Friday, December 14

Spend money to earn it

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An investment property can be more profitable if you improve it, chiefly the kitchen and bathrooms

When people hear the term “investment property” they think of a pristine home that is going to create an inflow of capital that never stops delivering.

The truth is quite different though, and the adage “you have to spend money to make money” is a bit more realistic.

Often the investment property you purchase will not immediately be as perfect as you would like, and if you bought a property at
market-related prices, the chances are the property could be somewhat dated.

To make an investment more appealing to the market and a lot more profitable, some cash outlay and a bit of elbow grease is needed.

If one renovates wisely, the investment property will surely pay dividends, says Greeff Christie’s International Real Estate chief executive Mike Greeff.

At first, a property bought for investment purposes will fulfil just 70% to 80% of the owner’s desires, so working on the rest will not only satisfy the investor (and increase the property’s value) but also potential tenants.

“When renovating, there are some changes that will definitely increase the value of your property,” says Greeff.

“Revamping the kitchen and bathrooms adds a modern feel to the home, as well as adding an extra 10 years’ value to some of the most frequently used parts of the home.

“Adding a garage or renovating an existing one is also a huge draw for potential buyers and tenants. A garage means peace of mind in terms of parking and vehicle security.”

This could also result in lower insurance premiums.

Automating the garage door and gate for convenience and safety is also worth looking at, Greeff says.

The addition of a cottage on the property will increase potential living space and thus the rental potential of the property.

“If your property does have a cottage, you are able to have two rental incomes. A cottage may also allow for an au pair, caretaker, student or young professional to be on the property.”

Apart from a cottage, Greeff says additional storage areas are always worth considering. This can also be used as seasonal storage as you alternate clothes, decor and furniture between summer and winter.

A relatively simple yet great renovation trick is to change the old lighting and water fixtures for new energy-efficient and water-efficient ones. Buyers and renters alike want to avoid unnecessary expense and a home that is efficient appeals to the frugal side of any individual.

“Add to this the moral high ground of living in a home that does not actively harm the environment or is unnecessarily wasteful of natural resources and you have a winning formula,” Greeff says.

Although renovations to a property that will be enjoyed by another family may seem like a waste of money, the simple truth is that the only guaranteed way to make money on an investment property is to invest in it, and make the property as appealing as possible to a renter or buyer.

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