Writing the title above, I cannot get out of my mind Now and Later, the impossible to chew candy from the days of yore, yet this is a different item: here we are thinking about property improvements now FOR later.
I've written a lot about...
Property improvements. Yes, I know it's a titillating topic that has you sliding up to the edge of your seat, and I aim to satisfy your attention here. However, here we are going deep. Or, instead, thinking long-term here.
Year and Years
Management One does a monthly exterior inspection and yearly annual inspections for clients who avail themselves of this service. This service enables property owners to view their property as if they are there. In these annual reports, we note repairs and advise or recommend their completion. There are a couple of reasons for this, and they are...
NOW or LATER
We add these recommended items so that you know, right now, that they ought to be done, and we do it in the now so that you know that even if you are not in a position to complete them right now, they still do exist as items of concern.
If we didn't point them out and say, someday, the owner opted to sell the property. The question would be (and is), "why didn't you tell me about this?" But even more poignant are real-world examples.
Our sales division recently sold two properties in our care for many years. Over the years, we noted on property #1 that the rear yard was all dirt, and sprucing it up would make a massive difference in the property's attractiveness and the quality of residents it would attract.
One of the essential things we have found over the years that is a common denominator when it comes to properties going into eviction is foul rear yards. All dirt equals a higher likelihood of a resident not caring for the home or, worse, not paying rent. We have seen it time and again.
As it turned out, said property still got a great resident (thanks to our expertise and dumb luck) who planted a backyard and installed a temporary sprinkler system, all at their own expense.
Yet, when it came to selling, that lack of appeal in the backyard (remember I said "temporary sprinkler system? The resident took it with them, as they ought to) probably cost that property owner time and money. How much time and money would be speculation, but I can tell you the house was on the market for longer than it should have been.
But wait, there's more.
Property 2 was similar but in a much less desirable area. Of any property on the market, THIS one should have had the items we suggested over the years and then some.
The rear yard was dirt. The fences were in poor condition, and a blue hue accented the paint. The garage doors were still wood swing-up doors, and the kitchen was dated.
As far as the fences, the truth is, replacing fences does not increase a property's value. However, a dilapidated fence/s can slow, or even cost, you a sale.
Let's put it this way, as the marketplace becomes more competitive, the quality of a given property means a lot.
Rental or Sale - Look at your property in terms of
How is the curb appeal?
The speed at which the property will rent or sell
The renter you market to is the renter you will get
How competitive is your property versus others?
How does refurbishing affect the value?
Pulling up to a property, people first notice how it looks overall. This is a visceral, emotional reaction, and this is its curb appeal. And bear in mind that not all ideas are good ideas.
We had a property years ago on the market, and we all thought a particular color would look perfect on this property's exterior. And it would have, except for one thing that got past all of us: the exterior paint clashed with the roof tile color! We regrouped and redid much of the paint to draw attention away from this silly error.
Beyond that, though, is to be aware of the current regional trends, but also be aware of current regional concerns.
As of this writing, I would be drawn and quartered if I redid a front yard with all grass. Sure, it would look great, but in a drought? That will indeed send some buyers or renters to other properties!
How long are you willing to wait?
A well-prepped property will generally (99% of the time!) rent faster, for more money, AND get a better qualified, better resident than a poorly prepared property. This truth applies to sales too, and $15,000 in kitchen improvements can translate to $30,000 in added sales price.
The renter is whom you are marketing to
Here at Management One, when we rehab a property, we aim for the end result to match (or exceed in some cases) the market's demands. Sometimes we get pushback from property owners, such as "Why are your standards so high?" Our standards are in lockstep with what the market calls for.
If you market a substandard product, you will get substandard customers; it's as simple as that.
The Jones' and the Smiths - being competitive
Piggybacking on the entry above, the more your property matches or exceeds the demands of the marketplace, the faster it will rent or sell versus a comparable home. However, that is not to say that matching or exceeding the marketplace means one can tack on an additional $900 in rent, but we strive to get a property owner the most we can. The same applies to sales!
Bear in mind that the market in sales has much more inventory in it right now than it has had in a long time, and consequently, sales properties are selling slower. However, they are still renting at a pretty fast pace in the rental market! But you must be competitive..
Is refurbishing worth it?
In a word: YES! What you do now, such as a kitchen redo, will raise your value. It will get you more rent, and it will get you more in a sale. However, not EVERYTHING that can be upgraded necessarily needs to be or will gain you additional value. Kitchens will. Bathrooms are generally a break-even. Fences are mostly an expense, they will gain you nothing, but a good fence will NOT cost you a sale. As we saw recently, it's often better to rip out all old smelly carpet and leave the floors plain in a sales situation rather than market a property with smelly old carpet. This can even be spun as an advantage. "You can choose your own flooring, Ms. Buyer..." but it can also result in concession requests. So, weigh those options.
Typing that header, I paused at how open-ended that is, yet it's true. Refurbish/Rehab properties with a strategy. Set aside money each month as part of that strategy. Pick your materials strategically. Know if you are planning on buying/keeping/acquiring properties. A well-planned strategy, like our Single Family Home Retirement Strategy, can help ensure you are headed into a beautiful future!