Investing in property can be a great way to build long-term wealth. However, to maximise your rental income and the eventual sale price, it pays to make improvements to your investment property. Here are some of the top reasons why upgrading your rental is worth the investment.
Increase Rental Yields
Making improvements to your investment property like upgrading the kitchen or bathroom or replacing old windows can directly increase the amount of rent you can charge. Things like adding an extra bedroom and bathroom, renovating the kitchen, installing new flooring, painting or landscaping can make your property more desirable and rent for a higher price. Just make sure not to overcapitalise and spend more than the potential rental upside.
Aim for improvements that will pay for themselves within a few years through higher rents. Unless you are highly proficient and qualified to do the work yourself, it is always better to pay a professional contractor to do the job. Choosing a pump for your shower is relatively simple, but projects like upgrading a boiler must be carried out by a qualified trades person.
Attract Better Tenants
An improved and well-maintained investment property will attract more tenant interest and allow you to be choosier with who you select. Better quality tenants are more likely to look after the property and stay long term. Less time vacant between tenancies means more rental income for you. Avoid problem tenants by offering a nicely renovated and upgraded rental.
Higher Resale Value
Down the track when you come to sell your investment, a property in superior condition will achieve a higher price. Kerb appeal from exterior upgrades along with modern, functional interiors and bathrooms will maximise the property’s resale potential. Also avoid deferred maintenance issues that could deter buyers if left unattended. Any money spent now on improving the property will likely be recouped upon sale.
Higher Demand from Buyers
An investment property that shows pride of ownership, with attractive updates and no obvious repairs needed, will be more desirable to future home buyers. Buyers are willing to pay more for a move-in ready property requiring no work. Your improvements will put your rental high on buyers’ wish lists when you eventually sell.
Increased Safety and Comfort
Upgrades may be needed for safety reasons, such as installing smoke alarms, adding lighting, replacing old electrical wiring or improving exterior security. You need to provide a safe environment for your tenants. Improving energy efficiency through double glazing or insulation can also make the property more comfortable to live in. Happy, comfortable tenants stay longer.
Tax Benefits
In the UK, landlords can deduct allowable expenses for investment property upgrades and repairs from their rental income. This reduces your taxable income from the rental. Just be sure to keep all receipts for improvements made. Speak to your accountant about maximising your tax deductions.
When considering any investment property improvements, do your research to choose enhancements that are likely to be cost-effective in increasing rents and property value. With the right upgrades, the expense can definitely pay off in the long run through higher yields and capital gains.
