Before You Jump into Property Renovations in 2023, Follow Due Process to Get The Best Result
Across Canada, rental rates are beginning to slow down and flatten out following years of substantial growth. As a real estate investor, you may be wondering what steps you can take to continue increasing your profit margins and improving the returns you reap on your investments.
One way to increase the amount of passive income you generate from your real estate investments is by increasing the value of existing assets via value-add renovations. By making a few simple, cost-effective changes, you could reposition your property and command higher rental rates from both current and future tenants.
While renovating existing property is usually a great way to improve the amount of passive income you’re able to generate, it’s worth noting there several things you’ll have to do to make this strategy feasible. For instance, you’ll have to account for the needs and legal rights of your current tenants. You’ll also need to balance the costs of the renovations with the higher rents you’ll be able to ask, and potentially obtain a loan to renovate the property.
But first, if you would like to get financing to complete your property renovations, click the link below for a free strategy call today.
What to consider before property renovations?
While property renovations may seem like a no-brainer, there are tons of factors to consider before hitting up the appliance and hardware store.
First, consider your current tenants. Communicate the improvements to them before you begin performing renovation work, and invite discussion about concerns they may have. Tenants may feel like property renovations are an attempt to force them out – after all, property renovations are noisy and inconvenient, and typically coincide with a rise in rents.
Next, check-in with any local and provincial housing authorities. You may need to ask about laws and regulations surrounding multi-family property improvements. Rent control and tenant protection laws in your area may regulate how you approach renovation projects.
You’ll also have to think about how you’ll finance improvements. If you have enough cash on-hand to renovate your entire property, it may be best to pay for the improvements outright. Or, to preserve liquidity, you may take out a second mortgage on your property or another line of credit to finance property renovations.
Simple, cost-effective property renovations
Your goal as a real estate investor is to increase your profit margins while keeping your operating expenses as low as possible. For that reason, seek out cost-effective renovation options to improve the value of your rental units as much as possible. Here are three cost-effective renovation strategies that can command higher rents at your property:
Improve the exterior
Investing in the exterior of your building allows you to significantly improve its curb appeal. This could go a long way toward elevating the value of your rental. Consider hiring a landscape architect to redesign large properties. Slapping on a fresh coat of exterior paint, putting new exterior window trim and sprucing up the garden beds could go a long way toward elevating the desirability of your property.
Install new appliances
If the appliances in your rental property look like they haven’t been updated since the 1990s, or if they are off-white, off-brand budget appliances, it could significantly ding the value of your rental unit to prospective tenants. If they see name-brand, state-of-the-art appliances, they’re much more likely to associate your rental unit with value.
Invest in better flooring
Few things help sell an apartment better than its flooring. If you’re looking for a way to command higher rents at your apartment, ditch the old carpeting and cheap laminate, and opt for hardwood flooring, or a modern composite substitute. Hardwood flooring, as well as concrete or tile flooring, are excellent options for rental units because they’re attractive and durable.
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Preparing for renovation
To embark on a renovation project, you’ll need to spend significant time preparing in advance. Taking the right steps to plan improvement will save you from getting lost in the process, spending more time and money than you intended. Here’s what to consider:
Plan with a professional
Prepare for a property renovation by planning the project with a qualified professional contractor. Even if you’re a relatively skilled handyman, it’s always best to work with a professional for major property improvements. Professionals can execute the work more quickly and with less disruption to existing tenants.
Draw up a contract
Draw up a contract with your contractor outlining the costs and timeframe of your renovations. It’s always best to operate under a contract, both for your protection and for the protection of the contractor. If you’re remodelling between tenants, your contract should account for move-out dates and expected completion dates. This helps you determine how long your rental will be absent as a source of cash flow.
Select your products
Once your contract is in place, start selecting the materials and products you want to renovate your property with. While it’s tempting to purchase the cheapest materials available, it’s important to remember the entire purpose of renovating your property is to add value to your rental. Opt for high-quality goods, but budget accordingly.
Keep it communicative
Throughout the renovation process, maintain a clear and open line of communication with your contractor, as well as with existing residents. Talk to residents about potentially disruptive changes in the workflow on the horizon, and inform your contractor about upcoming move-in and move-out dates at your property. Bear in mind, some flexibility on all sides will be necessary when renovating a multi-family property.
While renovating your rental property can be challenging, it’s often the best way to continue driving up the profitability of your investment. Going about property improvements the right way will help you reduce the costs of renovations and maintain good relationships with your existing residents.
Keep in mind, property improvements are something every investor needs to consider if they plan on holding their investment for more than a decade. Many investors tend to lump property improvements with fix-and-flip strategies, but they’re also critical for maintaining the value of long-term holds. Be smart about what you upgrade, what you spend and how you recover the cost of your improvements!
Now, if you would like to get financing to complete your property renovations, click the link below for a free strategy call today.