When you upgrade your rental property, you’re not only increasing your potential rent. You’re increasing your pool of tenant candidates, and the value of your real estate. But careful planning is key if you don’t want to get in over your head financially. These are some simple steps you can take to estimate rehab costs so you won’t be in for any surprises.
Get a Thorough Inspection
Make sure you have a professional inspector you can trust, because they have some pretty good advice. They can show you what’s wrong, what might go wrong soon, and what your priorities should be. Ask if they have contacts with local vendors that could give you a good price.
Make a List of Improvements
Categorize what must be done and put the tasks in order of importance. The first order of business is to make the unit habitable. When it comes to tenants, they’ll be looking at the kitchen and bathrooms, so tackle those first. Take it a step at a time, and don’t go overboard—you’ll be surprised by what a difference new floors and a fresh coat of paint can make. As for the age-old question: repair or replace? Many owners prefer to repair items until they have to replace them— but on the other hand, new features and appliances can translate to higher rents.
Compare Estimates
It can be time-consuming to consult with more than one contractor, but it’s essential to do in the beginning. Check online reviews and try to pin down the specifics. If they give you a price range, believe the higher number. And if you’re not sure what labor will cost, it’s a safe bet to double the cost of the materials. Don’t forget: there are always—always— extra costs, so leave yourself plenty of wiggle room.
Strategize With Comps
These simple steps can help you estimate rehab costs, but how much do you ultimately want to invest? If you’re smart, much of the decision will depend on what you learn from comparables in the area. You’ll need to get up to speed on the local market and what renters will expect. Take a close look at listing photos or schedule tours if you want to be more thorough. If your improvements won’t pay off, there’s no point in doing them.
There is, of course, a shortcut to many of these steps: you can ask for guidance from your management company. For instance, if you’re looking for full-service property management in Florida, R. Russell Properties has the experience and expertise that can save you both time and money. We can connect you with professionals, tell you about the state of the central Florida market, advise you on comparables, and more. Contact us to hear more.
