New rental property investors in Glenview often fall into the trap of over-improving their properties. It’s understandable to want a well-maintained rental to attract quality tenants, but too many improvements can cut into or erase your potential profits. This advice serves to alert you to potential risks and guide you in making informed investment decisions.
Our advice is to plan strategically and address any profitability obstacles before purchasing the property. 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. When purchasing an investment property, you should be confident that you can refinance or sell it for a profit at the right time. Otherwise, why buy the property in the first place?
Have conversations with a few lenders to understand mortgage products, costs, and if your goals are financially feasible. A trustworthy lender will explain potential barriers and evaluate the strength of your strategy.
Calculate property value after repair
To avoid over-improving your Glenview rental property, knowing its After-Repaired Value (ARV) is crucial. ARV is the expected value of the property after undergoing repairs or renovations. To make sure your investment is profitable, it’s essential to know the property’s value after improvements.
Use good comparable properties to calculate your ARV. Next, discuss with real estate agents, fellow investors, and your contractor. With more information, you’ll feel more assured that your improvements are just right—not overdone.
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. Understanding the local rental market enables you to enhance your property to charge market-competitive rents.
Don’t go overboard with improvements
Over-improving your property compared to others in the area is one of the worst things you can do. If most homes in the neighborhood have tile floors and composite countertops, avoid installing hardwood and granite.
Upgrades should be of good quality, but luxury materials and high-end products are usually a waste of money. Rather, target mid-grade materials that are reasonably priced yet good in quality. Even if your rental is located in an upscale area, use mid-grade materials and make tasteful, not extravagant, improvements.
Prioritize profitability over personal preference
Ultimately, avoid over-improving your rental by not becoming too attached to it. Treat it as an investment rather than your own home. Emotional attachment to rental properties can cause you to make preferred renovations that don’t increase profitability. Taking pride in your rental properties is natural, but it should come from owning a profitable, well-managed investment, not from the amount spent on improvements.
Need expert advice to enhance your rental property profits? Real Property Management Chicago Group can help. We’re a team of experienced property managers in Glenview and nearby. Contact us online or call us at 312-265-0660 to learn more.
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