Sunday, December 17, 2017 / Blog
There is no doubt about it, Australians love living in properties with their own private pools. There is a certain touch of elegance and lifestyle associated with being able to take a private dip whenever you want. Coming home from work on a hot day, and knowing you can just throw yourself into the refreshing water is a tantalizing option for many.
Now, this applies obviously to the desirability for you to install a pool for yourself, but what we want to address in this article is the idea of whether it is worth while to install a pool in your investment property. This is by no means a small ticket purchase, and can come at considerable cost so there fore should not be a decision that is made lightly.
The same processes need to be gone through when assessing any equity increase project, whether it be installing a new kitchen, repainting the building or laying new carpets. However die to the scale of this particular undertaking an extra degree of consideration must be kept in mind.
There would be two principle ways that a installing a pool could bring you a return. The first would be the straight up increase to the value of the property itself, as homes with pools are generally valued at a higher rate than a home that does not have a pool. This is a relatively straight forward way in which a pool could assist in providing a better return.
The second way that a pool could potentially bring about a stronger return would be with the potential for a higher rent being charged for the property. People will tend to pay just a little more for the luxury of having a rental property with a pool. There is also the possibility that by having a pool you will experience shorter periods of vacancy.
This is not a straight forward calculation as it will largely depend on what type of pool you are installing, how large it is, how much access your back yard has to earth moving machines and so on.
You will also need to remember that you will be payign for filters, fencing, permits and so much more than the initial cost of installing a pool.
Either way, you should be able to follow up with pool installers in your area to find quotations on how much it will actually cost to install.
Aside from the initial costs of the pool itself, you will also need to be aware of ongoing costs associated. Be they cleaning, filter maintenance and repairs, the chemicals themselves. Your property manager will more than likely be able to negotiate within the lease agreement for your tenants as to who is responsible for what costs, but you will need to be aware of what the total ongoing price of the pool will be. You should keep these details in mind, and factor them into the total holding costs of the property, even if you do have agreements with tenants for them to be covering these costs. It always pays to be safe.
You should not go into this with the blind assumption that a pool will bring greater return from your investment property. At a minimum you should be:
From here you should be able to come up with an estimated value increase that could be expected over the lifetime of holding the property, as well as an estimation of the additional cash flow that a pool could bring.
Then it becomes a relatively straight forward process of deciding if it will be a net positive decision to take, or if it is one that is best not being pursued at all.
The great people over at Homely have put together a guide that helps go into some of the finer details in deciding if a pool is going to be a good option for you.
Whilst we have simply been focusing on the financial aspects and the black and white question of 'can you make the numbers stack up' tey have run into greater detail on some of the finer decision processes behind installing a pool.
When it comes to your investment portfolio, quick decisions are dangerous decisions.
We recommend taking your time, doing your research and speaking with experts before you make any large decisions about increasing your portfolio, expanding the equity of your individual holdings, or making any changes to your investments!