True financial independence is a goal many hope to attain. To do so, most look outside of the traditional employer-employee relationship; seeking additional sources of income to build their own little empire. Of these, the best are passive. Who wouldn’t want to make extra money without extra effort? However, if you really want to realize the rewards real estate investing offers, it can never be a predominantly passive endeavor. Your rental property should always be in the back of your mind. Knowing when to remodel your rental property, and the power that renovating it has, is one important step to becoming a real estate mogul.
Real estate investing is exactly what it sounds like. Investing. You have to put money in, to get money out. Of course—this involves acquiring property. But it also involves making sure that property is not only up to code, but up to (or above) market standard. Up to trends. To really make money with a rental property, you’ll likely need to remodel. And do so frequently.
Because of this, you might not pick the finest finishes or most luxurious features. But you should never sacrifice quality, function, or style if you plan to charge a premium for your space.
There are many great reasons to get into real estate investing. There are also many not-so-great reasons that might convince you to stay out of it. Below, we offer some tips and tricks to navigating an ever-changing market, not investment advice.
Figure Out Your Budget (You Might Need to Remodel Your Rental)
If you’re looking to buy a property and repurpose it for rental income, the purchase price should never be a hundred percent of your budget. Even for the most updated, newly built property—there will be more work to do, things to pay for, before you can list your space.
A property between forty and sixty percent of your total budget is often a good bet. This will allow you to ensure everything is set up perfectly for your target market through remodeling, furnishing, and marketing. There are many different ranges you’ll be able to find that suggest spending various amounts, but it always depends on the space, your budget, and your goals.
Define Your Audience
Looking to rent to the college market and other young professionals? Perhaps add some bathrooms. Focusing on families? Try to find balance between a larger kitchen and room for hanging out, with spaces for privacy.
Rental properties that are designed to cater to specific markets often out perform more generalized spaces. Doing so allows you to better define your budget and income potential, while also ensuring you have happy tenants. You want to rent to young families, but your listing doesn’t have a bathtub? Remodel your rental property.
Whose Responsibility is it Anyway?
As mentioned in the intro, if owning a rental property becomes too passive—you should probably get out of the game. That being said, sometimes families, friends, or other groups will go in on a rental property together to better manage the responsibility. It is important to ensure that there is a clear point of contact having final say over matters between stakeholders, and tenants. Someone to handle communications with contractors when you remodel your rental property. Come up with a title, and give it to someone.
If you are hoping for this to be a slightly more passive opportunity, you may consider a property management company. However, this will cut into profits. Make sure to consider this during your initial budgetary planning/profit forecasting if you would like to use such a resource.
Remodel Your Rental Property Regularly
It is important to keep your listing clean, fresh, and ready for occupancy. There is a lot of power in designing your space for who you want to fill it. You and your investment portfolio will develop over time. So should your rental property. You may decide to remodel your space, in order to appeal to different segments of the rental market. As you age, you may prefer a more stable and consistent, year-after-year occupant. This might mean including a higher quality kitchen, and spending a bit more to improve other areas of your space. This will keep tenants happy, and willing to pay a premium for your property.
If owning a rental property fits into your investment goals and portfolio, we say: “go for it!” There are many resources out there that allow almost anyone to break into the industry. But again, it is important to perform your own cost-benefit analysis to ensure it is appropriate for you and your lifestyle.
Thankfully, our master design team understands that people renovate different spaces, in different properties, for different reasons. They are excited for you to make an appointment—and are ready to discuss the ways in which you can maximize your space’s potential on the rental market.