Getting the best return on an investment property

That is, how much profit will you pocket when it comes time to sell?

While a well-selected investment property will appreciate naturally over time, there are things you can do to improve a property.

We asked real estate agents where investors should be spending their money in order to secure the best possible return.

Focus on the basics

Jellis Craig Richmond sales consultant and auctioneer Travis Keenan says the quickest, easiest and cheapest way to get the most bang for your buck is to spruce up the floor and walls.

“When they’re ready to sell, new carpets and a fresh coat of paint are relatively minor things that can be done to just liven the property up a bit, particularly if it’s going to be vacant,” Keenan says.

“If you’ve got a single-fronted Victorian home, decent carpets, paint and polished floors can go a hell of a long way with the buying public. They can reap huge rewards.”

Take care with kitchens

Robert Stein-Rostaing from Laing and Simmons, Bondi Junction, says kitchen renovations usually bring greater returns than bathrooms, but it’s important not to over-capitalise.

Stein-Rostaing says his rule of thumb is that any money spent on property improvements should attract a fourfold return.

“We don’t advise people on making changes unless we believe there’s a potential for the improvements to return four times their investment. If they’re going to put in $10,000 into the kitchen, we’d want it to return $40,000, otherwise it’s simply not worth it,” he says.

“In the kitchen, it can range from putting in nice splashbacks to – if you can afford it – putting in new appliances, to tearing up the old linoleum that a lot of the investment properties have.”

Add a room

For many investment properties, the layout or strata rules will prevent significant structural changes. But Stein-Rostaing says that if there’s the potential to add another bedroom, it can pay off big time on auction day.

“Over the years it will provide a great return. Adding an extra bedroom is one of the easiest and quickest and best ways to add value from both a capital appreciation and rental perspective,” he says.

But he warns that the initial expense can be prohibitive.

“To knock down an average wall, you’re looking at $5000 minimum-plus. A decent sized wall will come in at around $25,000. Plus, the majority of investment properties are strata so you’ve got to get them to approve it.”

Get it styled

One of the simplest and cheapest ways to almost instantly bump your property’s value in the eyes of prospective buyers is to spend a little money having it styled before inspections.

A couple of thousand dollars worth of professional styling and temporary furniture can – like new carpet and a lick of paint – get buyers’ hearts racing.

“It’ll just create a little bit more interest. It’s going to create a greater sense of competition on auction day,” Keenan says.

Keep it simple

Keenan advises against splashing out on significant changes that may be polarising for some buyers.

He says most potential buyers will want to put their own stamp on a property, and may not love the major cosmetic changes you’ve just spent big bucks on.

“When you’ve got two or three buyers who know they can move into it and enjoy it and then add value over time, it means you’re probably going to have a couple more people bidding at a property,” he says.

“You’re better off getting the simple things right.”