Everyone is constantly watching their bottom line. Whether you are an investor or just simply keeping an eye on your budget, you are most likely always looking for ways to save a buck. With almost every property, there will be times when you need to get work done and will face a choice between doing it yourself, paying for the cheapest option or paying a little more. What you intend to do with the property in the long run will influence your decision. However, what you will find is that it is often better to pay to get the work done right than to try to do it yourself. Always consider the bottom line when fixing up a rental property.
Sweat equity can be a great way to add value to your property. There are many investors that enter the business with a specific trade under their belts. There are also many investors that think they are experts in a specific field because they have helped a friend build something in the past. While a great deal of money can be saved by doing work yourself, you can also waste a great deal if you do not know what you are doing. Items like landscaping, painting, drywall and other small cosmetic areas can be safely done without causing much harm to the property. Any type of electrical, roofing and structural aspects should be left in the hands of professionals. Experts doing the right work is always in the best interest of your property. You can put a band-aid on a problem for the short term, but sooner or later your work will be exposed.
In a perfect world, you could pay someone a fair rate to have excellent work done. However, typically you have to pay more to have better work done the way you want it. The first thing you need to evaluate is how long you plan on owning the property and what your long term goals are. But things can change quite a bit from one year to the next. You may think that you only want to hold the house a few years, but even small shifts could make owning sound like a better option. If you did stop-gap work just to get it done, it will cost you more to get it fixed the right way. Accordingly, you will have to sell it at some point. To maximize your sales price, the quality of the work needs to be something that will attract buyers and get your house sold. Doing the work just to get you through the next lease is often not the best plan of attack.
Regardless of what type of work you have done, it is always a good idea to do it when you want to instead of when you need to. Whether you are getting a new roof or getting a new mailbox, it is a safe bet to be proactive instead of reactive. If you wait until things are no longer functional, you pay more to get them fixed out of desperation. It is also more efficient to get appliances, furnaces, water heaters and central air units serviced every year instead of waiting for them to break. Many investors balk at the proposition of having to pull money out of their property reserves or lower their monthly cash flow for a couple of months, but the alternative is much more costly. Shopping around to get a new furnace in the winter when your tenants are without heat will often leave you paying the highest price for the quickest service. If you were to service the furnace every year, you could get five to ten more years out of it and possibly have a more efficient unit that will keep your tenants in the property much longer.
Your goal should be to reduce annual costs instead of trying to justify a rental increase. There are very few things you can do in your property that will demand a higher rent. Most renters are looking at your property as a stop-gap until they can buy a house of their own. You may think that spending more money to upgrade the bathroom will give you an extra few hundred dollars a month, but you will be disappointed with the results. This is not to say that work done on kitchens & bathrooms won’t give you a reward, but that reward is usually realized when you sell instead of lease. If you aren’t looking to sell for years and want to save your reserves, you may want to wait until you are closer to selling to tackle those kinds of projects.
Unless you are renting a brand new property, there will always be work that pops up from time to time. Deciding how you handle it can make all the difference in your portfolio. If you know what you need to do, you can save a lot of money. The worst thing you can do is to make the problem worse by taking on a project your aren’t qualified to do.