The Importance of Avoiding an “Over-Renovation”
What a great feeling it is to walk into a newly renovated home, smelling of fresh paint and new carpet. Many rental home investors are now providing incentives to new tenants, with upgrades and amenities that they may not have been able to afford in previous housing situations. If you do your homework, it is very possible to upgrade a rental home in an economical approach, yet maintain a beautiful luster.
Repairs that aren’t necessarily important to get the home “rental ready” can set you back thousands of dollars, and take valuable percentages from expected returns. Inexperience in the industry is no excuse for losing money on a renovation, and if you follow my advice, you will see how easy it can be to get an average home looking like a masterpiece, without breaking the bank.
Understand your surroundings
The first step in avoiding an over-renovation is recognizing the type of property you are dealing with. If you are working in a low to middle class neighborhood, you want to stay aligned with standard trends. While it feels nice to upgrade a home with stainless steel appliances and granite countertops, it can be counterintuitive to profits. Understanding the market you are dealing with, and what is expected from tenants will save a lot of money during renovation. At the end of the day, you want to ensure the delivery of a home that is easily comparable to its surroundings, yet has the ability to stand out as unique.
One of the most common upgrades that a rental home requires is flooring. If you are dealing with old carpet, the first option is always a deep steam-clean. Unless there are stubborn stains, or run down edges and tack-lines, you may be able to save the original carpet. If not, replacing with an economical grade, yet attractive substitution will do. Dark colored carpets are often most forgiving in hiding new stains or blemishes. When dealing with hardwood floors, the option of refinishing should always be considered, even with deep scratches or missing panels. Old hardwood floors can be sanded down to the raw material, filled in, and stained, to give a brand new look, and a smooth feel. In bathrooms and kitchens, peel and stick vinyl-flooring options work great, as they offer economical floor protection, and water impermeability, not to mention countless designs.
Heedless bathroom and kitchen renovations can easily cost thousands of dollars. When dealing with a property you intend to rent out, always understand that wear and tear might occur over the lifecycle of your tenants lease. It is therefore important to install items that will not require expensive maintenance (or replacement) in the future. Keeping a generally clean and simple design will often require much less maintenance than elaborate projects. Using economical items that will stand the test of time is also important, to reduce replacement/repair costs in the future.
Assuming you are not going to do the renovation work yourself, one way to avoid overpaying (and over-renovating) is to have unaffiliated contractors bid on the work that needs to be done. 3 different bids is always be a good minimum. Always make sure that the contractor understands your goals for the renovation. Before and after photos of the renovation will help you in the long run, should there ever be a dispute on what work was or was not completed.
Having unaffiliated contractors write a scope of work has two main benefits.
Firstly, having different sets of eyes, with different proposals on “rental ready standards” will give you an idea of what needs replacement, and what can be saved. Different points of view for renovation of a home will ensure no important items are forgotten. It is important that all points are covered, and after a few projects, a new investor will begin to realize what the industry standards are. Getting bids for a renovation should never be considered as a “contractor free for all” where the sky’s the limit for repair items.
Secondly, utilizing multiple contractors to write a scope of work may help drive the cost of your renovation down. If a contractor is pricing out a job, and he knows that he’s your only option, the likelihood of rounded up prices is a reality. Competition always creates for better deals. So put the contractors in competition with each other, and choose whomever you feel is providing the highest quality work, for the best deal.
It is equally important to let your contractor know that you may have plans for future work. Even if you are just starting off, building relationships with contractors will help you get discounts in the future, and priority among other investors looking to utilize the skills of contractors. Furthermore, the contractors will want to impress you to keep potential future business.
A seasoned contractor should always have all the tools necessary for any service they stand behind. If the contractor has presented expenses due to the need for equipment rental, that could be a sign that they aren’t very well experienced in the task at hand. Keep this in mind when looking over invoices and estimates. Using local contractors is helpful, as they often have knowledge on the trends of the area, and give suggestions on popular designs or color schemes.
Some may argue that they aren’t in the construction business, so they have to depend on the word of contractors and maintenance employees for pricing, and scope of work. Through experience, anybody can learn the do’s and do not’s of home renovation. Due diligence to ensure the contractors working on your investment home have experience and the proper certifications for the job is a must.
Always have a long-term plan for your investment, and set realistic expectations on the life expectancy of your rental property’s furnishings. Saving money will always be a concern, but should never come at the expense of quality and safety. Keep your designs and upgrades in line with the market you are dealing with. Furthermore, a local trusted inspector or construction manager will greatly aid in ensuring timely, safe, and fully complete renovation projects. Rental home renovations can make or break your investment property, so keep your expectations clear, and contractors close.