Over-improving rental properties is a frequent pitfall for new investors in Suwanee. Wanting a well-kept rental to attract quality tenants is natural, but too many improvements can diminish or wipe out your profits. This advice is to warn you of potential risks and support you in making informed investment decisions.
We suggest thinking strategically and resolving profitability challenges before buying the property. When your end goal is clear from the outset, you are less likely to encounter financial issues due to over-improving.
Plan for the long-term
Experts generally advise starting with a plan for your investment’s end—your exit strategy. When buying an investment property, you should feel sure that you can refinance or sell it at the right time for a good profit. If you can’t, what’s the reason for buying it at all?
Consult with several lenders to learn about mortgage products, costs, and whether your goals align with your finances. A reliable lender should clearly explain any potential barriers and assess the solidity of your strategy.
Calculate property value after repair
Another crucial detail to avoid over-improving your Suwanee rental property is its After-Repaired Value (ARV). The ARV is the projected value of the property after repairs or renovations. Knowing the property’s value post-improvements is crucial to ensuring a profitable investment.
Use accurate comparable properties to figure out your ARV. Afterwards, confer with real estate agents, other investors, and your contractor. The more data you collect, the more confident you’ll be that your improvements are sufficient—but not over-the-top.
Striking the right balance can be difficult, particularly for first-time investors. Still, using comparables, similar properties recently sold or rented in the area, can help guide your improvement decisions. A good grasp of the local rental market enables you to improve your property to charge competitive rents.
Don’t go overboard with improvements
One of the biggest mistakes you can make is to upgrade your property beyond the neighborhood standard. If tile floors and composite countertops are common in the neighborhood, avoid installing hardwood and granite.
While it’s important for upgrades to be good quality, luxury materials and high-end products are often not worth the cost. Instead, choose mid-grade materials that are of decent quality without being the most expensive. Even for rentals in high-end neighborhoods, focus on mid-grade materials and nice, non-extravagant improvements.
Prioritize profitability over personal preference
Lastly, prevent over-improving your rental by staying detached from the house. View it as an investment instead of your personal home. If you get emotionally involved in your rental properties, you might make renovations you prefer, which don’t necessarily improve profitability. It’s understandable to want pride in your rental properties, but it should be due to owning a profitable, well-managed investment, not the amount spent on upgrades.
Searching for expert advice to maximize your rental property profits? Real Property Management North Point can help. We’re a team of experienced property managers in Suwanee and nearby. Contact us online or call us at 404-905-9455 to learn more.
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