Over-improving rental properties is a frequent pitfall for new investors in Person County. Wanting a well-kept rental to attract quality tenants is natural, but too many improvements can diminish or wipe out your profits. This advice is to warn you of potential risks and support you in making informed investment decisions.
We suggest thinking strategically and resolving profitability challenges before buying the property. If you begin with a clear end goal, you are less likely to face financial troubles from over-improving.
Plan for the long-term
Most experts recommend planning your investment’s exit strategy from the start. Confidence in your ability to refinance or sell an investment property for a profit at the right time is essential. If you can’t, why buy the property at all?
Talk to multiple lenders to learn about mortgage products, costs, and whether your goals fit your financial situation. A competent lender can outline potential obstacles and determine if your strategy is sound.
Calculate property value after repair
To avoid over-improving your Person County rental property, knowing its After-Repaired Value (ARV) is crucial. ARV is the expected value of the property after undergoing repairs or renovations. To guarantee a profitable investment, you need to know the house’s value after improvements.
Calculate your ARV with accurate comparable properties. Afterwards, confer with real estate agents, other investors, and your contractor. With more information, you’ll feel more assured that your improvements are just right—not overdone.
Striking the right balance can be difficult, particularly for first-time investors. Still, using comparables, similar properties recently sold or rented in the area, can help guide your improvement decisions. A good grasp of the local rental market enables you to improve your property to charge competitive rents.
Don’t go overboard with improvements
Over-improving your property compared to others in the area is one of the worst things you can do. If the majority of neighborhood homes have tile floors and composite countertops, steer clear of hardwood and granite.
Upgrades should be of good quality, but luxury materials and high-end products are usually a waste of money. Opt for mid-grade materials that are good quality but not overly expensive or luxurious. Even if your rental is located in an upscale area, use mid-grade materials and make tasteful, not extravagant, improvements.
Prioritize profitability over personal preference
To avoid over-improving your rental, remember not to get emotionally attached to the house. View it as an investment instead of your personal home. If you get emotionally involved in your rental properties, you might make renovations you prefer, which don’t necessarily improve profitability. It’s understandable to want pride in your rental properties, but it should be due to owning a profitable, well-managed investment, not the amount spent on upgrades.
Searching for expert advice to maximize your rental property profits? Real Property Management Impact can help. We’re a team of experienced property managers in Person County and nearby. Contact us online or call us at 919-439-8989 to learn more.
Originally Published on Jan 29, 2021
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