Many factors come into play to maximize your return on an investment in your home. Let’s say you’re considering a multi-room remodel that will transform a single-family house into a multi-family home to increase the rental value.
It is an investment you are making. If you do it correctly, you will increase the value of your rental property enough to pay for the remodel and gain some income.
Here are the top 5 tips to maximize your return on investment when remodeling your home to enjoy yourself or remodeling a property for renters to enjoy.
1. Bring in the experts early and often
This priceless piece of advice is listed first on purpose. If you’re remodeling your home or property, bringing on a general contractor, architect, designer, or consultant is the best way to ensure that you achieve your vision without sacrificing potential resale value.
Remodeling contractors received calls every day requesting quotes on remodels of kitchens, master bathroom, bedroom, living room, or other bedrooms and bathrooms. The rate of return on investment differs depending on which portion of your home you want to remodel.
Even though you may spend a particular amount of dollars on new countertops in your home, the buyer may not like them or even care about the style. That is one thing you should keep in mind. Replacing certain items may be more rewarding than others.
2. Make a 5-10 year plan
Some people flip houses for a living, some plan to live in their home after they complete a remodel, and some remodel their homes to fit the needs of current or future tenants. Based on time spent enjoying your home improvements or new build, your return on investment depends on how much money you want to spend and the area where you live.
For example, if you spent $250,000 on an entire home remodel, your immediate return on investment wouldn’t be as great if you were planning on selling immediately, following the remodel. On the other hand, if you were to live in or rent out your home or property for 5-10 years, you would stand to make much more money off of your home.
Depending on the area you live in, a remodel may be considered a remodel if it is still up to date or more modern than the surrounding houses. For example, in a wealthier neighborhood, a home may only be considered remodeled for five years, while in an older one, it is a remodel for ten to fifteen years.
3. Remodel/build with intention
When you have a 5-10 year plan, you can remodel or build with intention. It may make the most sense for you to remodel your home in phases rather than all at once – and with this approach, you can focus on bringing the whole house up to date in time to put it on the market. Rather than reacting to the need for a remodel, you’ll be setting yourself up for success with a well-thought-out design and plan.
4. Focus on the hot spots
The kitchen and master bathroom remodels are where you can make most of the money. When you open up kitchens to the living room and master bathroom showers are updated to tile and glass doors, the buying value of your home jumps. Other things like modernizing your floor plan tend to cause more buyer and rental interest as well, moving away from boxy floor plans to open, shared spaces.
5. Timeless Design
Going back to our first recommendation – bringing in the experts early and often – we recommend working with a contractor and designer to help find the balance between “on trend” and “timeless design.” Remember, trends come and go. Shag carpeting was all the rage in the 70s, but if you spotted it now, you’d run for the hills.
Professional contractors and designers will be able to steer you in the right direction in terms of combining your taste with styles that appeal to resale value. This piece of advice is especially essential to rental property managers. If the style and structure of your rental property are too out of date, you may lose property value.
It is best to steer clear of too many design and building trends that may negatively affect the value of your property in the future. There is, of course, no crystal ball when it comes to determining what trends will stay in and for how long - so it’s best to stick to a timeless design.
In summary, consulting a remodel or new build contractor will increase your chances of maximizing your return on investment. When building or remodeling with an expert, they will work with you to generate a solid plan, provide expert advice on approaching your project, and keep your bottom line a top priority.
It's never a bad idea to keep your investment property protected. As you increase your rental's value, you want to consider coverage plans. Read here to learn about the best homeowners insurance.