In the past, renovations to investment properties in Sydney’s eastern suburbs were usually completed with the intention of increasing rental income or securing a tenant faster. But with vacancy rates in the eastern suburbs at all-time highs, renovating a home isn’t so much about getting a tenant faster; it’s become almost essential just to get a tenant full stop.
How COVID-19 has impacted the eastern suburbs rental market
We spoke to Marijke Walker, from Taylors Property Management Specialists, to gain an insight into the current property rental market.
According to Marijke, “the pandemic has doubled vacancy rates and reduced rents by 15 – 30 per cent across most of the eastern suburbs”. Two-bedroom apartments are typically leasing at $500 to $600 per week on average, down significantly from pre-COVID-19 rents of around $700 to $800 per week.
Marijke adds that property managers have simultaneously seen a 30 percent increase in competing properties for lease in the area compared to this time last year.
Overseas travel bans have kept out international tourists, international students and temporary workers from Sydney, many of whom live in short-term rentals near the coast. In the absence of this, many owners appear to have been forced to convert their AirBnB properties into long-term leases, which has increased the rental supply at the same time as the demand has dropped.
While good news for tenants, these figures indicate the challenges property owners face.
Should you renovate your investment property in the eastern suburbs?
Eastern suburb properties vary in age with brand new buildings set alongside art deco and 70s-era buildings. Older properties often find it harder to compete due to their aged features when compared to their newer, swankier counterparts. Putting the current situation into perspective, you may not have a choice but to renovate an older property in order to simply find a tenant.
Marijke’s advice is that “a well-presented property is essential in the current market”, as there are fewer tenants and a vacant property can be far more expensive than the cost of fixing it up.
An excellent way to start is to compare your property to similar ones in the area. What are their selling points? What features do they offer? Is your property more dated? Knowing what’s on offer will give you some valuable facts to help you make an informed choice.
Important renovations to consider for investment properties
A recently renovated property looks great – on paper and in person. It’s the perfect advertisement to showcase your property in the best possible light and deflect low-ball rents. So, how do you find your sweet spot? We’ve found that these renovations have helped landlords find quality tenants without overcapitalising on their property.
1. Basic home renovations
Some quick and easy home renovation wins to consider are new paint and carpets. A quality paint job for a two-bedroom apartment can cost between $2,500 and $3,500. Sanding and polishing your floorboards can also make a huge difference, as they are not just durable but also look great. The age and condition of your property will impact the scale of your home renovation with older homes requiring more work, potentially including floor changes, paintwork, lighting, and structural updates if necessary.
2. Kitchen renovations
Modernising the kitchen is another easy way to increase appeal to renters. Busy tenants want everything – style, space, convenience and function. Features like dishwashers, gas stoves, storage and easy-to-maintain benchtops are in high demand. Updating the kitchen gives them all this and more. Extensive kitchen renovations cost $20,000 or more, but small kitchen renovations can cost as little as $12,000.
3. Bathroom renovations
A modern bathroom renovation can help transform even the drabbest property into an attractive home for a tenant. Whilst a bathroom renovation in Sydney can cost anywhere from $7,000 all the way up to $30,000 or more, smaller makeovers including updates to taps, vanities, mirrors, grout, toilets, basins and bathtubs and can cost anywhere between $7,000 and $15,000. A more substantial bathroom renovation that includes re-tiling, toilet replacement, shower screen installations and floor and wall tiling might cost between $15,000 and $30,000. Most tenants today want it easy – low maintenance combined with modern aesthetics. Choosing the right features for your bathroom will ultimately pay dividends – now and for the future.
4. Outdoor upgrades and landscaping
It’s easy to forget the outdoors when you’re so focussed on the interiors. But with more people spending time at home, consider upgrading or landscaping your private garden or courtyard if you have one. Designing a stunning garden aesthetic will play a role in attracting tenants today, so this isn’t one to ignore, but at the very least, clean up the garden to make the property as presentable as possible. Landscaping and outdoor upgrades of a small garden can cost anywhere from $500.
5. Heating and cooling upgrades or installations
With Sydney experiencing hot summer days and cool winters, tenants expect air conditioning today. Older properties don’t have this advantage, which is why you may need to install an air conditioner. Expect to pay around $1,200 inclusive of labour, delivery and installation of a single split system. It usually takes a day to install and the return is well worth it.
Every little bit counts when it comes to impressing tenants. But we always encourage you to keep the palettes neutral. For starters, they reflect light and open up smaller spaces. They also make it easy for tenants to add their touches without clashing with the décor.
Whilst the conditions today are tougher than they have ever been for a landlord in the eastern suburbs, property renovations are not just important to keep the rent coming in, but they can still add long term value to the property. The good news is you may also be eligible to claim capital works deductions based on the type of renovations completed.
At the end of the day, rental properties don’t need high-end fixtures. Instead, choose hard-wearing fittings that withstand the test of time over multiple tenancies. We say this because these renovations can improve the value of your property and potentially make better long-term returns.
COVID-19 has taught us that life is uncertain. But if there are some things you can control, like the appeal of your home, now is a great time to start. If you are considering renovating your rental property to attract more tenants, experience counts. DCON Group are your bathroom renovation experts in Bondi, and we can also help with home renovations and extensions. Contact DCON Group for a free quote to find out how we can help you modernise your eastern suburbs property to help get a tenant.