Home Improvements That Pay

Now That You Own It

Once you take title to the property you need to get it ready to lease or sell as quickly as possible. When I first started buying rent houses my wife and I did all the repairs and painting ourselves. We now hire a person to do the labor, and we provide the materials. I find this much faster than getting bids and waiting on the sub contractors to finish up somewhere else so they can come do our work. Having control over the labor gets the job done faster. Time is money in the rental business.

One of the most common mistakes that beginners make is to over improve a property. There are repairs that are required and repairs that will increase the value of the home. You only want to do the repairs and improvements that will get the place ready to rent or that will help sell the house. Do only the work that will get you more at resale than you paid to have the work done or those repairs that you must do to protect the asset. For example, if the roof leaks you must, at least, patch it or replace as much as you have to, but putting on designer shingles will not return the extra cost over your basic shingles.

When an appraiser values a home, they start with a comparable price for that neighborhood. They then deduct those things the home needs, like a new roof, and add anything the home has that would add value, like good landscaping. They continue this process until they reach their best estimate of the homes market value.

I have listed here the improvements that I found return more than they cost.

Keep good records of all amounts spent, as these are tax deductible and/or will reduce your cost basis when you resell.

Protect the asset

When you made your offer to buy the house, you should have allowed for all the repairs the home needed at contractor rates. You then do the work yourself or subcontract out the work for less thus gaining the sweat equity. Start by doing those repairs that have to be done, foundations, roofs, any water leaks, and mechanical repairs etc. These are the repairs you must do to protect the home and make it usable. They do not increase the homes value.

Exterior

Improve the properties curb appeal, clean the gutters, paint the exterior if it needs it, consider a new color scheme if it would greatly enhance the curb appeal. Replace torn screens or any thing that gives the appearance of being shabby. The three areas that will help you rent or sell a house is its curb appeal, the bathrooms, and the kitchen's appearance.

Landscaping

Good landscaping is a quick way of turning a few hundred dollars into a few thousand. Trim the bushes and trees, replace any dead plants, and clean the flower beds. Color helps. Simple landscaping will go a long way towards increasing the value of any property.

Fences and Driveway

Fences and driveways do not increase the value, but they can take away from the value and curb appeal. Make repairs rather than replacing, as replacements can be expensive. If the fence or driveways are in poor condition, negotiate a lower price when you buy the property so that you can afford to improve them.

Kitchens and Baths

The woman of a household most often makes the decision to rent or buy a house. The rooms she will look at first are the kitchen and then the baths. They should be in good repair and very clean. If the bathrooms and kitchens are way out of date, then the cost of updating should have been deducted from the purchase price. If you do improve while making a repair, be modest in the amount you spend.

For example, one of the houses I purchased needed a new vanity mirror, the existing one was a in-wall metal medicine cabinet. I could replace it for $19, or I could buy a triple mirror model for $69, or a lighted model for $179, I chose the triple mirror cabinet as it improved the looks of the bathroom at a reasonable cost. I did not do any more than that because an appraiser expects a mirror in the bathroom and will not allow more for a fancier one than the house would normally have.

Interior Paint

When painting stay with neutral colors, beige, tan, cream, and off white. Lighter colors make the rooms feel larger and will compliment most furniture. A fresh coat of paint will go along way towards giving the house a clean look and feel. Painting one wall a complimentary color is a inexpensive way of adding style to a room. Visit new home display houses for ideas on accent walls and colors.

Appliances

People expect modern appliances that work with no missing knobs. I always buy used appliances as the home will not rent for more if I buy new. When reselling I leave the refrigerator out and throw it in as a deal clincher. Stainless steel appliances are expected in houses over 100K.

Closets

If you are painting the room, paint the closets a lighter color or shade as it makes them look larger. Add a new 100 watt light bulb. If you are going to sell the home, a mirror on the door never fails to please.

Check Everything Else

Look the home over for anything needing repair and anything that might be a hazard.

As a landlord you are responsible for being sure the houses you rent are safe. Ask yourself a few questions anytime you are contemplating a repair or improvement.

1. Is this repair necessary to protect my investment or reduce a hazard?
2. What is the most economical way of making the repair or improvement?
3. Will this increase the rental value, or resale value, or both?
4. Will the work improve the appeal of the property to buyers or renters?
5. Is this work cost effective?
6. Is the smoke detector current and working?

"This one thing I do well, for it is my obligation to myself"
Jim Glasgow