Real Estate the Family Guy Way

By
Commercial Real Estate Agent with NAI Tampa Bay

 

Investment Real Estate Improvement Considerations

 

When considering a project for an Investment property, the first question you need to ask yourself, is simply, "Is this necessary, now?"

If the project is not considered dire and the consequences are minimal to nil, then logically in this market, it would seem to make fiscal sense to postpone the project (e.g. - Window replacements, asphalt replacement vs. repair)

Secondly, the next aspect to consider is how to recoup the cost of the improvements? Rent Increase? Reduction in amenities? Does the current market or your current rents allow for upside movement? Do you offer things like curbside trash removal whereas there is trash service offerred by the municipality, can you change light bulbs to be more cost effective, insulate water heaters, provide new air filters for tenants to improve efficiency and reduce costs...

Finally, Is there a clear advantage gained by making the improvements and abosrbing the immediate outlay of expense? Rental Increase with improvement... (New windows equals a $25 p/unit increase)

Scenario

$6,000 for new windows and insulation

$25 increase per unit (we'll say 4 units)

$1,200 per year gained in rent

5 years to recoup the cost of window replacement

Can you handle the approximate costs and term for reimbursement for this improvement?

 

 

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Rainmaker
294,635
Marilyn Harrell
Better Homes and Acres - Beaverton, MI
Wixom Lake - Beaverton MI

As a landlord, we just do what we need to do as money permits, with property taxes so high, it's hard to make any profit. If you have good tenants, keeping rent at a constant low and taking care of any problem large or small in a timely manner prevents tenant turnover that can be costly. Investors that are buying up run down homes should certainly have them into decent condition before offering them for rent.

Apr 19, 2009 05:54 AM #1
Rainer
111,282
Charles Perkins
Charles G. Perkins, CPA - Burien, WA

I agree, I repair only what needs to be done at this time.  When the economy improves, I'll consider ways to enhance the property value.

Aug 17, 2009 04:37 PM #2
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Rainer
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Sean Dreznin

Commercial Investment Real Estate Agent
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