Flipping houses is a great way to make money if you have the time and, more importantly, the means. Flipped properties made up almost six percent of all home sales in 2016 in the US. However, remodeling a rental could actually help you reap even more long term benefits. The key is knowing which rental home renovations are worth making. It does involve a lot of work and effort on your part, so it is essential to be very strategic with your choices.
Reasons for renting as opposed to flipping
As mentioned above, flipping houses is a widespread occurrence nowadays. However, that said, it is not as profitable as it was initially made out to be. In 2016, the return on investment (ROI) for flipped properties was 51 percent. This was an all-time high, and the number has been steadily declining ever since. If you still wish to get into real estate, buying and then renting out a property might be ideal for you.
There are several benefits to renting versus flipping. Firstly, the rents are on the rise, so you could actually earn more money. Secondly, renting is more beneficial from a tax standpoint. Many people buy a property and then use the rent to pay off the mortgage. Doing some work on it can go a long way in how much the house will be worth if you decide to sell at some point. Finally, it is much more difficult to fail by renting than flipping homes.
Flipping requires a lot more knowledge and work, though you shouldn’t approach renting too naively, either. Be careful with your choice of property and the work you want to do on it. In the end, with the rent, tax benefits, and property appraisal, you can end up with up to a 20 percent ROI.
How to choose the most cost-effective options when you’re renovating a rental property?
To remain hassle-free when remodeling a rental, your projects need to fit into at least one of the two following criteria. Ideally, they would fit both.
The first criterion for choosing the most cost-effective options when you’re renovating a rental property is to ensure the project you are undertaking will make your rental more appealing to prospective tenants. This will, in turn, do two things. First of all, you will be able to charge more for rent, making the property more profitable. And second, the tenants will be more likely to jump on the opportunity and stay there longer. This will free you of the hassle of having to look for tenants often.
The second criterion is making sure that the renovations you’re making will add value to your rental in the long term. Particular renovations will add almost as much value as they initially cost you to do.
Rent vs. location
Remodeling a rental is almost always beneficial but can, in some cases, hurt your chances of finding tenants easily or charging the rent you think you should. For example, if your rental property is in a low-income neighborhood, it can be quite challenging to find tenants that would want that location while paying the asking price for it, no matter how great the place is. This doesn’t mean you shouldn’t renovate at all, but that you should be careful with the kind of work you get done. You don’t want to over-renovate, making it an investment that will prove a slow return.
Remodeling a rental without hassle
These tips on remodeling a rental property will make it worth the effort and usually won’t even require a lot of effort, to begin with. As a rule for most renovations, you should empty the place before getting to it. In some cases, the property will come with certain bits left – usually in the kitchen or bathroom area. Before getting any work done, make sure to find quality storage to ease the process.
Research has shown that first impressions matter greatly when it comes to real estate. Improving your rental’s curb appeal will make it much easier to close the deal, and it is usually hassle-free. It is also one of the ways to upgrade your rental without breaking the bank. A fresh coat of paint, a neat lawn, and some flowers or shrubs will go a long way without being a drag. You don’t want to overdo it either, especially when it comes to landscaping. Some people might be turned away if it seems like its maintenance will be a lot of work.
Kitchens and bathrooms
As you are probably aware, when it comes to buying a property, the state of the kitchen and bathroom are very important when it comes to renting as well. Kitchen remodels have a very high ROI and can make the whole place seem more modern and expensive. New appliances and the contemporary style of the cabinets and tiles will enable you to charge much more for rent. However, when moving your old appliances out, make sure to pack and handle them properly so that they stay in good condition.
Bathrooms will often require a bit more money and definitely a lot more hassle on your part. They will pay off immensely, though. Put yourself in the shoes of the tenant. How well-done the bathroom is can often be the difference between renting and moving on. A well-equipped bathroom is definitely one of the amenities renters can’t resist.
Replacing the roof is another idea for remodeling a rental that will require a bit more work and money. However, avoiding any leaks can actually save you money for any future renovations you would have to get done. It will also save you the hassle of having to react quickly if any leaks start happening.
There are plenty of benefits of renting a property you are not living in instead of selling it. Remodeling a rental might seem like too much hassle at first glance. However, if you choose the projects carefully, you will be able to make your rental more profitable and more attractive to tenants without exerting yourself and your finances too much.