You’ve found an investment property that ticks all the boxes: it’s the right price, in the right location, it has excellent bones, the potential capital gains look great, the potential returns are excellent, and your team thinks it’s a good choice.
Really, really ugly. How on earth can you rent out a property to fantastic tenants if it looks ugly?
Don’t panic, it’s not the end of the world. Remember renters are savvy and you may even be able to turn that ugly duckling into a massive selling point to potential tenants.
First of all you need to be secure in your homework. Before you signed the contract to buy the property, you would’ve undertaken a lot of research – market research, property comparables, rental return numbers – lots and lots of number crunching. It’s not exactly the most glamourous part of property investing, but it is the most vital. Because it doesn’t matter how ugly a property is, if the numbers stack up… well they stack up.
So what do you do with the eyesore?
You can either do one of two things:
- Throw money at it
- Let your tenant throw money at it.
Throw money at it:
While looking at the property you no doubt factored into the purchase price some upgrades to the property. These will increase it’s appeal, but you have to think about your potential renters and what the actual problem is.
Is the property ugly because it:
- is outdated
- has bad layout
- has bad curb appeal
- or is it ugly for some other reason?
If you have done your homework properly, I’m sure that it’s ugly for cosmetic reasons, so should be fairly straightforward to remedy. If it’s ugly because it’s in a bad location, the building is not structurally sound or some other fundamental issue – then you probably shouldn’t have brought it!
However, if the property is dark, overgrown and outdated, you can get rid of all that and start again. Some time and effort in the garden, some paint and new flooring may do the trick. But here’s something to consider, maybe you can get your tenants involved.
Let your tenant throw money at it.
I’m sure as a landlord you know that tenants want to put their stamp on a property to call it home. You could use this to your advantage.
If you ripped out the old, maybe you could work with your tenants to develop the property so that it works for them and you. Let them paint the property (with your approval on colors and standard of work), let them put in a garden (with your approval on plants), let them choose the flooring (based on 2 options you provide). That way the tenant helps foot the bill on some aspects of the property, while you reap the rewards.You could even go 50/50 in purchasing the products and labour.
This is not always going to work however. It depends on the property and depends on the tenants. This is ideal for tenants you know well. Maybe you have tenants that are looking for a different property to rent, so rather than losing them, you could approach them about working together to create a great home for them. Or if the tenants are new to you, you may be able to cut a deal – they could have reduced rent for 6-months while they provide labour of upgrading the gardens and painting.
Each property is unique and that’s part of the fun of investing in property. If you look at your investment property in a different way you may be able to turn that ugly ducking into a cash cow and a beautiful swan all at the same time. But I would advise that before going ahead with any creative solutions that you check with your team, and seeing what they advise. Having tenants work on the property for you, could backfire!
What do you think, would you let your tenants decorate your property for you?