Renovating an investment property has a significant impact on the success of your investment. The right improvements can increase the value of your property and the rental income it generates every month. They can also help you get and keep your dream tenants. Making the wrong renovation choices is money down the drain and can make it harder to find tenants.
Of course, the most important decision in real estate investing is the property you choose. Before you buy a real estate investment property, partner with a real estate investment company that helps you identify the best investment properties and gives you all the information you need as an investor, and a landlord, to make informed decisions.
When you’re at the home improvement stage of your real estate investment journey, fight the temptation to do the following renos.
Install a Swimming Pool
Plenty of people like going for a dip in the summer or occasionally relaxing in a hot tub. But pools are expensive and a lot of work to maintain. Even if you hire a property management company to look after your pool and you find tenants who want one, as an investment, it will take a long time to make your money back on it. You’re limited on how much rent you can charge if you want to stay competitive with other rental properties in your market. The added rent you would have to charge will likely cause prospective tenants to look elsewhere.
Pools are also a liability risk. As the landlord, you could potentially be responsible for injuries and accidents. If your investment property already has a pool, ensure you have the proper insurance coverage. You might also want a lawyer to draft a waiver and include it in the rental agreement.
Converting a Room into a Specific-Use Area
It might seem like a good idea to convert a room or a portion of your investment property into a home office. But despite the COVID-19 pandemic turning many employees into remote workers overnight, only half of Canadians currently working from home expect to continue doing so in 2022.
This example illustrates how committing the time, money and effort into converting a room to a specific-use area can ultimately result in a space that potential tenants don’t want or need. Most tenants prefer the empty space to use as they see fit. The same is true of libraries, gyms and home theatres.
Upgrades that Don’t Add Value to Your Rental Income
Watching home improvement shows might give you the impression that adding stone kitchen countertops or a stand-up shower can drive up the value of a home. While luxury finishes may add value to a houseflip, they rarely do for homes already at market value. It’s essential to know how your investment property stacks up to comparable units to know what improvements you need to make to stay competitive and which you can skip.
Most reno projects should be done by professionals. Amateur DIY projects are easy to spot and could cost more money to fix. And when you’re choosing materials for upgrades, prioritize durability, even if those materials cost a little extra.