Join Australia's most dynamic and respected property investment community

Reno or reduce?

Discussion in 'Property Management' started by Ghoti, 18th Oct, 2016.

  1. Ghoti

    Ghoti Well-Known Member

    Joined:
    10th Jun, 2016
    Posts:
    124
    Location:
    Melbourne
    Possibly jumping the gun here, but want to make use of a window of opportunity!

    1st IP and I was pleasantly surprised at the rental the PM said we'd achieve - about $20-30pw more than I had expected based on limited reviews of RE.com adverts in the area. HAd 3 opens, each attended by only 1 party and no applications.

    First week I put down to Grand Final weekend, and second week due to 'back to school'. Now I wonder. Property is a 3+2+2 generally good condition, freshly painted, new carpets and ~400m from primary & secondary schools. However the kitchen is tired and we planned to replace it in 12 months.

    So are we too anxious too soon? Should we look to reduce the rental or bring forward kitchen renovation plans?

    Hardly Normal have a kitchen special running at the moment - 600mm hotplate, oven and rangehood for $799 interest free over 2 years. Got me thinking that maybe we should bite the bullet and do the kitchen reno (HN applicances, Kaboodle cabinets and maybe a no-name dishwasher).

    What are the thoughts of those more experienced in the game?

    Cheers,
    Scott
     
  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,224
    Location:
    NSW
    Either of these is acceptable Scott.

    Remember that the property must be "available for rent" to be able to claim tax deductions like loan interest etc - so if you decide to renovate, do it quickly and still do Opens and advertising.
     
    Tony Fleming likes this.
  3. Phase2

    Phase2 Well-Known Member

    Joined:
    14th Jul, 2016
    Posts:
    421
    Location:
    Perth
    ^^^ this.

    Don't forget to weigh-up the cost of kitchen reno vs return from rent. Payback is usually pretty slow.
     
    Colin Rice likes this.
  4. Ed Barton

    Ed Barton Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,114
    Location:
    Brisbane
    Perhaps you were right and the agent wrong in your rental estimate.
     
    Joynz likes this.
  5. Joynz

    Joynz Well-Known Member

    Joined:
    5th Apr, 2016
    Posts:
    819
    Location:
    Melbourne
    Where is it and what rental is the agent recommending?
     
  6. Ghoti

    Ghoti Well-Known Member

    Joined:
    10th Jun, 2016
    Posts:
    124
    Location:
    Melbourne
    We were planning to do the kitchen in 12 months anyway in pursuit of more equity as well as potential to retain/attract better tenants. If doing it now means we get a tenant sooner then that becomes part of the payback scenario.

    Ultimately I guess the timing may be moot as a the ATO would deem replacement wan improvement rather than repair.
     
  7. Ghoti

    Ghoti Well-Known Member

    Joined:
    10th Jun, 2016
    Posts:
    124
    Location:
    Melbourne
    Carrum Downs, Vic and $385pw. I just expected there would be a few parties through each week based on our experience as tenants, but admittedly a different area.
     
  8. larrylarry

    larrylarry Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,502
    Location:
    Sydney
    Yeah I agree too. Bear in mind it's harder to have it leased close to Christmas so if you do reno now...it will eat into October and November. I'd probably lower rent to get someone in the review after new year.
     
    Phase2 and Tony Fleming like this.
  9. Tony Fleming

    Tony Fleming Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    530
    Location:
    Sydney
    Have you considered just doing the kitchen up compared to getting a new one? I've repainted kitchen cupboard doors/base, new door handles and sink. Normally only costs a few hundred and it can be done in a day or two. As @larrylarry said now is the time of year you want to lock in a tenant.
     
    Phase2 likes this.