Think of your property as you would holiday accommodation. Is it 1 or 5 stars, or somewhere in between? Then think of the location. What are the majority of people in that community are looking for in their home? What is in high demand, what’s moving quickly for a good price and why?
Firstly a bit of honest self-reflection will probably be required. How would you rate your property?
2 Star – At base level accommodation there are a few non negotiables. As a landlord it is your responsibility as to provide a safe and healthy environment for your tenants and their visitors. If you can’t afford to maintain the property to this absolute minimum standard you need to speak with your property manager about divesting yourself of the asset and if that’s not an option, you must cease renting it out immediately. There are no circumstances under which it is ok to put people’s health or safety at risk.
3 Star – The property is maintained to at least the minimum standard expected within your neighbourhood. Some minor aesthetic improvements like paint and flooring or major renovations done 15 – 20 years ago might increase your rating to 3 Stars. One level above the minimum requirements should attract a reasonable quality tenancy and gross annual yield in a relatively strong market. Allowing the property to deteriorate back down to a 2 Star rating will extend your vacancy periods, weekly rental return and potentially attract either a less house proud tenant or someone who struggles to make their payments. Not improving the property could also see higher vacancies and rent decreases if the market tightens.
4 – 5 Star – Invest to improve the property to above the average standard expected in your neighbourhood. Your property will certainly attract a higher quality tenant in a shorter time frame, also increasing your gross annual yield with longer tenancy tenure and higher weekly rent. Improving the property will also increase your depreciation allowance and add value to the balance sheet.