One of the poorest actions that new Lake Mary rental property investors make is to over-improve their rental house. It is justifiable to want your rental to be in good condition and to appeal to quality tenants. But improving the property too much will restrict or even cut out any profits you hope to obtain while you recoup your remodeling costs. One of the best strategies to keep away from this mistake is to think strategically and address obstacles to profitability upfront – before you even pay for the property, if achievable. When you begin with your main goal in good understanding, you will never see yourself in a financially shaky situation from over-improving.
Most experts propose beginning by planning the end of your investment’s life – your exit strategy. When you buy an investment property, you need to feel confident that you will be able to refinance or sell the property in the future and make a tidy profit. If not, what is the point of owning one? 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 – together with any improvements you have intended. Speak to some lenders to learn about mortgage products, costs, and whether your goals align with your financials. A reliable lender should clarify which barriers you may face and whether your strategy is solid or not.
Another fundamental piece of information you need to avoid over-improving your Lake Mary rental property is your After Repaired Value (ARV). To ensure that your investment is profitable, you must estimate what the house will be worth after you finish improvements. Using this figure, you can then be sure that you will not be too excessive with your remodeling plans. Using good comparable properties, calculate your ARV. Then, talk to real estate agents, other investors, and your contractor. The more details you collect, the more confident you’ll feel that your improvements are enough – but not too much.
Finding that balance can be a real challenge, usually if you are a first-time investor. Erring in either direction can cost you big time. However, the best way to find the right improvements for your rental house is to review your comparables again. If you know what the other rental homes in the area 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 to make your property nicer than others in the area. If most neighborhood houses have tile floors and composite countertops, don’t install hardwood and granite. Even though anything you upgrade should be of good quality, generally, 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 big boost in a property. But even in such cases, you should aim for mid-grade materials and proper but not very extensive improvements.
In the end, 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. When you get emotionally involved in your rental properties, you may begin to make redesigns that you like but will not do much to improve profitability. It is normal to want to take pride in your rental properties, but pride should come from being the owner of 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 Vanguard, our team of Lake Mary 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 407-681-7802.
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