A common mistake for new rental property investors in Crowley is over-improving their rental house. It’s normal to want your rental to be in great condition to draw quality tenants, but excessive improvements can shrink or erase your profits. This caution is designed to make you aware of the risks and help you make well-informed investment choices.
Our practical suggestion is to consider strategic planning and tackle profitability issues before buying. Starting with a clear end goal helps prevent financial instability from over-improving.
Plan for the long-term
It’s often suggested by experts to start with an exit strategy for your investment. 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?
Speak with a few lenders to understand mortgage products, costs, and if your goals match your financial situation. A trustworthy lender will explain potential barriers and evaluate the strength of your strategy.
Calculate property value after repair
A key piece of information to prevent over-improving your Crowley rental property is knowing its After-Repaired Value (ARV). The ARV is the predicted value of the property after repairs or renovations. Ensuring your investment is profitable requires knowing the house’s worth post-improvements.
Determine your ARV with the help of reliable comparable properties. Next, discuss with real estate agents, fellow 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.
Achieving the right balance can be tough, especially for first-time investors. However, comparables—similar properties sold or rented recently in the area—can 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. When neighborhood houses mostly feature tile floors and composite countertops, refrain from using hardwood and granite.
While quality upgrades are necessary, luxury materials and high-end products usually aren’t worth the investment. 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
Lastly, prevent over-improving your rental by staying detached from the house. Treat it as an investment rather than your own home. Emotional involvement in rental properties can lead to making preferred renovations that don’t boost profitability. Wanting to take pride in your rental properties is normal, but it should come from having a profitable, well-run investment, not from how much you spent on upgrades.
Interested in expert advice to optimize your rental property profits? Real Property Management Trailhead can help. We’re a team of experienced property managers in Crowley and nearby. Contact us online or call us at 817-930-1160 to learn more.
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