One of the typical errors made by new rental property investors in Anthem is over-improving their rental homes. While it’s natural to desire a rental in good condition to attract top tenants, too many improvements can lower or eliminate your profits. This advice is to warn you of potential risks and support you in making informed investment decisions.
Our practical suggestion is to consider strategic planning and tackle profitability issues before buying. Starting with your end goal in mind helps you avoid financial instability caused by over-improving.
Plan for the long-term
Experts usually suggest planning your investment’s exit strategy right from the beginning. It’s important to feel confident that you can refinance or sell an investment property at the right time and make a profit. If you can’t, why buy the property at all?
Discuss with various lenders to gain insights into mortgage products, costs, and if your goals align with your financials. A knowledgeable lender should inform you of possible obstacles and verify the soundness of your strategy.
Calculate property value after repair
Another vital factor in avoiding over-improving your Anthem rental property is understanding its After-Repaired Value (ARV). The ARV is the predicted value of the property after repairs or renovations. You must know the house’s post-improvement value to ensure a profitable investment.
Use accurate comparable properties to figure out your ARV. Following that, talk to real estate agents, other investors, and your contractor. Gathering more information will boost your confidence that your improvements are adequate—but not overdone.
Getting the balance right can be challenging, especially for new investors. However, you can use comparables—similar properties recently sold or rented in the same area—to guide your improvement decisions. By understanding the local rental market, you can upgrade your property to command competitive rents.
Don’t go overboard with improvements
Making your property nicer than others in the area is one of the worst things you can do. If the majority of neighborhood homes have tile floors and composite countertops, steer clear of hardwood and granite.
While quality upgrades are necessary, luxury materials and high-end products usually aren’t worth the investment. Aim for mid-grade materials that offer good quality without being too costly or luxurious. Even in upscale neighborhoods, choose mid-grade materials and make nice but not extravagant upgrades.
Prioritize profitability over personal preference
Ultimately, avoid over-improving your rental by not becoming too attached to it. Think of it as an investment, not a home for yourself. Becoming emotionally involved in your rental can result in renovations you like but won’t significantly enhance profitability. Pride in your rental properties is natural, but it should be from owning a profitable, well-maintained investment, not from spending excessively on improvements.
Searching for expert advice to maximize your rental property profits? Real Property Management Pinnacle Peak can help. We’re a team of experienced property managers in Anthem and nearby. Contact us online or call us at 480-716-5700 to learn more.
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