Investing in DC-area real estate can be an exceptional opportunity if you know how much to put into the rental property in question to reach maximum returns on your investment. However, finding balance between what a renter wants and what they will pay for is hard to do.
As your trusted DC property management team, we want you to know it is even possible to invest too much into your rehab efforts! That's also why it is so important to have some guidance on your property portfolio building efforts in the DC area.
What renters want is very different from what homeowners seek in a residential property, and you may quickly find yourself in the red on some 'upgrades' that don't yield legitimate returns.
Can You Over Invest in Rehab?
The simple answer to this is 'Yes!' Sadly, it happens all of the time.
- You find a rental property that has glimmers of potential when it comes to returns.
- You keep pouring money into this investment property because you have new ideas for desirable features.
- You want to make this property a stunning, high-quality investment—yet, at some point, you've crossed the line from rental upgrades to a fix-and-flip property.
Remember, this is not your home. It is not a place where most people will even live long-term in the fast-paced DC rental market (even if you hope they do). You want to give them what they need and a few extras without breaking the bank in the process.
Investing in turning a property into a luxury space may not yield the kind of returns you expect outside of Capitol Hill. Most of today's renters do not want a pricey home; they want function. They want modern appliances and features. They want responsive, preventative maintenance services from professional property management in Washington, DC.
Expensive upgrades won't always yield more rent. That's a critical factor to keep in mind—and one any seasoned DC property management group will warn you about.
How Much Rehab Is Enough, Then?
- Renters generally want affordable quality; that is, they want a single-family home or condo that fits their budget.
- They also want a rental property to have good quality finishes and good workmanship.
- They do not always want the most luxurious amenities.
Your future renters are likely looking for a safe, reliable home. What that means for you as a property owner could be various things. As you work to grow your investment portfolio, here's a bit of advice on what residents in the DC area are willing to pay for.
Small Things That Impact Daily Life Matter
Where do your renters spend the most time? This impacts your decision when upgrading your rental property. The right updates will create a functional, welcoming, and comfortable space.
There are small (yet very effective) changes you can make to boost the appeal of your investment property to your future residents. The most likely areas to invest in include:
- Space-maximizing floor plans
- Quality, modern appliances (and outlets)
- Some type of clean, easy to use outdoor space
- Lots of natural light with energy-efficient windows
- Ample storage space in closets and the kitchen (if you can fit it)
- Laundry access in the home (even smaller units are a 'selling' point!)
Get to Know the Area
Another important factor when determining how much to invest in your investment property is its neighborhood. DC neighborhoods are quite versatile: Some areas demand more features and better materials than others do.
Look at demand in rentals for your area when comparing two upgrades: which will yield better ROI, updated USB outlets, or that countertop renovation? A good way to gauge what you should invest in through this process is simply taking the time to consider what other properties on the market offer.
Take a closer look at listings to get this insight or work with a full-service DC property management company to get straight to the heart of highly-recommended upgrades.
Consider the Local ROI
- Take a look at what people are paying in the community you are buying a property in to know how much you can spend on a renovation. To stay successful, no matter the market conditions, you need to be competitive in your pricing.
- Before considering any renovation, take a closer look at how much you need to bring in from rent to make this property profitable for you with the additional upgrades—especially if this is a new investment addition.
- If that is a price that is out of the range of normal in the community, chances are good; it is not worth the investment.
Here's why: No matter what you put into the property, it will cost you if the comps do not make sense. While you may be able to get closer to the 'high end' of your rental bracket with square footage and features, you are less likely to get significantly more than that.
You have to know what renters want—and a DC property management company can help you with this.
Hiring a Property Manager Can Help You
Property management services are designed to help property owners make profitable choices for their investments in the DC area! When you hire a DC property manager, they can help you determine where to invest, how much to invest, and what your ROI will be on any investment you do make. They can also give you support in weighing the projects you do based on what the current market is willing to pay in rent.
When you are unsure how much to put into your next investment, utilize the skills of our Rent Estate™ Advisors. This is an easy way for you to learn what renters want and pay for, so you do not make a costly mistake you end up paying for over the next decade.
You can also learn more about excellent ways to grow your portfolio with your copy of our free resource, Real Estate Investing: Grow Your Portfolio!