One of the worst approaches that new Person County rental property investors make is to over-improve their rental house. It is important to keep your rental to be in good condition and to appeal to quality tenants. However, improving the property too much will reduce or even take away any profits you expect to obtain while you recoup your remodeling costs. One of the safest approaches to prevent that mistake is to think strategically and address obstacles to profitability upfront – before you even purchase the property, whenever possible. When you begin with your key goal in firm knowledge, you will never catch yourself in a financially shaky situation from over-improving.
Several experts recommend beginning by planning the end of your investment’s life – your exit strategy. When you buy an investment property, you have to feel confident that there will be a possibility to refinance or sell the property at some point and make a tidy profit. Otherwise, what does buying entail from the start? So as you’re crunching the initial numbers, think about what you will need to get out of your property for many years down the road – together with any improvements you have intended. Communicate with a couple of lenders to learn about mortgage products, costs, and whether your goals align with your financials. A trustworthy lender should define which barriers you may face and whether your strategy is solid or not.
Another essential piece of information you need to avoid over-improving your Person County rental property is your After Repaired Value (ARV). To guarantee that your investment is profitable, you need to know what the house will be valued at after you finish improvements. Using this figure, you can be assured that you will not be too extensive with your remodeling plans. Using good comparable properties, calculate your ARV. Then, talk to real estate agents, other investors, and your contractor. The more details you accumulate, the more confident you’ll feel that your improvements are enough – but not too much.
Finding that balance can be a real challenge, typically if you are a first-time investor. Erring in either direction can cost you big time. However, the perfect option to find the right improvements for your rental house is to scan your comparables once more. If you identify what the other rental homes in the locality look like – and what they rent for – you can improve your property up to the point that it will allow you to charge market rents and no more.
One of the worst things you can do is to make your property nicer than others in the area. If most neighborhood houses have tile floors and composite countertops, don’t install hardwood and granite. Even though anything you upgrade must be of good quality, in general, luxury materials and high-end products are a complete waste of money. There are exceptions to this rule, usually, if your rental is in a high-end neighborhood or certain upgrades would give you a great boost in property. But even in such cases, you should aim for mid-grade materials and good but not very pleasant improvements.
At long last, avoid over-improving your rental house by remembering not to get too attached to the house. Try to view it as an investment, not a home. As soon as you get emotionally involved in your rental properties, you might end up making renovations that you like but will not do much to improve profitability. It is normal to want to take pride in your rental properties, but pride should come from being the owner of profitable and well-run investment and not how much you spent on improving the property.
Would you like some expert advice on how to improve your rental property to maximize profits? We can help! At Real Property Management Impact, our team of Person County property managers can help you find comparables, calculate your market rents, and much more! To learn more about what we offer investors like you, contact us today online or call us at 919-439-8989.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.