If you talk to some real estate investors, you’ll discover that they focus on buying the cheapest houses possible and charging the highest rent they can get. In other words, their primary focus is on immediate cash flow. And while it’s smart to think about cash flow, a rental property is more than four walls, a floor, and a ceiling. It’s a piece of real estate that holds both short-term and long-term value.
Instead of just thinking about how you can keep expenses low and avoid putting up more capital than you have to, you should be seeking out opportunities to enhance the value of your properties. This will allow you to charge more on the front end and eventually sell the property for more on the back end. While this approach may stand contrary to that of other investors in your area, it’s a promising strategy that won’t let you down.
Six Ways to Add Value
While adding value is good, you definitely don’t want to price yourself out of the neighborhood. In other words, trying to turn a $100,000 house into a $250,000 house in a neighborhood where the median value is $125,000 isn’t a good idea. Instead, you should be looking to make your property the best value in the neighborhood. In this case, that would mean adding enough value so that you can one day command $125,000, regardless of whether it’s a buyer’s or seller’s market.
How exactly do you do that? Well, here are some of the most effective ways to tangibly increase the value of any property. Some take more time and money than others, but they all tend to work.
Consult With a Local Real Estate Agent
One of the best things you can do is call on a local real estate agent who knows your neighborhood really well and ask him to spend an hour at your property with you.
An agent who is familiar with the area will know exactly what properties need to sell at a specific price point. Grab a pen and paper, walk through each room with the agent, and take notes. You should get some great advice and can sort of develop a game plan/timeline for future upgrades and renovations.
Offer the agent a fair hourly rate for his time – $100 should do – though he probably won’t take it. Most will offer you this sort of consultation as a perk, hoping that you’ll use them to buy and sell properties in the future.
Make the Kitchen the Biggest Priority
The kitchen is by far the most important room in the home. When it comes to renting (or even selling in the future), an outdated kitchen is a huge turnoff. On the other hand, a modern kitchen with all of the appliances and features quickly commands attention.
A fresh coat of paint on cabinets, new countertops, and a couple of new appliances should do the trick. According to the 2016 Cost vs. Value Report, a kitchen remodel brings a long-term ROI of 64.9 percent (not to mention an immediate bump in rent).
Freshen Up the Paint
Looking for an extremely quick, cheap, and easy way to increase the value of any home (regardless of price point)? Head down to your local home supply store and grab some paint. A fresh coat of paint throughout the home can make even the most outdated property look enticing.
A gallon of paint will typically cost you less than $25. If you invite some friends over to help you out, you can paint four or five rooms in a day. (Just be sure to buy them some beer.)
Add a Bedroom
If you have more time and money, you can add a substantial amount of value to your rental property by adding another bedroom. In some neighborhoods, this can result in tens of thousands of dollars in increased value.
The first place to start is by reviewing your existing floor plan and looking for opportunities to create a new bedroom without adding square footage. The most common solution is to turn an unused dining room, office, or bonus room into a bedroom by making a few tweaks and adding a door. If this isn’t an option, then run the numbers and see what it would cost to build an additional room. Call that same realtor and see if it makes financial sense.
Upgrade the Bathroom
Bathrooms may be small, but they leave quite the impression on potential renters and buyers. The last thing you want to do is miss out on signing a contract because the bathroom was outdated. Thankfully, it’s pretty easy to spruce up a bathroom. Some new tile and upgraded fixtures are all you need. Start with the master bathroom and then work your way to other bathrooms as your budget allows.
Show the Backyard Some Love
While most landscaping upgrades only add temporary value to a property, there are some things you can do that will add long-term value as well. Enhancing the backyard is one such thing.
By planting a few shade trees, you can take what was otherwise a boring piece of grass and turn the space into a shady oasis that can become one of the centerpieces of the property. If you’re looking for a point of differentiation in the neighborhood, you may also consider building an outdoor fireplace or small deck addition. People love the idea of having an outdoor living space and you’ll get a really good return on your money.
Contact Green Residential Today
At Green Residential, we’ve made a name for ourselves as the premier provider of professional property management services in the Houston area. For over 30 years, we’ve dedicated ourselves to offering custom and proactive solutions that allow real estate investors to focus on the big picture responsibilities that really matter.
If you’re interested in learning more about what sets our real estate management services apart, please feel free to contact us today!