6 Ways to Improve the Value of Your First Investment Property
You may be wondering why, after spending everything you had, you’d want to spend even more money to improve the value of your first investment property. The question is a valid one, but doing so gives you more borrowing power for the next investment opportunity, and it gives you the opportunity to charge a higher rent than you previously thought.
So, how do you improve the value of your first investment property? Any of the following suggestions will do the trick. Keep in mind, however, that any capital needed is just the cost of doing a successful business.
1. Upgrade And Make Repairs
Many first time real estate investors (and many experienced ones too!) like to purchase “fixer-upper” properties that allow them to buy cheap and rent or sell high after making the necessary repairs and improvements. This is a great way to get started, especially if you don’t have a lot of money to put toward the purchase of an investment property in the first place.
By making repairs and upgrading outdated interiors, you can raise the rent from what it was in the era the property was decorated to something closer to the current market rates.
2. Rent More Space
Tenants will pay more for more space, so if you have a common hall closet you can open up into a rental unit, or give the key to for a tenant’s use, you’ll be able to charge more rent and increase your overall profit.
3. Combine Or Divide Units
If you have a large unit that’s difficult to rent because of its size, you might want to consider dividing it into two units instead. This tactic may make the unit more appealing to potential renters because rent will be lower. In the long run, you’ll avoid vacancies and probably increase your monthly rental income despite charging lower rent.
Alternately, you can combine two small units into a larger one and charge more rent, if you find that prospective renters prefer a larger living space.
4. Lower Your Expenses
Owning an investment property carries with it a bevy of expenses that are hard to get around. This isn’t to say you can’t do your best to lower these expenses. Go through your expenses with a fine tooth comb and figure out what you can do yourself, what you can’t live without, and what you can do away with in order to keep as much money in your pocket as possible.
5. Don’t Pay Tenant Expenses Yourself
Gas, water, heat, and electricity are all expenses that vary depending on the tenant living in your rental property. Some landlords will include some of these expenses in the rent, but this can have devastating consequences if the tenants use more than you’ve estimated.
If the meters for these expenses aren’t separate for each unit, consider making them so to make each tenant responsible for his or her own expenses every month.
6. Raise The Rent
No tenant likes to hear that his rent is going to go up, but if the rent you charge falls below the current market rate; you have the right to raise the rent at your next opportunity. Even a small increase of just 3 percent will add up over time.
As a new investor, you may not be aware of all the ways you can increase the value of your first investment property. Using the tactics listed above, you should be able to learn and start making a tidy profit rather quickly.