Over-improving rental properties is a frequent pitfall for new investors in Matthews. It’s understandable to want a well-maintained rental to attract quality tenants, but too many improvements can cut into or erase your potential profits. This cautionary advice is meant to highlight potential risks and assist you in making informed investment decisions.
We advise thinking strategically and addressing profitability challenges before purchasing the property. By keeping your end goal clear from the start, you can avoid financial difficulties from over-improving.
Plan for the long-term
Many experts recommend beginning with an exit strategy for your investment. It’s important to feel confident that you can refinance or sell an investment property at the right time and make a profit. Otherwise, why buy the property in the first place?
Talk to multiple lenders to learn about mortgage products, costs, and whether your goals fit your financial situation. A trustworthy lender will explain potential barriers and evaluate the strength of your strategy.
Calculate property value after repair
Another vital factor in avoiding over-improving your Matthews rental property is understanding its After-Repaired Value (ARV). The ARV is the projected value of the property after repairs or renovations. Knowing the property’s value post-improvements is crucial to ensuring a profitable investment.
Use accurate comparable properties to figure out your ARV. Afterward, consult with real estate agents, other investors, and your contractor. The more knowledge you gain, the more confident you’ll be that your improvements are appropriate—but not excessive.
Finding the proper balance can be tricky, particularly for first-time investors. However, comparables—similar properties sold or rented recently in the area—can guide your improvement decisions. By understanding the local rental market, you can upgrade your property to command competitive rents.
Don’t go overboard with improvements
Over-improving your property compared to 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.
Though upgrades should be of good quality, luxury materials and high-end products often waste money. Rather, target mid-grade materials that are reasonably priced yet good in quality. Even for rentals in high-end neighborhoods, focus on mid-grade materials and nice, non-extravagant improvements.
Prioritize profitability over personal preference
To avoid over-improving your rental, remember not to get emotionally attached to the house. Think of it as an investment, not a home for yourself. If you get emotionally involved in your rental properties, you might make renovations you prefer, which don’t necessarily improve profitability. Taking pride in your rental properties is natural, but it should come from owning a profitable, well-managed investment, not from the amount spent on improvements.
Want expert advice to increase your rental property profits? Real Property Management Experts can help. We’re a team of experienced property managers in Matthews and nearby. Contact us online or call us at 704-220-0110 to learn more.
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