Renovating to Rent: Smart Upgrades That Boost Rental Returns
A well-planned renovation can transform your investment property, helping you attract quality tenants and increase rental income. The key is knowing where to spend and where to save, so you are not over-capitalising while still presenting a home that tenants are excited to move into.
Understand Your Market First
Before picking up a paintbrush, it is important to know what tenants in your area are actually looking for. A young professional renting in inner Perth may want modern finishes and low-maintenance living, while a family in the suburbs may value outdoor space, storage, and safety. Understanding who your property appeals to will guide which renovations will deliver the best return.
Avoiding Over-Capitalisation
One of the most common mistakes investors make is overspending. To avoid this:
Start by assessing the current condition of your property.
Identify the areas that genuinely need updating, rather than renovating for the sake of it.
Keep a contingency fund aside for unexpected costs.
The goal is to strike a balance — present a property that is modern and functional without investing more than the rental market will justify.
Calculating Return on Investment
Renovations should always be considered through the lens of return. A simple formula to work out ROI is:
ROI = (Increase in annual rental income ÷ Total renovation costs) × 100
For example, if you spend $10,000 on upgrades and expect to lift rent by $2,000 per year, your ROI would be 20%.
This calculation helps you decide whether the renovation is financially worthwhile and keeps your decision-making clear.
Do Not Forget Tax Benefits
Smart renovations can also deliver long-term financial advantages beyond rent. Renovation expenses can often be added to the property’s cost base, reducing capital gains tax when you sell. In addition, creating a depreciation schedule helps you track the value of new fixtures and fittings, maximising deductions and supporting claims with the ATO.
Practical Upgrades Tenants Value
Some upgrades are not just about looks — they make the property easier and cheaper to live in, which tenants are willing to pay more for. Consider:
Energy efficiency: LED lighting, split-system air conditioning, and modern appliances.
Safety and security: Quality screens, alarms, or smart locks.
Technology-ready features: Reliable internet and plenty of power points, especially as more tenants work from home.
The Power of Street Appeal
First impressions matter. Tenants decide quickly whether the home feels right. Simple touches like a neat garden, clean windows, or a freshly painted front door can set the tone before they step inside.
Think About the Long Game
Renovations are not only about finding tenants faster — they are about encouraging them to stay longer. A clean, functional home reduces turnover, minimises vacancy, and protects your property’s long-term value.
The best renovations are strategic, not excessive. By focusing on smart improvements, calculating ROI, and taking advantage of tax benefits, you position your property to attract quality tenants while maximising returns.