Rent Sense: Improve To Add Value

September 5, 2018by melissad0

By Neil Fjellestad & Chris De Marco

Now could be a good time to improve your property in order to preserve its condition overall, enhance its rental value and/or upgrade the appraisal for generating better mortgage terms. Higher demands are being by renters that rightfully want to feel value for their largest household expenditure. Rental increases go down easier when improvements are apparent. Preferred renters stay longer when improvements are consistent. Items such as landscaping, exterior paint, new roofing, plumbing and electrical upgrades tend to benefit investors more than trendy renovations. Floor plan design items that delight residents and most often add value are kitchen or bathroom renovations and wall changes that create usable space and natural light.

More rental owners are taking advantage of low interest rates and better loan terms to borrow against their property equity in order to make improvements. Of course, the interest and cost of improvements are additional tax benefits as well.

Real estate investors need to remember that upgrades to property don’t automatically yield an immediate increase in property value that is equal or greater to the costs of the project. Often, the benefits to your property are long-term. Savvy property owners always keep an objective eye toward the surrounding neighborhood and changing home ownership trends so they don’t “over-improve” their real estate and/or pick the wrong improvements. Property improvements should keep a home’s overall appearance and amenities equal to the other homes in the community in order to get the best return on investment over time.

Finally, do not create unnecessary debt in the process of improving the physical condition of the property. Our recommendation to rental owners is to maintain a 30 percent equity position at all times.

Property improvement responds well to the old adage “measure twice; cut once.”

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