To have the best return on your rental property investment, you must develop a consistent and long-term property renovation budget. While rental properties do not typically need a complete “flip” renovation, knowing where you need to allocate your property renovation budget is important to get the greatest effect on the Magnolia market in increasing rent value.
Seasoned property investors recommend distributing funds for property renovation on the main property sections based on the following percentages:
- Kitchen: 30%
- Bathroom: 20%
- Exterior: 20%
- General Improvements/Other: 30%
After you determine the parts of your property that fall under these percentages, factor in the total worth of the property and get 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 appear like this:
- Kitchen: $12,000
- Bathroom: $8,000
- Exterior: $8,000
- General Improvements/Other: $12,000
Bear in mind that each adjustment has to factor in your target market and what would maximize value for your future Magnolia residents. Make a list of each room and feature of your property and make use of your allocated property renovation budget to find what requires the most improvement (you do not need to use the entire budget).
Some property investors will choose to maximize their property renovation budget by redoing the whole kitchen or bathroom; however, it is important to keep costs as low as possible and find what needs the most work. For example, you could maintain the main kitchen body and only replace the floors, sink and faucet, add new appliances, and paint the cabinet doors or install new handles. Bathrooms can generally stay the same with their walls and layout, but you could put in a new shower head 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 wish to keep, consider using a second-hand market by selling them to have more funds for adding new items. Alternatively, to cover costs, other Magnolia investors might buy from the second-hand market or a community online classifieds section to find cheaper items for kitchens, bathtubs, windows, and doors.
In general, a full renovation with your Magnolia property renovation budget will most probably always add additional value. However, overcapitalizing could become a factor, especially when rental values could change depending on the market. As such, ensure that your budget fits your goals and that you do not perform costly renovations that are not needed to bring in higher rent.
In establishing the most important items to concentrate on with your property renovation budget, we have discovered that these items tend to attract a better rent value:
- Updating the kitchen and bathroom to be more modern
- Installing blinds/window dressings and floor coverings
- Including privacy features
- Outdoor living spaces and fencing
- Ease of access to rooms
- Natural lighting in the home
The most crucial factor in renting to Magnolia residents is to have the best presentation that you can to make a positive impression with your prospective renters that will last long after they decide to live in your property. Furthermore, prior to contacting you, potential residents would often drive by the property itself to view its condition. If they are impressed, then they will contact you for additional information. If not, they will likely move on to the next rental property. As such, curb appeal can help attract and retain quality residents. An effectively prepared property renovation budget will result in careful consideration of all the costs necessary to allocate the correct resources and time to what matters most to your future residents.
Would you like more information about Real Property Management Republic, or would you like to schedule a free assessment of your rental property? Contact us online or call us at 281-362-5001 today!
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