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Rental repairs and renovations to maximize return on investment

Rental repairs and renovations to maximize return on investment

Many investment property owners may see the need to improve their units in today's increasingly competitive market, especially because of how much return on investment even a few basic upgrades can create over the long term. With that in mind, however, it's important to spot the differences between what constitutes a great return on investment and a more modest one.

Perhaps the biggest repair hurdles many landlords run into when it comes to boosting return on investment is putting off improvements until their underlying issues are exacerbated, according to real estate expert Ethan Roberts, writing for Auction.com. For instance, if landlords are slow to repair or replace a malfunctioning washing machine, its functionality is only likely to worsen, and could eventually cost significantly more to fix and potentially even cause more damage than just to itself (such as with leaks).

What to monitor
As the old saying goes, an ounce of prevention is worth a pound of cure, so getting out in front of any possible hurdle in this regard will help keep an owner's return on investment high, the report said. If a past tenant reported a leak in the ceiling, it's vital to get that problem assessed and fixed sooner than later.

Of course, many properties that get used by a rotating cast of tenants over time are likely to encounter the same difficulties, according to Bigger Pockets. Many of them relate back to plumbing issues that lead to drips from the bottoms of sinks or bathtubs, as well as from faucets, toilets continually running or spigots no longer providing hot water. Often, these repairs will cost little more than a few hundred dollars, even in the most extreme cases, but the fact that they may need to be made at all could be a sign of a potentially larger problem going forward.

These may be most important to monitor closely simply because of how much it can cost to repair water damage versus other types of fixes that may need to be made over time, the report said.

What to expect
In addition, it's also important for property owners to keep in mind that in many cases, they will be able to deduct the cost of one-time repairs from their annual tax liabilities, but that's not typically the case with improvements, according to Landlordology. When making improvements as a means of boosting a property's value, however, the deductions will be different because they are technically considered capital expenses that must be depreciated, evenly, over time. It's also important for landlords to be able to differentiate between what constitutes a repair – such as fixing a cracked foundation – versus an improvement – such as adding structures to an existing foundation.

With these issues in mind, it may be wise for landlords to do all they can to better understand what they may need to do to boost their return on investment and avoid repair-related pitfalls. A little online research in this regard can go a long way, but so too can efforts to be a little more proactive about these potential hurdles.

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