One thing that you need to understand about the renovation of your rental property is the fact that it’s not just a residential building, it’s also a business. Seeing as how it’s there to make you money, every renovation that you make has a certain break-even point. Sure, you may need to renovate the kitchen in order to make the place both livable and more appealing to potential tenants, however, is it wise to go for a marble countertop? Of course not, this kind of investment will never pay itself off. In other words, you need to walk a thin line between being too cheap and too extravagant and here are several tips on how to manage this difficult task.
1. Setting a renovation budget
The first thing you need to do is establish the value of the property in question. Hire someone to make an assessment and try to figure out the average value in the area. Second, the renovating budget needs to be set somewhere around 10 percent of the total value of the place (for a major renovation of the project). Also, make sure to do a fresh assessment in order to go for the current market value of the place. Sure, you also need some flexibility, which is why you should stick to about 1 to 2 percent extra (just in case). Overall, this should set you on the right track.
2. Prioritize
Every demographic has its own list of priorities. For instance, are you trying to attract students, young couples or families? The thing is that while it may seem like you don’t have much of a choice, certain areas are just richer in certain demographics, making it more likely to attract people from this group. Other than this, you can probably afford to be a bit picky. If you have several candidates for the place, it’s always better to pick people that you like the most.
3. Ask for a professional opinion
Another thing you need to understand is the fact that you’re not the only one with this trouble in mind. You see, there are some people who see this as their main source of income and own several properties each of which needed a remodelling at one point in the past. Then, there are some who professionally manage a rental property, which would make them more than qualified to give an opinion on this subject matter. Seeing as how everything in the rental industry is location-based, what you need to do is look for local experts. For instance, if your property is in Brisbane, what you should do is look for experts in property management in Brisbane.
4. Reducing vacancy
When trying to justify the cost of the project, you need to understand that it’s not just about the rent money and the break-even point. A property in the ruinous state is a property that you just can’t find a tenant for. A property in bad shape is a property that you won’t have an easy time finding a tenant for. The worse the condition of the property is, the longer the vacancy time will be. In the rental industry, vacancy is a period during which you’ll continuously lose money (taxes, utility bills, etc.). In other words, this project is more urgent than you’ve thought.
5. DIY is not necessarily smart
There are some people who see the idea of DIY renovation as a great way to maximize returns and increase value with minimal investments. This is not necessarily a good idea, seeing as how a poorly executed renovation might defeat the purpose of the project, to begin with. In the end, it will diminish the value of the property or force you to hire a professional (like you should have from the very start). Just remember, it’s not about boosting the value of the property, it’s about maximizing returns.
In conclusion
One last thing you need to understand is the fact that your ability to manage a proper rental property means being able to establish a meaningful relationship based on trust and respect with your tenants. This means that providing them with the bare minimum might not be the best of ideas. So, you might have to take that extra step, walk the extra mile in order to provide them with everything that they need and more (while, naturally, still staying on the budget).
