To get the greatest return on your rental property investment, you should make a consistent and long-term property renovation budget. While properties being rented out do not usually require a complete “flip” renovation, it is important to know where you should distribute your property renovation budget to have the greatest effect on the La Crescenta market in elevating rent value.
Experienced property investors suggest allocating funds for property renovation on the key parts of the property based on the following percentages:
- Kitchen: 30%
- Bathroom: 20%
- Exterior: 20%
- General Improvements/Other: 30%
After determining the areas of your property that fall under these percentages, factor in the total worth of the property and take a percentage of it. For instance, if you have a $40,000 property renovation budget based on 10% of a $400,000 property value, it may look like this:
- Kitchen: $12,000
- Bathroom: $8,000
- Exterior: $8,000
- General Improvements/Other: $12,000
Keep in mind that each adjustment needs to factor in your target market and what will maximize value for your future La Crescenta tenants. Create a list of every room and feature of your property and use your allocated property renovation budget to find what requires the most improvement (you do not need to utilize the whole budget).
Certain property investors will want to maximize their property renovation budget by redoing the entire kitchen or bathroom, but it is important to keep costs as low as possible and find what needs the most work. For example, you could maintain the main kitchen body and just replace the floors, sink and faucet, add new appliances, and paint the cabinet doors or put in new handles. Bathrooms can generally stay the same with their walls and layout, but you can set up a new shower head or heads, toilet, or vanity based on your vision for a cleaner and more modern look. If there are items from your property that you do not plan on keeping, consider utilizing a second-hand market by selling them to have more funds for adding new items. Alternatively, to cover costs, some La Crescenta investors may purchase from the second-hand market or a community online classifieds section to get lower cost items for kitchens, bathtubs, windows, and doors.
In general, a full renovation with your La Crescenta property renovation budget will most likely always give extra value. However, overcapitalizing can become a factor, particularly when rental values can alter depending on the market. As such, make sure that your budget fits your goals and that you do not perform expensive renovations that are not needed to bring in higher rent.
In determining the most important items to concentrate on with your property renovation budget, we have found that these items tend to attract a higher rent value:
- Updating the kitchen and bathroom to be more contemporary
- Installing blinds/window dressings and floor coverings
- Including privacy features
- Outdoor living areas and fencing
- Ease of access to rooms
- Natural lighting in the home
The most important factor in renting to La Crescenta residents is to have the best presentation that you could to make a good impression with your prospective residents that will last even after they decide to stay in your property. Additionally, prior to contacting you, potential residents will often drive by the property itself to view its condition. If they are impressed, then they will contact you for additional information. If not, they will move on to the next rental property. As such, curb appeal can help attract and retain quality residents. An effectively planned property renovation budget will lead to careful consideration of all the costs necessary to allocate the right resources and time to what matters most to your future renters.
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