New rental property investors in Winter Garden often fall into the trap of over-improving their properties. 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 warning is intended to make you aware of the risks and help you make better investment choices.
We recommend strategic thinking and addressing profitability concerns upfront before acquiring 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. You need to ensure that you can refinance or sell an investment property at the right time and make a profit. Otherwise, what is the purpose of buying it in the first place?
Speak with a few lenders to understand mortgage products, costs, and if your goals match your financial situation. A competent lender can outline potential obstacles and determine if your strategy is sound.
Calculate property value after repair
Another crucial detail to avoid over-improving your Winter Garden rental property is its After-Repaired Value (ARV). The ARV is the projected value of the property after repairs or renovations. To make sure your investment is profitable, it’s essential to know the property’s value after improvements.
Determine your ARV with the help of reliable comparable properties. Afterward, consult with real estate agents, other investors, and your contractor. The more details you gather, the more confident you’ll be that your improvements are sufficient—but not excessive.
Finding the proper balance can be tricky, particularly for first-time investors. Yet, you can rely on comparables, similar properties sold or rented recently in the area, to direct your improvement decisions. Knowledge of the local rental market lets you upgrade your property to charge competitive market rents.
Don’t go overboard with improvements
One of the worst errors is upgrading your property beyond the neighborhood’s average. When neighborhood houses mostly feature tile floors and composite countertops, refrain from using hardwood and granite.
Though upgrades should be of good quality, luxury materials and high-end products often waste money. Go for mid-grade materials that provide decent quality without the high cost or luxury. Even in high-end areas, opt for mid-grade materials and make improvements that are nice but not over-the-top.
Prioritize profitability over personal preference
Finally, ensure you don’t over-improve your rental by not getting too emotionally attached. Treat it as an investment rather than your own home. Emotional attachment to rental properties can cause you to make preferred renovations that don’t increase 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.
Seeking expert advice to boost your rental property profits? Real Property Management Alliances can help. We’re a team of experienced property managers in Winter Garden and nearby. Contact us online or call us at 407-378-7611 to learn more.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
