In today’s show Miriam Sandkhuler, the founder of Property Mavens, details some ways you can improve the income you are getting from your investment property.
Kevin: If you’re looking for some clever ways to improve the income of your rental property, stand by, because that’s exactly what we’re going to be talking to Miriam Sandkuhler about. Miriam is the author of a great book I’ll tell you about in just a moment, but she is also the founder of Property Mavens. They’re a property advisory firm; they help you buy the right property, and they also help with vendor advocacy.
Miriam, let’s look at the best ways that you’ve found to improve the income of a rental property.
Miriam: Kevin, it’s really about understanding who your demographic is – who is the tenant you’re targeting who’s going to want to actually rent the property from you? It’s a case of the property itself, the surrounding vicinity, the suburb, who you’re likely to attract, and what it is that they’re going to want.
When you have the ability to understand that and do the research, then you’re in a better position to make sure that you can do what’s required to your property to extract as much rent out of it as you can.
Kevin: For someone who may be struggling a little bit with their property – in other words, it may be untenanted for a while – a good idea might be just to go and immerse yourself in the local area and maybe find out why it’s not renting. It’s not always about price, is it?
Miriam: No, it’s not about price. Frequently, it could be the physical size of the property itself. It could be the features that it may or may not have. A perfect example would be an inner-city suburb where you have high density, you have older apartments with a whole lot of new apartments being built close by, and you have tenants who are prepared to pay a little bit more for something shiny and new, whereas your tired old apartments may be inadequate and unappealing.
That’s where something like a cosmetic renovation might come in. You might need to do new carpet, new paint, new window furnishings. If that’s not adequate, and the property manager is advising you that tenants want more, that’s where you’d start looking at possibly putting in a new kitchen or a new bathroom, but making sure that you don’t overcapitalize in the process.
Kevin: That was going to be my next point. You have to make sure on all of these things that you do not overcapitalize. What’s your experience there about making sure that that doesn’t happen?
Miriam: Work on a percentage of your purchase price of your property. If you spent, say, $400,000, and you have one of these apartments that might be a bit tired, only be putting 1.5% of the value of the purchase price into the renovation on the bathroom. If you spent $400,000, don’t spend more than $6000 updating the bathroom. You can do it affordably and within a reasonable budget nowadays. You can go to organizations like IKEA or Masters, and they have got more affordable options for you. The same with the kitchen. You don’t want to spend more than that 1.5% or 2% of the purchase price.
Work on a percentage, stick to that budget, and do the best you can with the money that you have.
Kevin: And remember, too, that you’re not really renovating it to suit yourself; you’re really renovating it for your target tenants.
Miriam: Absolutely. Talk to your property manager, talk to other property managers, find out what tenants want, and then, if it’s a case of extra bells and whistles, maybe if you throw Foxtel into the package, that might appeal to them. It may be that you need to put a gardener in if it’s a really great property but it’s a high-maintenance garden.
Start thinking laterally and creatively. Ask the property manager what the feedback is from prospective tenants, why it doesn’t appeal to them, and then come up with creative solutions, but make sure that they’re affordable. Make sure they’re not going to blow the rent out so that ultimately it doesn’t appeal to anyone.
Look, maybe it comes down to have you bought the right property and is it in fact going to perform how you need it to? Sometimes it could even be a tough lesson that it may be one that you need to let go of.
Kevin: I guess sometimes, too, you have to remember that any improvement you make is not necessarily going to help you get more rent but it may just help you make sure you keep your tenants in there and that you really reduce that number of vacant days.
Miriam: Absolutely. You don’t want it sitting on the market for weeks and weeks on end. It’s about being pragmatic in a really reasonable and fast time frame so that you can do whatever it is you need to do as cost-effectively as possible to make sure that it’s tenanted. You do not want a property languishing and costing you hundreds of dollars a week in mortgage repayments and not having any revenue coming in to offset that.
Kevin: At the start of the chat with Miriam, I mentioned about the book that Miriam has written. It’s called “Property Prosperity: Seven Steps to Investing Like an Expert.” You can get more details on that at Miriam’s website, as well, Property Mavens.
Miriam, thank you very much for your time.
Miriam: Thanks so much, Kevin.