One of the main mistakes that new Weeki Wachee rental property investors make is to over-improve their rental house. It’s reasonable to expect the rental to be in good condition and to appeal to quality tenants. However, improving the property too much can decrease or even take out any profits you desire to gain while you recoup your remodeling costs. Probably the ideal approach to stay away from this dilemma is to think strategically and address obstacles to profitability upfront – before you even purchase the property, if necessary. When you proceed with your ultimate objective in a clear perspective, you will be less likely to see yourself in a financially shaky situation from over-improving.
Many professionals recommend that you begin by planning the end of your investment’s life – your exit strategy. When you purchase an investment property, you have to feel confident that you will have the option to refinance or sell the property at a certain point in time and make a tidy profit. Then, what is the purpose of purchasing in the first place? 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 – including any improvements you’ve planned. Communicate with some lenders to learn about mortgage products, costs, and if your goals align with your financials. A decent lender should be able to clarify what barriers you may face and whether your strategy is solid or not.
Another significant piece of information you need to avoid over-improving your Weeki Wachee rental property is your After Repaired Value (ARV). To guarantee that your investment is profitable, you must identify the house’s value after you finish improvements. With the help of this figure, you can be confidently sure that you’re not going too vast with your remodeling plans. Utilizing good comparable properties, calculate your ARV. Afterward, talk to real estate agents, other investors, and your contractor. The more details you gather, the more confident you’ll feel that your improvements are enough – but not too much.
Finding that balance can be a real challenge, particularly if you are a first-time investor. Erring in either direction can cost you big time. Yet, one approach to find the right improvements for your rental house is to look to your comparables once more. If you recognize what the other rental homes in the location 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 most terrible things you can do is make your property nicer than others in the community. If most neighborhood houses install tile floors and composite countertops, don’t use hardwood and granite. Even though all that you upgrade should be of good quality, in general, luxury materials and high-end products are a complete waste of money. There are exceptions to this rule, particularly if your rental is in a high-end neighborhood or certain upgrades would give you a significant boost in a property. However, even in such cases, you should aim for mid-grade materials and good but not too good improvements.
Lastly, 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. The minute you become emotionally involved in your rental properties, you may begin to make improvements that you want but will not do a lot to improve profitability. Of course, you deserve to take pride in your rental properties, but that pride should come from being the owner of a 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 Connection, our team of Weeki Wachee 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 352-428-2316.
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.
