How much should you spend on investment property maintenance and improvements?

One of the advantages of investing in property is that you can make improvements to enhance its value and consequently your personal wealth. A disadvantage is that dwellings require ongoing maintenance, and this expense reduces an investment property’s cash flow.Minimising or avoiding maintenance costs is often a false economy. Maintenance cannot be avoided, only deferred. Problems either remain unresolved or they get worse. Either way, you will have to complete the maintenance at some stage or accept a lower (eventual) sale price, as most potential purchasers will factor in these costs.How much should you spend on maintenance and improvements?As a general rule-of-thumb, it is a reasonable expectation to spend circa 0.40% to 0.75% p.a. of a property’s value on ongoing maintenance. You may not need to spend that each year, but over a 10-year period, that would not be an unrealistic expectation. Houses tend to require more maintenance than apartments.Items that increase rental incomeIt is important to ensure that your property is in good tenantable order so that its comparable to other properties in the surrounding area. Also, it is wise to look for items that will enhance or maximise its rental income. Such items tend to include:§ Air conditioning, particularly in apartments, is highly desirable and can often increase your weekly rental income by up to $20. That is a pretty good return on investment considering a split system cost around $3k to $4k to install.§ New carpets.§ Re-grouting tiles in kitchens and bathrooms. Not only is this good preventative maintenance, but it can have a positive impact on a property’s appeal.§ Sprucing up bathrooms and kitchens. It is advisable to maintain both the kitchen and bathroom to the same standard, otherwise it looks a bit odd. These projects can be completed cost-effectively by replacing the flooring (e.g. new vinyl), painting cupboard doors and replacing handles, replacing benchtops, appliances, tapware and so on. Avoid full kitchen refits where possible.The standard of any maintenance and improvements must be in-keeping with the area and in line with tenant expectations.Items that increase the value of a propertyCompleting maintenance typically preserves a property’s relative value. However, completing improvements often increases a property’s value, although its typically a once-only improvement.Some examples of improvements include renovating kitchens and bathrooms, improving natural light (e.g. through painting, installing skylights, etc.), adding a bedroom (for houses). These enhancements can improve a property’s value by more than their cost.Non-cosmetic expenses such as rewiring, reroofing, plumbing and so on tend to have little to no impact on value, but sometimes they are unavoidable.Don’t go overboardYou cannot expect a tenant to take good care of your property if you don’t. Therefore, it is important to maintain your property to a good standard, commensurate with tenant and potential purchaser expectations, so that you attract quality tenants.However, improving a property is a financial decision, not an emotional one. You don’t need to put in marble kitchen benchtops and European appliances. It must be durable and attractive whilst also being cost-effective and good value for money.Apartments: common areas and facadeIf you own an apartment, you will know that the Owners’ Corporation is responsible for maintaining common areas and the building.It is important that these are adequately maintained to improve street-appeal, security and structural integrity. Also, where possMy new book is available for pre-order now: Pre-ordering the book will help me get it into bookstores. So please do me a favour - please consider pre-ordering now - links and pre-order bonus are available here: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at [email protected]. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.