IMAGINE this scenario: the very first property you bought is nearing completion. You have watched it “grow” from the ground up over the last three years. You have visited the site numerous times, more than you can remember.
This feeling of excitement and expectation is like no other. It’s almost like waiting for the birth of your firstborn child. In many ways, both situations are eerily similar. You have an expectation of what the finished product will look like, but you will never know how it will turn out until the very end.
If the developer had a show house or show apartment, you would no doubt have been to visit it countless times. You would have memorised every aspect of the interior design work, convincing yourself that you would be able to recreate the same in your property once it’s handed over.
Then the big day comes and you troop off to the developer’s office to sign the necessary papers and collect your keys. With great excitement, you and your family go into your new home. Then the shock hits you, when you realise that your new home is nothing like the show unit you pictured it to be. Bare walls, floors and ceilings, wires hanging from the walls and ceilings. Oh no, you tell yourself. This is going to take some doing.
So now you need to start making the decision on how to renovate, and more importantly, how much renovation to undertake. Renovating your property is not cheap. It can be a never-ending task as you keep adding to what you had initially planned to do.
How much to do? How much money do you put into this? These and other decisions will have to be made. Usually, the decisions you make will be driven primarily by how much money you have set aside for this exercise.
But renovations don’t always translate into a higher value for your property. Oftentimes, much of the renovation that goes into a property will not actually make much difference to the ultimate value of the property.
The astute investor will approach this exercise with caution. Of course, if the property was going to be your own home, you would probably be prepared to spend more money on your renovations. But you must remember that this property may not be your home forever. You may decide to upgrade in a few years. And at that point, you may put this property up for sale. And what a shame it would be if you were unable to recoup your costs at that time.
If the property was bought as an investment, and your primary goal was to rent the property out for a steady and stable income, then the question of how much you would spend on renovations would be an ever more pertinent one.
One of the most prudent ways to approach this situation would be to put yourself in the shoes of a prospective tenant. Do enough to make the place attractive to a prospective tenant.
Keep your renovations simple. Put in enough furnishings to make the place livable. There is no need to spend money on lavish interior finishes, unless of course it is a high-end property and all these additional “bells and whistles” would actually translate into a higher quality tenant or higher rents. In which case, it may be the smartest financial decision to undertake a comprehensive makeover of the place.
Happy hunting, and may the force be with you.