Managing Investment properties risk
Updated: Sep 1
One of my clients has a one bedroom investment in Sutherland Shire in an older style apartment building built in the 1960’s. The agent cant lease the property, the property became vacant right after the worst of the first round of Covid-19.
“Jeremy, Why Can’t I Lease My Property?”
“Jeremy, I don’t understand why I can’t lease my property. Prospective tenants are offering $60–$70 per week less than the rent I was previously receiving, it has been vacant for almost six weeks, and the agent never returns my calls.”
This was the problem presented to That Real Estate Guy.
Using our Invest Smart process, we reviewed the local rental market, comparable one-bedroom apartments and competing properties in surrounding suburbs.
The problem soon became apparent.
Hundreds of newer apartments had entered the market. At the same time, some older apartments, particularly those in average or poor condition, were taking longer to lease or struggling to attract suitable tenants.
Understanding What the Tenant Is Actually Buying
The apartment itself had some good fundamentals.
It was situated in a smaller, established block approximately ten minutes' walk from transport, parks, schools, local shops, cafés and the beach.
But location wasn't the whole story.
The question became:
How much is a prospective tenant prepared to pay for an apartment in poor, average or very good condition when they can compare it instantly with newer competing properties nearby?
We assessed the apartment's physical condition, local demographics, competing rental stock and the difference in rent achievable between older and newer, or renovated apartments.
The gap was obvious.
The apartment had accommodated only three tenants over approximately twenty years, but during that period there had been very little capital investment beyond occasional deep cleaning and minor maintenance.
It was simply tired.
Don't Renovate for Perfection. Renovate for the Market.
The kitchen and bathroom are two of the most important presentation areas in an apartment, so they received particular attention. Flooring, paintwork, fixtures and overall cleanliness were then considered.
We could have replaced considerably more.
But that wasn't the objective.
The renovation wasn't about creating the perfect apartment. It was about achieving what we call:
Rent-to-Market Effectiveness
In simple terms: where should the owner spend money and where shouldn't they to reposition the property competitively for its target rental market?
That is one of the questions our Invest Smart analysis is designed to examine.
The Business Outcome
An investment property is an asset, and its performance should be measured accordingly.
Approximately $23,000 was invested in the property, including:
a new kitchen and appliances;
electrical and plumbing works;
new paintwork;
new timber-style flooring incorporating soundproofing to the required strata standard;
bathroom hardware and presentation improvements; and
a professional deep clean.
We also appointed a new managing agent and arranged professional property photography.
Professional photography is a relatively small expense, but it can materially improve the way a property presents online. In a competitive rental market, presentation is part of the property's value proposition.
The important lesson wasn't simply “renovate the apartment.”
It was to understand the market first, identify why the property was underperforming, determine what prospective tenants valued, and then allocate capital specifically to those areas most likely to improve its competitive position.
Property owners considering repairs, renovations or capital improvements should obtain advice from their accountant or tax adviser regarding the appropriate tax treatment of expenditure, as repairs, depreciating assets and capital works may be treated differently for taxation purposes.
Is Your Investment Property Performing as Well as It Could?
If your property is experiencing extended vacancy, declining rental enquiries or increasing competition from newer stock, the answer isn't necessarily to reduce the rent.
Sometimes the asset itself needs to be reconsidered.
An Invest Smart Property Report can help identify the market, property and competitive factors affecting your investment property and where improvement may create the greatest impact.
This version is also much better for website authority because it demonstrates a real methodology rather than merely saying TREG has expertise.
One additional improvement would make the case study significantly stronger: put the actual outcome at the end if you have it: e.g. vacancy before renovation, old rent, new advertised rent, achieved rent, days to lease and approximate improvement in annual income. That converts the article from a story into evidence of your process.
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