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I've worked with a lot of real estate investors, and I've noticed that many of them make one dire mistake. I see it all the time—a rookie investor thinks they can make more in rent and attract a higher quality tenant by making extraneous purchases, but it never works out that way. Inexperienced investors often try to over upgrade their property based on what is appropriate for the neighborhood.
On this episode of Investing in Real Estate, I'll share more about why this rookie mistake is such a serious problem. I'll talk about why over upgrading your property decreases your ROI, and I'll give one exception to this rule! Don't miss episode 243!
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When you’re renovating your rental property, it’s important to make the home comfortable and safe for your tenants. However, there are certain improvements that simply don’t pay off. In order to maximize your return on investment, you won’t want to waste money on elaborate upgrades.
That’s why it’s important to assess what is appropriate, based on the neighborhood. For example, in a C class neighborhood, your tenants don’t expect high quality amenities or features. More importantly, the rental amount does not change based on these improvements! All you’re doing is decreasing your ROI.
For example in the C class neighborhoods where we invest, it would be excessive to install a bunch of bells and whistles. Our tenants aren't expecting luxury apartments with amenities and granite countertops. And most importantly, they aren't looking to pay for those things.
It’s important to make your rental property a comfortable and safe home for your tenants. However, there are certain improvements that simply don’t pay off. In order to maximize your return on investment, you won’t want to waste money on elaborate upgrades.
On today's show, I'll share more examples of what it means to over upgrade your rental property. I'll talk about another common mistake I see in this industry, and I'll give of an example of one circumstance in which you should conduct an extensive rehab. Please join me on episode 243 of Investing in Real Estate!
On this episode you'll learn:
- How can you leverage a property that is inching toward a higher neighborhood classification?
- What kind of flooring is appropriate in a rental property?
- Should you make upgrades when your property appreciates?
- And much more!