So-called “smart” homes are the latest trend among homeowners, but should investors use them to drive up rental yields?
Like so many things in real estate, that depends on a number of factors; your own personal financial situation, the property itself, market conditions and improvement costs.
It also depends upon how “automated” you want the home to be.
There are a wide range of products on the market, ranging from automated locks to whole house systems, therefore the product(s) you choose, if you choose to automate at all, will dictate your improvement costs and ultimately your profit.
• Advertising that your home has smart, money saving features can be advantageous in a tight rental market or even if you’re selling to an owner occupier.
• If the market potential allows you can command higher rents for the “smart” upgrades you’ve done.
• The convenience of smart systems can potentially encourage tenants to renew their leases.
• You can experience a significant reduction in costs if you’re paying utilities. This alone can improve your home’s ROI.
Following are some of the most common ways to automate the systems of a home, including some of the pros and cons of each.
• Saves money
• Enhances security
• Older properties may require electrical system updates
• Can be costly, depending upon the system needed
• Possibility of being hacked
• Saves money by managing energy and/or water use
• Improves efficiency by reducing power usage at certain times of the day
• Much more expensive than standard appliances
• Not a ‘must have’ for renters
• Not likely to justify a higher rent
3. Keyless entry
• Allows you to give temporary authorization to access the property
• Can give you a record of visitors to the property (good for use when vacant or work is being done on the property)
• Can be changed for new tenants, reducing cost of a new lock
• Vulnerable to hacking
• Can need to be reconfigured or re-booted
4. Automated security systems
• Can adjust as needed (e.g. lights only, lights plus cameras, etc.)
• Can discourage break-ins
• Give both you and your tenants peace of mind
• Can pick up interference from other wireless devices, triggering a false alarm
• Can be hacked
5. Irrigation systems
• Reduce cost by eliminating daily upkeep of the landscape
• Can be synced with the weather forecast to prevent watering unnecessarily
• Some systems can sense the moisture in the soil to determine how much water is being used
• Can manage the amount of water given according to plant species (e.g. desert plant vs flower)
• Can be very expensive to set up.
• Are costly to maintain, repair or replace
• Might be more expensive than paying someone to manage the landscape
• Save money
• Increase comfort (adjust temperature before you arrive home)
• Can manage the temperature remotely if you’re between tenants
• Can reduce temp in unused areas
• Can be programmed to turn off and on
• Can adapt to the user, automatically conserving energy when nobody’s home
• Can be unreliable
• Can be hacked
You must understand your property’s market demographic to avoid overcapitalising. There’s no point to these upgrades unless you can expect to realise a return on your investment.
If you do choose to go ahead with smart upgrades be sure to shop around as the price range for each of these systems can vary greatly.
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Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
Read more expert advice articles by Sam
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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