As residential as well as commercial developers, we understand the importance of having an investment property. These properties can be security, retirement, or the primary source of income for homeowners, and each situation comes with different obligations and constraints.
Maintaining a rental property, whether it be a single home, duplex, or multiple dwelling units, requires work and a sufficient budget to cover repairs, improvements, or upgrades. For larger-scale projects, it’s wise to consult with a professional, either someone in real estate, an appraiser, or a licensed general contractor, to give you a Comparative Market Analysis, assess your project’s needs and to help keep you on task and on budget.
It is important to remember that for most rental properties, you do not have to go into a renovation with the same outline as you would for your own home. You want your rental property to be pleasant, yes, but mostly functional. It does not have to be your dream home or your renter’s, so shelve those plans for the rock waterfall and state-of-the-art design. The main goal of any remodel project on your rental is to increase your equity. Also keep in mind that a large-scale project will come with long-term construction, which cuts into the time you could be collecting rent—the return on your investment.
Determine what improvements will give you the biggest return of your investment.
For big renovations, focus on the biggest draws. Nothing will turn off potential renters quite like disgusting bathrooms and kitchens. Stained grout and chipped tile, or linoleum that brings to mind Starsky and Hutch reruns, will not give renters the confidence that you can maintain your property sufficiently. And even Realtor.com states that remodeling a kitchen or bathroom can offer close to an 85% return of investment.
Larger master bedrooms and closets are also a draw. But if you’re stuck in terms of room size and layout, maximize the space you have. Do you have dead corners or lost space that can be turned into storage? Is there a tiny storage cabinet that is not as useful and could be opened up to make more room space? Contractors are especially helpful in finding the hidden fixes to make the best use of the room you do have.
How much work can you afford to put into your rental property?
Base your remodel on a realistic or professional assessment of current or future rent. This is a good time to remind yourself that you do not have to live there, so opt for resilient over stylish. And keep in mind that, as with any renovation project, there are often hidden costs. If opening up a wall uncovers black mold or leaking pipes, most of your budget will be sucked into those repairs. Know ahead what your maximum budget is, and then plan your renovation estimates to fall well under that number.
Need to fix up a property on a budget?
Not doing any major construction on your rental? Then your first step is to make repairs before any replacements.
Sure, hardwood floors or laminates are all the rage, but if you can’t afford to replace the carpet, and it hasn’t been thrashed by a previous tenant’s twelve cats, a labradoodle, and a lemur, then opt for a deep shampooing instead. If you have hardwood floors, sand and re-stain the wood. Even if your previous tenants liked to chip ice directly onto the floor, the wood can generally be sanded and buffed enough times to come out completely revitalized. This is one of those cases where you might splurge and hire a company to do this process for you; the best will spend several days sanding and polishing and sweeping repeatedly—not generally something everyone has time (or the back strength) to do. If you opt to install laminate, buy well more than you think you’ll need, especially if your property gets frequent turnarounds in renters. All that furniture moving in and out will undoubtedly scratch the floors, and a replacement of individual panels is a quick and cheap fix. The floors will always seem in good condition, even if you only replace the most damaged or most visible pieces.
Replace fixtures. Make sure all overhead lights/fans work properly, make sure the switch plates aren’t damaged or disgusting (think of all the hands that wear away at the coating, turning it a sort of vague tan color), and make sure all drawer pulls and cabinet knobs are clean, tight, and even. And that they match.
Check the condition of the walls. If there are only minor holes or dirt marks, you may not have to invest in complete interior repainting. Sand, spackle, spot-paint. Or get one of these bad boys. A bonus? If you have kids, this is something you can get them to do.
Don’t underestimate the power of landscaping.
If you have a property with yard space, be conscious of the power of curb appeal with some light landscaping. This will be the first part of your property that welcomes tenants to the neighborhood. Also, even if the property is older and not in pristine condition (and you don’t have a budget for larger improvements such as new windows and window frames, external painting or re-stuccoing, or roof replacement), a manicured outdoor space will show the tenant that the property is cared for. This doesn’t mean you have to spend a thousand dollars laying new sod; river rocks, wood chips, ground cover or other drought-resistant plants stylishly placed is a low-cost way to spruce up the outside.
Hang on to all your receipts.
All of them. You can likely write off all your expenses as deductions on next year’s return.
In Southern California, having a rental property is a good investment, but you have to be prepared to take care of that investment. At Murfey Construction, we can help you with that process, either with a remodel or in designing and building a house or multi-dwelling unit. Visit us at http://murfeyconstruction.com.