If you’re buying a new property as an investment or renovating one that you already own, make sure you understand how to profit from your real estate renovation. Stay focused on property improvements that make a profit rather than just make the building seem “better.” It’s easy to get off track with a muddled vision, and getting off track can needlessly cost you money down the line.
Renovating property to rent can yield tremendous rewards, as long as you consider it an investment and not a personal hobby for fun. “Flipping” TV shows populate networks and cable channels and make it look like a lot of fun. It might be; however, it’s essential to keep in mind that this is business, so lay out your goals from the beginning.
Buying Property to Renovate
A flipper’s mindset sometimes starts with a desire to find the cheapest property, throw a little money into it, and expect more purchase or rental interest as a result. The truth is, you need to do your homework, learn as much as you can and then make wise decisions regarding the property you purchase based on what you know.
- Location – Don’t buy a cheap property without understanding your target renters or buyers and where they’re already looking. A great location offers solid starting value.
- Home buying and renting trends – Whether it’s a building with multiple units or a single-family house, consider the current style, rooms available, and amenities that will lend additional value to your investment before any renovation. Also, what are existing renters looking for in that area?
- Quality over cheap – A “cheap” property may become expensive in the end. Instead, choose a quality property built well, requiring less maintenance and needing no significant structural addition or repair.
- Valuation – Decide the total value you intend to deliver with the property at the end of the project. Develop your budget and make meaningful decisions based on these estimates.
Add the Most Value Using the Least Cost for Your Real Estate Renovation
Whether you plan to sell the property soon after renovations, down the road, or intend to rent for higher profit, you must add value to your property for the least cost, or else the renovation makes no sense. Here are suggestions regarding how to stay on track:
- Clean the property thoroughly – Create immediate value with minimal expense at the beginning by making sure the property is clean and safe. The grounds should have no debris, and the interior should have no lingering odors or stains.
- Plan for low-maintenance – Choose furnishings and materials that require less frequent maintenance or future expense rather than the cheapest bare-bottom priced materials.
- It’s not your home – Keep in mind that this renovation is not the dream home you always wanted, and it shouldn’t be. Resist spending additional money for amenities, trim or upscaled appliances that won’t bring a higher rent or selling price. Avoid decorating to fit your taste or comfort.
It’s important to understand how to set up your investments and maintain them to yield the best payoff. Sometimes that involves paperwork, special accounting, and legal choices for tax structure. Other times it means a new coat of paint on the right property. We see all sides of your financial profile, even the hands-on, practical parts. Let us know what other ideas or questions you might have regarding your real-estate investments. Contact your Myrick CPA professional today.