If you own your home, congratulations. It’s not easy being a homeowner, but it definitely has its perks. If you are longtime reader, you have probably thought about becoming a landlord, acquiring another property, and maximizing the equity in your current home. If you have lived in your house for any length of time, you are probably noticing a few things you’d like to change. It’s like living with a person. You don’t really know the house until you’ve spend a lot of time with it. But will it pay off for you to make the changes you want to implement? I’ll help walk you through the thought process and make sure that you renovations you tackle are the best for you and your wallet.
1) Can You Possibly Do it Yourself? Many homeowners can save around 50% by doing simple household repairs themselves. Maybe you can even handle something more complex. Just remember, if you can’t do it well, it’s best to leave it to the pros. But on the other hand, skills learned well will serve you in this and all of your future homes. Your house is a big investment. Unlike spread bets which pay off in hours, you will only see a return on your investment in your home sometime far down the line. Make sure the decisions you make now will make that return a great one.
2) How Fast Will it Pay For Itself? This question applies most to landlords, but also to those who are selling their homes in the near future. If you want to do a $20,000 bathroom remodel on your rental property, how much more in rent can you get back every month. If the update will make the house more attractive, providing you with $1100 in rent every month, I say go for it. My rule of thumb is “a remodel must pay for itself in two years or less”. By adding a lot to the rent you can charge, a remodel of this size would fit that bill.
3) What Are Your Goals For Your Home? Real Estate investors come in all shapes and sizes. Some live in the home they want to stay in for the rest of their lives. Some have a home that is just a stepping stone to bigger and better things. These investors will obviously approach this question differently. If you want to move somewhere else in the future, renting your current place to others, you’ll want durable but inexpensive upgrades. If you plan to sell, you may want to make the changes more impressive, to get it off the market quickly. If you want to live in your house forever, make it your dream home. Obviously, there are limits to what you want to spend, but I’m an advocate for being happy where you lay your head. Splurge every now and then, especially if you have other properties generating income elsewhere.
Renovations are varied, and there are lots of things to consider. But make sure you are seeing a good return on investment, and that all improvements you make align with your goals. If you follow these simple steps, your renovation investments should pay off really nicely.