Updated 4 November 2026
CM Law's Ultimate List: The top 50 FAQs on Buying a Residential Investment Property #22: Renovation Potential
Explore the full residential investment property guide.
A dated property can offer room for improvement, but the purchase only makes sense if the building, approvals and budget support your plans. Fresh paint and a new kitchen cannot resolve every structural or legal problem. Before buying a NSW investment property to renovate, establish what is worth retaining, what needs investigation and what you can lawfully change.
What makes a property worth renovating?
Renovation potential depends on whether achievable improvements justify the purchase price, work and risk. Look for a location that suits your intended tenants, a building worth retaining and a realistic scope. An unattractive interior may present an opportunity, but age or a low asking price alone proves little.
The Australian Government’s guide to buying an existing house recommends assessing hidden problems alongside improvement options. Separate essential repairs from discretionary upgrades so you understand how much of the budget creates additional utility.
What do good bones mean in a building?
“Good bones” is an informal description, not structural certification. It suggests an underlying building and layout that can support sensible improvements. Investigate the foundations, framing, roof, moisture control and drainage, using qualified professionals. Sound-looking walls or attractive period features do not establish that hidden parts are in good condition.
My practical advice is to look beyond tired finishes, but test the good-bones claim before paying for it. An inaccessible subfloor remains an unanswered question. Ask what has actually been inspected and what needs further assessment.
Which warning signs need specialist investigation?
Cracking, sloping floors, sagging ceilings, persistent damp or evidence of timber pests warrant investigation. Arrange building and pest inspections and follow recommendations for engineering or other specialist advice. A standard visual report has limits: it does not normally inspect footings, concealed services or every inaccessible part of the building.
Read the inspection report’s exclusions, not just its summary. For older buildings, allow for asbestos and lead-paint assessment before demolition or sanding. Identifying the cause of deterioration matters more than simply covering the damage.
Can the existing layout work without major structural changes?
Consider room proportions, circulation, storage, natural light, ventilation and access. A useful existing layout may allow improvements without extensive reconstruction. Ask a designer how rooms could work for tenants and an engineer about structural alterations. Do not assume a wall can be removed because an open-plan arrangement looks appealing.
Your Home’s renovation guidance encourages retaining useful structures and improving comfort. Check opportunities for insulation and climate-appropriate shading. Moving bathrooms or kitchens can introduce plumbing, waterproofing and approval requirements that should be costed before purchase.
What should you check before exchanging contracts?
Have the contract, title, planning information and available approval records reviewed against your intended work before exchange or auction. An existing extension or converted room is not necessarily authorised. Obtain technical advice and preliminary costings while you can still decide whether the property suits your plans and budget.
My advice is to describe the intended renovation to your solicitor, rather than simply saying you plan to improve the property. A planning certificate identifies relevant controls; it is not permission for your particular design.
Will the renovation need council or certifier approval?
The approval pathway depends on the work and the site. Some minor work is exempt only if all applicable standards are met. Complying development requires a certificate; other proposals may require development consent and further construction approvals. Establish the pathway before treating an advertised renovation opportunity as achievable.
NSW Planning explains the three pathways. Ask council, a certifier or a planning adviser about the actual proposal, including site constraints. A builder’s quotation does not replace the necessary planning and building approvals.
How can heritage controls affect the project?
Check whether the property is individually heritage-listed or within a heritage conservation area. Controls can affect demolition, external changes and sometimes internal work. Heritage status does not prohibit every alteration, but the permitted scope, approvals and any exemptions need investigation before you rely on a particular renovation plan.
Service NSW’s heritage guidance distinguishes local and State listing processes. Allow for specialist advice and suitable materials where required. An exemption under one approval regime does not necessarily remove obligations under another.
What changes when the property is in strata?
Strata renovation rules distinguish cosmetic work, minor renovations and major work. Bathroom waterproofing or structural changes generally require more substantial approval than painting or replacing cupboards. Check the strata plan, by-laws and approval requirements, including any common property affected. Council approval does not replace the required strata authorisation.
NSW’s strata renovation guidance explains the categories. Common-property alterations may need a by-law allocating ongoing maintenance. Investigate existing renovation approvals and scheme finances before assuming an attractive apartment can be remodelled as you wish.
Can you renovate while tenants live in the property?
An existing tenancy continues to matter after purchase. Entry, privacy, repairs and termination rules constrain your timetable; buying with renovation plans does not automatically give vacant possession. Significant renovations can support termination only when the statutory conditions are met, with the required notice, supporting evidence and lawful timing.
The current NSW termination rules require necessary vacancy and work starting within two months after the tenant leaves; other conditions apply. Budget for disruption, and check rent-increase rules rather than assuming improvements permit an immediate increase.
What belongs in a realistic renovation budget?
Include the purchase and transaction costs, investigations, design, approvals, building work, finance, insurance and lost rent. Allow for unresolved defects and delays as well as the visible improvements. Obtain written scope-based quotes and identify exclusions, allowances and variations. A low headline estimate may omit work essential to completion.
Test whether the project remains affordable if costs rise or completion takes longer. Keep funds for necessary repairs rather than committing the entire budget to finishes. The appropriate contingency depends on the building and unresolved risks.
How should you test the expected value and rental return?
Compare recent sales and rental evidence for genuinely similar properties, accounting for location, land, accommodation and condition. Obtain independent valuation or rental advice where appropriate. Renovation spending does not translate dollar for dollar into value, and a higher advertised rent does not establish the income you will actually receive.
Compare the completed property’s estimated value with the full acquisition and renovation cost. For rental cash flow, include vacancy and ongoing expenses. A paper valuation increase is not realised profit or money available to pay contractors.
Are renovation costs immediately tax-deductible?
Not necessarily. The tax treatment distinguishes deductible rental repairs from initial repairs, improvements, depreciating assets and capital works. Fixing defects that existed when you bought the property is generally capital expenditure, even if you did not know about them. The timing and availability of deductions depend on the expenditure.
The ATO’s repairs and maintenance guidance explains these distinctions. Keep itemised records and obtain tax advice before budgeting for deductions. Eligible capital works may be deducted over time; cost-base treatment also requires appropriate adjustments.
How can you protect yourself when engaging a builder?
Check the contractor’s licence and that it covers the proposed work. Obtain a clear written contract addressing scope, price, allowances, variations and payment stages. Confirm any required Home Building Compensation cover before paying money or work starts. The applicable requirements and exemptions depend on the work and contract value.
NSW building-contract guidance and SIRA’s insurance guidance explain these protections. Have unclear terms reviewed before signing, particularly exclusions and provisional allowances that could materially change the final cost. Keep written records of agreed variations.
What real case shows the risk of renovating without approval?
Renovation potential depends on whether proposed work can lawfully proceed. In The Owners – Strata Plan No. 550 v Artuphel [2025] NSWCATCD 82, a bathroom project resulted in reinstatement orders after required approval was not obtained. For prospective buyers, this illustrates why strata permissions belong in the feasibility assessment.
The Cronulla owner described the work as urgent plumbing repairs. NCAT found that common property, including waterproofing and sewer pipes, had been affected. The works were not exempt cosmetic work or approved minor renovations, and urgency was not established.
On 8 July 2025, NCAT ordered removal and reinstatement as near as practicable to the previous condition within 12 months, excluding limited works paid for by the owners corporation. This was an approval and rectification dispute, not an investment-return case; NCAT did not decide whether consent had been unreasonably withheld.
How can CM Lawyers help assess the legal risks?
CM Lawyers can review the purchase contract, title restrictions, strata documents and tenancy issues against your renovation plans. We can also advise on building contracts and disputes. Our legal review works alongside building, engineering, planning and tax advice, helping you understand the commitments before you buy or start work.
For advice on buying a property or a contract review, call (02) 9557 9000, email lawyers@cmlaw.com.au or contact CM Lawyers. Bring the proposed scope and inspection reports so we can address the legal questions that matter to your project.
This article provides general NSW legal information, not advice about a particular property or a substitute for building, engineering, valuation or tax advice.
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