Knowing Where & How To Spend On Upgrades

As a new investor, it can be very difficult to figure out how to best allocate your money. Successful investors, new and old, have to constantly battle with their budget and stretch their dollar as far as they can. When dealing with a rental property, you will always run into debates as to where to best spend your money. In some cases, it makes perfect sense to purchase a used appliance or to get an item repaired instead of replacing it. In other cases, however, it will end up costing you much more money if ignore a problem and wait it stops working before you act. Knowing how, where and when to best spend your money can make all the difference on your rental property.

Like most investments, knowing your long term goal will help guide you along the way. Almost anything you do to the property will not have much of an impact on your monthly cash flow. If you are thinking about selling the property in a year or two, dumping money into to replace items may be throwing money away. You will see the impact of any upgrades when you sell, but if you are in the middle on the quality it won’t have much of an impact. If your goal is more short term and you don’t want to put a lot of money into the property, you should look for band aid fixes to get you through.

If you want the property to be part of a long term portfolio, you should treat the property as if you were living there. Items such as the roof, windows and flooring should be looked at with a 10-15 year plan in mind. Spending money on these big ticket items is protecting your investment and you should feel confident that they will not have to be dealt with again for years. Not only will this bolster your property value, but they are two less things you will not have to worry about with your tenant.

Many landlords will get upset when they get calls for a leaky faucet, running toilet or broken washing machine. The reality is that these things can happen in a rental house just as easily as they could in your house. As long as these are not caused by tenant negligence, you should worry more about why it happened. If these items are a sign of much more serious issues, you have to find that out and deal with them. If the dishwasher keeps stopping, is it a problem with the dishwasher or maybe the plumbing in the kitchen? If it only costs a marginal amount more to deal with the problem the right way and not have to worry about it coming back, it just makes sense to spend the money and be done with it. If not, you can expect a phone call in six months telling you that the problem is back.

Knowing how and where to spend money on a rental property all comes back to your long term goals with a respective property. Putting a patch over a problem will only lead to more issues in the long term. If you value your investment, you will take care of the problem as it comes up.