How A Reno Can Help Piggyback You Into Your Next IP
Would you like to purchase another investment property but not sure where to get the funds? Why not renovate an existing investment? The increased cashflow and additional equity could make all the difference.
If you are wanting to purchase a second or third investment property but aren’t sure where to get the funds, why not renovate your existing investments? By rejuvenating one of your current properties, you can use it to piggyback into your next investment - and here's how.
Not only will you be able to raise the rent on a newly renovated pad, therefore increasing your cashflow for a new purchase, but a quick renovation will add to the value of your property, increasing your overall equity, which will allow you to go ahead and make a new property investment.
Minor or major renovations
As a general rule, try not to spend more than 10% of the property’s value on your renovation. However, even a fresh coat of paint, new floorboards or a revamp of the garden can increase the price of your weekly rent.
The key is to spend as little as possible to add as much value as possible to the property.
If you are able to add enough value, you might even be able to save for a deposit for the new property on the extra income you are making!
What is the best space to renovate?
One of the most valuable areas of the home to renovate is the kitchen because we spend so much time in this area of the house.
By doing a complete kitchen makeover (even on a budget) you can increase a property’s value by as much as $100,000!
Bathrooms are also another area of the home that’s worth investing in. Even low-cost renovations such as purchasing a new sink or countertop can increase the value of your rental income.
The benefits of already having one investment property
One of the great benefits of already owning one investment property is that you can use this investment to help piggyback you into your next purchase.
You can receive tax deductions on the repayments you make towards your mortgage and also access deductions on the depreciation of the property. If this applies to you, by reducing your taxes, you have more money to invest in your next property.