So, you’ve decided to renovate your South Florida investment property. That’s great! Maybe you’re planning on painting the walls — but wait, by doing that, the new walls won’t go with the doors, so you’ll have to upgrade those, too. But won’t the new door color end up clashing with the windows? If you’ve been a real estate investor for quite some time, you’re aware of how quickly things can get out of hand. Sooner or later, your budget of $3,000 will become $30,000, badly hurting your bottom line.
If you’re planning on improving your property, you need to plan properly, otherwise, you’ll lose the potential for profit. In this article, we’ll help you figure out how much your budget should be, as well as what you can do to stay within that budget.
How Much Does a Home Remodel Cost?
In general, the cost to remodel a home ranges from $10 to $60 per square foot. However, the cost can rise to as much as $150 per square foot if you’re going for high-end upgrades such as, say, turning the basement into an indoor theater. The cost is also dependent on the contractor’s fees. For instance, if your property is located in downtown Miami, you shouldn’t be surprised if your contractor hands you a bill that’s in the thousands.
Before getting into budgeting, it’s best to find out how much you would probably have to pay. Discuss your remodeling dreams with other property owners who’ve recently updated their homes. Alternatively, you could consult a property management company to find out the current rates for contractors in your area. Doing this lets you set realistic dreams.
Remember to set aside money for unwelcome “surprises” such as water damage. Things won’t always go your way when it comes to home upgrades, so be prepared to spend a bit more than you anticipated.
How Do You Budget For a Home Remodel?
Here are some ways to budget wisely:
#1 Decide Which Rooms Need Remodeling
Chances are that you’re renovating your investment property because it doesn’t suit your ideal tenant’s needs. For instance, if your property is in a college community, then you’d naturally want to rent it out to student tenants. In this situation, you’d need more space to accommodate more than one tenant at a time. Hence, adding more bedrooms and bathrooms should be at the top of your to-do list.
#2 Determine Which Upgrades Have the Highest ROI
If you’re planning on reselling your home, opt for improvements that have a high return on investment (ROI). There’s no reason to renovate a room if it won’t increase your property’s resale value. Consulting a property management firm can help you identify which updates can enhance the value of your investment or you can check this to calculate ROI. For instance, some of the most valuable rental home improvements include a renovated kitchen, stone veneers, and window replacements.
#3 Talk to Homeowners
Chat with other investors who have recently renovated their investment properties. Treat their mistakes as “learning lessons” to help you make better decisions. They will be able to tell you what you should and shouldn’t do when it comes to home remodels. In addition, they will be able to tell you where to source supplies at a lower price This can save you a substantial amount of money.
#4 Get Bids From At Least Three Contractors
But first, be specific with what you want. Come up with a list of things that you want them to do, right down to the tiniest detail. For instance, your future contractors should be aware of whether or not you want custom cabinets. Be sure to indicate specific brands for appliances in case that’s something you’re particular about. That way, your contractors can prepare an estimate that is as accurate as possible.
Ideally, you should seek bids from at least three contractors. If this is your first time hiring a contractor in your area, consider hiring a property management company. They can help you choose the best contractor for the job.
#5 Research the Prices of Materials
Don’t let your contractor fool you. Your contractor may submit a bid wherein the cost for, say, marble countertops is double the typical cost. To ensure that you aren’t being overcharged, it’s important to spend some time researching the current cost of materials. Alternatively, you could hire a property manager to screen each contractor. They’re aware of the standard cost of contractor services, so they should be able to determine who’s being honest with their bids.
What’s the Best Way to Stay Within Budget?
Your budget can get out of control especially if you don’t commit to it. If you allow yourself to make “small” purchases — such as a new kitchen sink that wasn’t part of the plan — you won’t be able to complete the remodel. Here are a couple of clever ways to ensure that you don’t overspend on your renovation:
- Don’t pay with credit. Relying on credit is a bad It would be better to take out a loan since the renovation’s ROI will likely result in you making more money, anyway. Unlike credit, you can actually pay off your loan quickly.
- Do it yourself. You don’t have to hire vendors for everything. If you can paint the cabinets by yourself, go for it! If you can handle a paintbrush then, by all means, paint the walls. The DIY route can help you save a lot of money.
- Reuse existing materials. Do you have hardware that you can reuse for your cabinets? Do you have leftover paint from your previous renovation? Instead of purchasing supplies, check if you already have them.
Planning on Renovating Your Investment Property?
Renovating an investment property can be challenging for long-distance landlords. You won’t be able to coordinate with contractors or oversee the work. Fortunately, Luxury Property Care’s reliable property managers are here to handle everything. We work only with vetted vendors so you can rest assured that your investment property is in capable hands. Best of all, we will make sure to work within your budget.