Renovate Your Property For Positive Cash Flow – Part 3 of 5

This is Part 3 of the 5 part guide on positive cash flow properties. Read Part 1, How to find positive cash flow properties here and Part 2, Commercial Properties here.

It’s time to get proactive. Renovations are a great way to increase your cash flow if they’re conducted efficiently.

Renovate to achieve cash flow positive

To illustrate how to renovate and achieve cash flow positive success, we’ll take a young couple as an example, Jack and Jill.

Jack’s philosophy is to buy a house that is going to increase in value so that you’re able to charge more rent. The old ‘worst house in the best street’ theory is paramount to positive cash-flow investing.

As far as loans are concerned, Jack and Jill opt for five-year interest-only loans. This means that their outlay is considerably less than if they were paying principal & interest, and therefore increases their cash flow.

In the current market, capital growth is more difficult to come by, so investors have to be more proactive when it comes to increasing the value of their property. Jack and Jill are no exception to this rule and in a few years ago they bought two properties worth $50,000 and then renovated them to increase their rental value.

The most important thing when renovating is to minimise costs so your outlay is less, but you want the place to appeal to renters at the same time is what Jack believed

Top 10 tips for first time buyers and renovators

  • Take the time to specifically set out in writing a plan of your vision and desired outcome
  • Determine your budget and don’t exceed the amount
  • Visit displays on current home trends
  • Visit auction houses and demolition sales to try and reduce initial purchase price
  • Employ the services of trained consultants
  • Keep your renovation functional and utilise space wisely
  • Try not to personalise the renovation if you think you may sell the property
  • Keep as much storage space as possible
  • Remember, less is more
  • Try to combine outside elements within (colours, textures)

Scope of works

Flooring – Living and dining space
Painting – Ceiling, walls in two bedrooms and living and dining space
Carpeting – Two bedrooms
Electrical – Power points and light switches

If you listen to the media hype, you would be forgiven for thinking that as a first homebuyer, you have little to no chance of buying something affordable in Sydney but with a bit of determination and some clever thinking, you will be able to afford a nice home through renovation.

This article has been republished with permission from Your Investment Property magazine. Try our Loan Repayment Calculator and find the best repayment strategy for you.

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