What to Renovate in Your Investment Property

Renovating an investment property is a strategic move that needs careful planning. You want to improve its appeal and rental yield, but without overcapitalising. Strategic renovations can make your property more desirable to tenants, maintain competitive rental yields, and even provide tax benefits. Here’s a practical guide to help you decide what to renovate in your investment property.

Consult Your Property Manager

Before picking up a hammer or hiring a tradie, have a chat with your property manager. They’ll provide valuable insights into what tenants in your area value most, the trends in your specific market, and how the coastal environment of Sydney’s Northern Beaches may influence material choices.

For example, certain fixtures might need to withstand salt air and humidity. Your property manager can also guide you on timing renovations to align with tenant turnover, avoiding unnecessary disruptions to rental income.

Focus on Strategic Areas

Not all renovations are the same. Some areas offer higher returns on investment than others, both in tenant satisfaction and rental yield.

1. Kitchen and Bathroom Upgrades

The kitchen and bathroom are often dealmakers (or breakers) for tenants. Consider replacing dated fixtures, adding modern appliances, or updating benchtops. Even small upgrades, like replacing cabinet handles or installing new taps, can make a big difference.

As the ATO explains, "capital improvements such as remodelling a bathroom or adding a pergola should be claimed as capital works deductions." Remember, these deductions can significantly reduce the financial impact of your renovations over time.

2. Fresh Paint and Flooring

A fresh coat of paint can instantly brighten your property and make it feel more inviting. Stick to neutral tones to appeal to a broader tenant base.

For flooring, consider durable options like hybrid or vinyl planks that are easy to clean and maintain. If you prefer carpet in certain areas, remember it typically depreciates over seven years, something to factor into your budget.

Budget Smart: Aim for 10% of Annual Rental Income

A good rule of thumb is to allocate about 10% of your annual rental income towards renovations and maintenance. This keeps your property competitive while ensuring you’re not overspending.

For example, if your property earns $50,000 per year in rent, setting aside $5,000 annually allows for periodic updates without straining your cash flow.

Don’t Forget Tax Benefits

Renovations often come with tax advantages. Depreciating assets like new appliances, carpets, or curtains can be claimed over their effective life, while structural improvements may qualify for capital works deductions.

As the ATO wrote:
"The rate of deduction for these capital works is generally 2.5% or 4% per year, spread over a period of 40 or 25 years respectively."

Working with a qualified quantity surveyor can help you maximise these benefits by identifying all eligible deductions.

Coastal Style: Suit Your Market

Since your property is on the Northern Beaches, renovations should reflect the lifestyle and aesthetic tenants expect from a coastal location. Think light, airy spaces, and materials that stand up to the coastal climate. Adding features like ceiling fans, louvre windows, or outdoor living spaces can make your property more appealing to tenants seeking a beachside lifestyle.

Avoid Overcapitalising

While it’s tempting to go all out, remember that the goal is to attract tenants and increase rental income, not to create your dream home. Stick to practical, value-adding renovations. For instance:

• Avoid luxury finishes that don’t align with your target tenant market.

• Prioritise functionality and durability over aesthetics alone.

Long-Term Gains: Stay Competitive

The rental market is always evolving. Regular updates to your property ensure it remains competitive and attractive to tenants, helping you minimise vacancy periods and achieve consistent rental yields.

With over 60 years of experience, the team at Greycliffe Property can guide you through the renovation process, ensuring you make smart, informed decisions. From coordinating trades to advising on tenant preferences, we’re here to help you get the most from your investment.

Ready to Renovate? 

Thinking about upgrading your investment property? Before you start, give us a call. Our personalised advice will ensure your renovations are both tenant-friendly and financially sound.

Visit our website for more information.

Make your next renovation one that pays dividends. Let’s do it right, together.