Before reaping the benefits of your rental property investment, you must first start the ball rolling on a property renovation budget. Despite the fact that rental properties do not conventionally involve an all-out “flip” rehabilitation, it is vital to sense how to prioritize your property renovation budget.
Master property investors support parceling out funds for renovations on the main features of the property derived from the following percentages:
- Kitchen: 30%
- Bathroom: 20%
- Exterior: 20%
- General Improvements/Other: 30%
After you verify the areas of your property that fall under these percentages, take the gross monetary value of the property and remove a percentage of it. For example, if you have a $40,000 property renovation budget based on 10% of a $400,000 property value it would look like this:
- Kitchen: $12,000
- Bathroom: $8,000
- Exterior: $8,000
- General Improvements/Other: $12,000
Recall that each refinement needs to have regard for your target clients and what will multiply value for your future residents. Create a list of each room and feature of your property and utilize your allocated property renovation budget to find what needs the most improvement remember that you do not need to use the whole budget.
Even though some property investors might long to maximize their renovation budget by redecorating the kitchen or bathrooms, be cautious to keep your spending as low as possible and determine what calls for the most work. For example, you could keep the main kitchen body and just replace the floors, sink/faucet, add new appliances, and paint the cabinet doors or add new handles. Bathrooms can generally stay the same with their walls and layout but you could place a new showerhead or heads, toilet, or vanity based on your vision for a more clean and modern look. If there are items from your property that you do not want to keep, consider utilizing a second-hand market by selling them to have more funds for newer items. Be sure to also consider purchasing from these same second-hand markets or from your local community online-classifieds section to find lower cost items for kitchens, bathtubs, windows, and doors.
For the most part, a full reconstruction with your property renovation budget will most likely compound the valuation of your investment property. Be warned that overcapitalizing can become a concern, especially when rental values can alter depending on the market. As such, ensure that your budget fits your goals and that you don’t perform expensive or unnecessary renovations to justify charging higher rent.
The following is a list we feel should be considered as safe investments:
- Updating the kitchen and bathroom to be more modern
- Adding blinds/window dressings and floor coverings
- Including privacy features
- Outdoor living areas and fencing
- Ease of access to rooms
- Natural lighting in the home
It’s important when renting to residents to present your property in the best light possible so they will not only rent from you but choose to stay as long as possible. Be sure to factor in curb appeal as potential residents are known to frequently drive by properties to imagine themselves living there. Taking care to properly construct a property renovation budget will result in resources being allocated in the right manner, saving you time and getting you the residents you most desire.
If you are interested in having your property managed by Real Property Management Investment Solutions, have more questions, or just want to speak to one of our team members, then contact us online or call us directly at 616-419-8880 today!
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