Tuesday, March 25, 2014
Upgrading your rental property can make or break its profitability. Weigh up these pros and cons before you start remodelling...
With many other available rental properties competing for the same market in your area, it may be difficult to make your property stand out. A simple upgrade may grab the attention of potential renters and help you avoid vacancy periods. Next to getting bad tenants, a long vacancy period is the most dreaded situation for landlords as it generates expenses from maintenance, taxes and mortgage payments without earning any income. A property upgrade will make your property become more desirable.
The right types of upgrades can also make for a valuable increase in your rental fee. Adding extra rooms will maximize the capacity of your property and can entice potential renters to shell out more for more privacy. Be careful not to add personalized rooms such as game rooms or libraries though, as these may be a hard sell for most renters.
Upgrading your rental property may be expensive. This is not only a matter of whether you can afford the expense or not, but rather, you should also consider if the expenses will be worth it. Look into comparable rental properties with the upgrades you plan to do and assess their rental fees. This will give you a good idea of how much higher you can go on your rental fee. If it’s not that significant, it may not even cover your upgrade expenses. Do the math to find out if it's worth it.
Wear and tear
Since your property is rented out to tenants, you don’t have total control on what they do to it. Wear and tear from everyday use is inevitable, however, you may also encounter bad tenants who vandalize your property or are simply careless. Be prepared for possible damages even on upgrades that have just been made.