nz/podcasts

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