Over-improving a rental house is a common pitfall for new Macon property investors. Although it’s natural to want your rental in top shape to attract good tenants, over-improving can reduce or eliminate potential profits. This warning is intended to make you aware of the risks and help you make better investment choices.
We recommend strategic thinking and addressing profitability concerns upfront before acquiring 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
It’s often suggested by experts to start with an exit strategy for your investment. Confidence in your ability to refinance or sell an investment property for a profit at the right time is essential. If not, what’s the point of making the purchase?
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
A key piece of information to prevent over-improving your Macon rental property is knowing its After-Repaired Value (ARV). ARV represents the estimated value of the property post-repair or renovation. You must know the house’s post-improvement value to ensure a profitable investment.
Determine your ARV with the help of reliable comparable properties. 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. Yet, you can rely on comparables, similar properties sold or rented recently in the area, to direct your improvement decisions. Knowledge of the local rental market lets you upgrade your property to charge competitive market rents.
Don’t go overboard with improvements
Making your property nicer than 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.
While quality upgrades are necessary, luxury materials and high-end products usually aren’t worth the investment. Go for mid-grade materials that provide decent quality without the high cost or luxury. 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
Finally, steer clear of over-improving your rental by keeping emotional attachment in check. Think of it as an investment, not a home for yourself. When you’re emotionally involved in your rental properties, you might make renovations you like but that don’t enhance profitability much. It’s normal to want pride in your rental properties, but it should stem from having a profitable, well-run investment, not from excessive spending on improvements.
Seeking expert advice to boost your rental property profits? Real Property Management Vesta can help. We’re a team of experienced property managers in Macon and nearby. Contact us online or call us at 478-257-7055 to learn more.
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