Renovations can drastically increase the profit you will make on a Revenue Property. There are many forms of renovations that can be done, but not all have the same effect on your bottom line. It is important to know which ones pay and which ones just waste your hard earned money.
The following suggestions will help you decide what is most profitable for your given situation.
Renovate When You Purchase
Some Renovations may need to be done after first purchasing a property in order to get it up to code and to ensure that the property can be insurable by your insurance provider. Insurance companies seem to be getting much more strict than in the past, especially when it comes to electrical issues. For example, you may need to replace older wiring systems and/or service panels. Ensure to check with your insurance provider before purchasing the property.
I would also recommend upgrading old plumbing if needed. A leaky pipe later on can cause a lot of damage.
Most tenants won't report a problem until it is seen, often after the damage has already been done.
A good roof is a must as well. Keep on top of the condition of your roof and don't let it get too far gone. A leaky roof can cause a lot of damage as well.
An upgrade to a kitchen and bath area can ensure you get the top rent for your area as well. Be careful though not to overdo it in this area. For example, in most cases, I would not recommend granite counter tops or stainless steel appliances, etc. New laminate counter tops and inexpensive cupboards will suffice. Also, new plain appliances are good enough.
The reason not to overdo it is simple. You likely won't get much more rent and your insurance provider won't cover you for vandalism. Tenants will never treat your property as you would. Damage will happen and the lowest cost replacement is the best for your bottom line.
Renovate to Increase Rent
Some governments restrict how much you can increase rent from year to year. Generally, this is called rent control and it is bad for the investor. You may find that over time your rents are lower than the average in your area.
Fortunately, there is a solution (in most cases) for the above. You must first vacate your property. To do this, you simply don't renew your tenants' lease which will leave the property vacant.
While vacant, you renovate. This may include replacing flooring, a new paint job, upgrading kitchen and bath areas, etc. Again, be careful not to overdo it as mentioned above.
Now you can advertise the property as newly renovated and charge whatever rent you feel is fair.Your rent will now be up to the market level and more importantly your profits should be up as well.
Renovations Pay
By using the above suggestions, you will be able to ensure that your investment is well taken care of and there should be fewer surprises down the road. A properly renovated property will ensure you the highest possible profits with the least amount of hassle.
Remember, when it comes to investing, boring is good.
As always, I welcome your comments and suggestions for future topics.
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