To receive the highest return on your rental property investment, you need to develop a consistent and long-term property renovation budget. Although properties being rented out do not usually need a complete “flip” renovation, knowing where you should allocate your property renovation budget is essential to get the biggest increase in value possible in the Largo market.
Experienced property investors recommend distributing funds for property renovation on the key features of the property based on the following percentages:
- Kitchen: 30%
- Bathroom: 20%
- Exterior: 20%
- General Improvements/Other: 30%
After you have figured out which areas of your property fall under these percentages, factor in the overall worth of the property and take 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
Remember that each adjustment should factor in your target market and what will maximize value for your potential Largo residents. Make a list of each room and feature of your property and utilize your assigned property renovation budget to find out what requires the most improvement (you do not need to use the whole budget).
Some property investors will choose to maximize their property renovation budget by redoing the complete kitchen or bathroom, but it is important to keep costs as low as possible and identify which parts need the most work. For example, you could maintain the main kitchen body and only replace the floors, sink and faucet, put in new appliances, and paint the cabinet doors or install new handles. Bathrooms could generally stay the same with their walls and layout, but you could install a new showerhead, toilet, or vanity according to your vision for a more clean and modern appearance. If there are items from your property that you don’t want to keep, try utilizing a second-hand market by selling them to have extra funds for adding new items. Alternatively, to cover costs, other Largo investors might buy from the second-hand market or a community online classifieds section to get lower cost items for kitchens, bathtubs, windows, and doors.
A full renovation with your Largo property renovation budget will generally add more value. However, overcapitalizing can become a factor, specifically when rental values can alter based on the market. As such, make sure that your budget suits your goals and that you do not do expensive renovations that are not needed to attract higher rent.
In determining the most important items to focus on with your property renovation budget, we have learned that these items tend to draw in a higher rent value:
- Updating the kitchen and bathroom to be more up-to-date
- Adding blinds/window dressings and floor coverings
- Including privacy features
- Maintaining outdoor living areas and fencing
- Ensuring ease of access to rooms
- Keeping natural lighting in the home
The most vital factor in renting to Largo residents is to give the best presentation that you can to make a positive impression with your prospective tenants that will last even after they decide to reside in your property. Furthermore, prior to contacting you, potential renters will often drive by the property itself to look at its condition. If they are impressed, then they will contact you for more information. If not, they may move on to the next rental property. As such, curb appeal can help attract and retain quality residents. A well-planned property renovation budget will result in a thorough consideration of all the costs necessary to allocate the right resources and time to what matters most to your future tenants.
For more information about the services that Real Property Management TradeWinds offers, please contact us online or call us at 727-400-4722 today!
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