There is a saying you should buy the worst property on the street, and make it into the best, but does this saying extend to investment properties?

While some investors do make money out of buying a property, doing it up and selling it in a relatively short space of time, most of us are thinking long term, and are looking for an income and capital growth to make our money.

So, if you come across an investment property which does need some work beyond the usual painting and decorating, and it has the potential to make good rental returns, what should you consider?

Here are four points:

1. Negotiate a rock bottom price

If you’re going to spend time and money bringing a property up to a good rental standard, you must get it at a rock bottom price. Do your research so you know what comparable sized properties in pristine condition in the area are fetching.

That way you can factor in what needs doing and how much it will cost to upgrade the property in making your offer and looking at your budget.

Which also leads us to our next point….

2. Time without a tenant

If the property does require some major work, such as a rewire or a kitchen refurb, the property will sit empty; this is time when there is no income from the property, but there are going to be quite a few outlays. If you’ve taken out finance on the property, this needs to be factored into your budget.

3. Renovate for profit

Any renovations must be for profit. We don’t believe in cutting corners, and all renovations should be of a high standard, but there is a difference between essential and quality renovations, as oppose to desirable and top-end (of course, this will also depend on where the property is located, and what your potential tenants are likely to expect in their rental; high end tenants will probably expect more).

You need to stand back from the property and renovate with your business head on.

For instance, rewiring to make a property safe and bring it up to safety standard is essential; however, installing a state-of-the-art kitchen, with expensive fittings might not add value in terms of both rental returns, or increase in the property value later down the track.

You must be realistic with your renovations and don’t over capitalise.

4. What do tenants want?

You also need to think about what tenants are looking for. These may include storage space, so you may consider putting in some additional cupboards, and with utilities on the rise, any energy saving/low energy usage white goods are a plus.

This is also where we come in. We can give you plenty of tips on what improvements you can make to make it more desirable to tenant. Having been in the business for over 45 years, we have a quite a few other ways in which we help maximise your rental return – check out our blog with tips on how to maximise your rental return.

We’d love you to get in touch to tell you more, and also tell you how our property management services can make your life easier.

Drop into the Cardiff office or give us a call on 02 4956 9777. Or send us an email at mail@newcastlepropertymanagement.com.au – we’ve helped many people realise their financial dreams through property and we’re keen to help you.