46) When to Remodel A Rental & How to Become a Millionaire

House Money Weekly

In this week’s House Money Weekly segment, Lauren and Alan get together with their special guest Amanda Orson. They discuss blog 144, When should I renovate a long term rentals? New investors love to make a property their own and put their own touch on it but that's not always the best plan. Alan wrote three scenarios to tell you when you should renovate a long-term rental. The first scenario is you can't rent it as is. Even if it looks ugly to you or if it looks like you don’t want to live in it, that doesn't mean the tenant didn’t want to live in it. A tip from Alan is to try to rent the property in its current condition and if you get multiple tenants applying then you know the property is fine. Lauren believes there are some situations where there's a need for renovation because she knows she can get a good return if the countertops were granite. The second scenario is if the renovation pays for itself in three and a half years. If you put $20,000 renovation in a property and raise the rent to $476, then that's a 3-and-a-half-year payback period which is great. Every new investor wants to make the property pretty, but Alan believes that if you can have your house ugly in the street but sexy in the spreadsheet then that is how you make money. The third scenario is when you're going to sell it. This is the time the property is in its best condition and you give it a new look and you don't have to renovate everything. The two ways people lose the most money is when they bought for the wrong price and the second is by over renovating.

 

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