A common mistake for new rental property investors in Weeki Wachee is over-improving their rental house. Wanting a well-kept rental to attract quality tenants is natural, but too many improvements can diminish or wipe out your profits. This caution is designed to make you aware of the risks and help you make well-informed investment choices.
Our practical suggestion is to consider strategic planning and tackle profitability issues before buying. If you begin with a clear end goal, you are less likely to face financial troubles from over-improving.
Plan for the long-term
It’s often suggested by experts to start with an exit strategy for your investment. When buying an investment property, you should feel sure that you can refinance or sell it at the right time for a good profit. If you can’t, what’s the reason for buying it at all?
Discuss with various lenders to gain insights into mortgage products, costs, and if your goals align with your financials. A reliable lender should clearly explain any potential barriers and assess the solidity of your strategy.
Calculate property value after repair
Another vital factor in avoiding over-improving your Weeki Wachee rental property is understanding its After-Repaired Value (ARV). The ARV is the predicted value of the property after repairs or renovations. You must know the house’s post-improvement value to ensure a profitable investment.
Use accurate comparable properties to figure out your ARV. Following that, talk to real estate agents, other investors, and your contractor. Gathering more information will boost your confidence that your improvements are adequate—but not overdone.
Getting the balance right can be challenging, especially for new investors. However, you can use comparables—similar properties recently sold or rented in the same area—to 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
One of the biggest mistakes you can make is to upgrade your property beyond the neighborhood standard. If tile floors and composite countertops are common in the neighborhood, avoid installing hardwood and granite.
Ensure your upgrades are of good quality, but know that luxury materials and high-end products are often wasteful. Opt for mid-grade materials that are good quality but not overly expensive or luxurious. Even in high-end areas, opt for mid-grade materials and make improvements that are nice but not over-the-top.
Prioritize profitability over personal preference
Ultimately, avoid over-improving your rental by not becoming too attached to it. View it as an investment instead of your personal home. Emotional involvement in rental properties can lead to making preferred renovations that don’t boost 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.
Interested in expert advice to optimize your rental property profits? Real Property Management Connection can help. We’re a team of experienced property managers in Weeki Wachee and nearby. Contact us online or call us at 727-279-7779 to learn more.
Originally Published on Jan 29, 2021
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