Hey there, my name is Ben Everingham and I’m the director here at Pumped On Property. In today’s video, I’m going to talk about the top 10 ways to increase the value of your investment property. This is going to be an action packed video today where we talk about everything from adding bedrooms and bathrooms, to doing cosmetic renovations, to cleaning up the outside of the house, to repainting the outsides of the house and opening up floor plans, as well things like subdivisions, granny flats, etc. I’m really excited to have you on today’s video. If this is your first time on my YouTube channel, please subscribe to today’s video. If you’re on my blog, please leave a comment. I’d love to answer any questions that you have in relation to this video. Or if you’ve got any other ideas you’d like me to talk about or any questions you’d like me to answer related to the property industry, I’d love to do that as well.
I think the positives associated with adding value to an investment property is really a no brainer. Obviously, it reduces your risk, and as a low risk investor and a very low risk individual, I want my LVR on all of my properties to be as low as possible all of the time. In the last five years I’ve helped our clients buy over $130 million worth of property. When I’m buying that property for my clients and myself, I’m really thinking about risk all of the time and how can we go from a high risk position at the start of our portfolio to a low risk position over time. Reducing risk is extremely important. As you increase the value, obviously your overall loan to value ratio drops. That means that you can buffer reductions in the market and things like that over time.
Another massive positive for me of adding value is you can leverage off the equity into more investment properties. One of the major reasons why you actually clean up a property is to revalue that property and hopefully go buy something again using that. I also like the fact that you can increase the rent. As it’s a little bit more challenging at the moment to borrow money off the banks, increasing the rent can be a really powerful way to increase your overall serviceability.
I also like the fact when you’ve got a high quality, lower maintenance, better presented property you also attract better tenants. I’m losing it. You attract much better tenants, and those tenants pay on time. They stay in the property for longer because they get emotionally attached to it. Or if you lose them, you can easily attract another tenant. Obviously, it increases the overall value of the property, which is a great thing whether you’re leveraging off that or you just want a higher quality property for the other reasons.
The first thing I wanted to talk about … and I’ve done this list in order of how I think you should prioritise them. Again, this is my personal experience. Before I started this business I worked for a building company that built over a billion dollars worth of property a year in Australia, America, and New Zealand. Some of these things are some of the tips and the tricks that I learnt from them, as well as seeing the properties that I’ve bought for myself and adding value to them, and the properties we’ve bought for our clients.
The first opportunity to add value to a property is to add a bedroom. The second option is to add a bathroom. I’m going to talk about both of these in conjunction. The ways that you could do this would be to maybe buy an oversized floor plan. A lot of the homes built in the 90s and early 2000s were huge, those big suburban homes that everybody wanted to live in. Often they have living areas and dining areas and media rooms which are no longer relevant or really used by anybody these days. If the floor plan’s large enough, you can close off the floor plan, put a door there, and potentially build in a bedroom and hopefully a bathroom as well. That is the number one way in most areas that you can dramatically lift up the value of a existing property. Again, this video is focused on existing properties. There’s plenty of other things you can do with other strategies as well.
The third thing, which is kind of in line with adding a bedroom or a bathroom, is adding car accommodation. Again, if you have a property without any car accommodation, you’re at a disadvantage to the marketplace, and both valuers and future tenants are going to look at that property as it’s missing something. It could be as simple as adding just a little car port, or it could be a more advanced strategy of actually boxing something in and creating a formal garage area. Either way, it can, at the right time and the right market in the right suburb, be a really powerful way to increase the overall appeal and value of the property.
Now we’re not talking about regional areas here. We’re talking about high quality metro markets like your Sydney’s, your Melbourne’s, your Brisbane’s, and the major regional markets surrounding those cities. Your property, for it to increase in value, has to be in a high enough quality area where prices are high enough to warrant you spending this money. If you’re going to go buy a $150,000 property in a regional area and spend $50,000 doing all of these things, you’re probably going to over capitalize, where if you go and spend 4 or 5 or 600 or $700,000 in a higher quality metro market, then generally the higher the price point, the more potential there is to add some value if you buy at the right price with the right potential to add value.
The fourth thing is cleaning up a kitchen. Now this can be done two ways. You can replace the existing bench top, repaint the cabinetry, and clean it up the old school way. Or you can potentially completely rip out the kitchen and replace it with something more modern. If you’re looking at ripping out the kitchen completely, I also think it’s important, which is point nine we’ll talk about more, is to open up that floor plan as well. If there’s no structural walls there, it can be a really nice way of creating more living space, creating more social space for your tenants. Also, valuers love that stuff.
The fifth thing is adding a bathroom or cleaning up a bathroom. Again, it can be done the same as the kitchen. I remember on my first property, actually my third property, sorry, that I renovated, I didn’t have a huge amount of money at that time, so what I did was I painted all of the tiles, I replaced the shower screen, I replaced the vanity, and I replaced the hand rails and the door handle. To me it looked like a new bathroom. When I ultimately sold that property six months after I bought it, for a really decent profit, the people that were moving in were happy with that. Now that’s just DIY cheaper way of doing it. Again, if it’s in a nice area, sometimes just gutting the bathroom and starting from scratch can be also a very nice way of increasing the overall value and appeal of your property.
The sixth thing that I wanted to talk about is the old cosmetic renovation trick. This is simply where you change the lights, you change the fans. You might add an air conditioner. You change the floor coverings. You might retile or re-carpet or polishing the floor boards. You do the door handles. You paint the old window frames. You replace the blinds and you paint the overall home. All of a sudden it looks like a much nicer property. Then you add cleaning up the kitchen and bathroom on top of that, and that can add a huge amount of appeal at a very, very low cost.
Now most of the reasons why I add value to properties isn’t for extra rental return or to attract better tenants. It’s mainly to increase the value of the property so that I can either borrow off the equity or I can potentially put myself in a better, safer position from an equity position. The major reason I do it, though, is to get the property ready to sell. Because, again, if you do all of this work today, in five years from today you’re probably going to have to do most of it again because it will depreciate over time and your tenants will unfortunately probably trash the joint.
For those of you who haven’t seen my horror story videos over there with Ryan, I share a couple of the stories where things have gone seriously bad for me. When I say trash the joint, I’ve had some experiences where my tenants have really destroyed my places. Trashing the joint is just scuffing up the walls and those sorts of things. Don’t get too concerned about my language there.
The seventh thing, which is a simple one, is just cleaning up the garden, so ripping out some of the existing gardens, putting up nice garden beds, mulching it and putting in some half decent plants that don’t require any maintenance, potentially getting rid of old lawns and replacing the grass with something a little bit nicer that’s going to be a bit more evergreen. Again, that can be a really nice way of sprucing up.
Which leads me to the eighth point, and that is repainting roofs, repainting the outsides of houses if they’re rendered or cluttered, or potentially just acid washing and cleaning the bricks if it’s an older style home. Again, that can make a massive difference. You’ve seen examples of this all over Australia where something’s been a little bit derelict or rundown, somebody throws a coat of paint on it and it can really add some appeal.
The ninth thing and the second last thing I wanted to talk about, and it probably actually should have been further up the list, is that open plan feel. As we change and as society changes, we’ve done some research, and people are basically spending more time in a smaller number of spaces in their homes. We’re not spreading out as much anymore. We’re spending more times in the kitchens, the living areas, and the lounge rooms. Creating a space that opens up those three areas into one can be a really nice way to attract tenants and to also increase the owner-occupier appeal of your property. In an ideal world you’d have the kitchen, the living, and the alfresco opening up onto a big backyard. That’s what I look for personally if I can find it when I’m buying for myself. Or if it’s a double story joint, having a nice big open plan onto a balcony. My mum’s just walking out now and I know my team’s not going to edit this, so sorry guys.
The 10th thing that I wanted to talk about and the final thing is those more advanced strategies. Now this is all about adding value to your investment property. Obviously, if you’re lucky enough, or not lucky enough but smart enough, to buy yourself a site that you could do something more to in the future, those things could include adding a granny flat to increase your rental return. Generally it doesn’t actually add capital value to the property in most markets around Australia, but it definitely adds value to your net cash flow or your cash flow week to week, and can turn a negatively geared property into a neutrally geared or a positively geared one.
Or, like me, I remember the second property that I bought up on the central coast of New South Wales was a property where it was just an existing house. I thought long-term I might add a granny flat to it. I went to the council to see if I could do that, and they told me that I could actually subdivide the property. I’d bought a duplex block without even knowing it. Sometimes it’s worthwhile in terms of adding value to your property, before you do any of the things that I’ve talked about today, and just finding out what’s underneath the land and what your highest and best use may be. Because sometimes if you’re thinking of selling or revaluing, your highest and best use might actually be doing nothing and just sitting on the land value if it’s a subdivision or a duplex or a triplex site long term. I hope you’ve enjoyed today’s video. They’re just some of the different ideas that I have about simply adding value to properties.
There’s so many different ways that you can do this, but if you can get in that mindset where everything you buy, you look at like you’re looking to manufacture growth, it can be a really, really nice way of reducing your risk, increasing the value of what you buy, leveraging from one property to the next without having to save heaps of money yourself, attracting much higher quality tenants, and obviously increasing your rental returns as well. For those of you who are seriously interested in buying property, I’d love the opportunity to have a one on one strategy session with you where we’d look at where you are right now and where you’re looking to work towards long term, which for most of us is financial independence. You’d have that session with me. My name is Ben, or my brother Simon. We’d love the opportunity to learn more about where you’re looking to go and would love to spend that complimentary time with you.
Thank you so much for your time today, and good luck adding value to your investment property. Thank you.