When you have properties you intend to let others live in, one of the most critical returns on investment you can calculate, especially in the beginning, is the cost of renovation. This is where it's time to take off the hat of being a homeowner and put on the hat for business and profit. However, because your intention is to provide a place for people to live, there needs to be a balance between thinking like a homeowner and a business person. If you have a property that no one wants to live in, you can't generate income. But if you spend too much money on improving things, that lengthens the amount of time before you can see any ROI.

Here are some of the considerations you need to make when deciding how much to spend on improving a property.

Higher Quality Means More Affluent Residents

One of the biggest considerations for budgeting on property improvements is planning around what kind of residents you want to have. The old adage "you get what you pay for" is also true of residential investment properties. Low-budget improvements and renovations will be very obvious in photos and in actual visits to the physical location, which means that whatever you are hoping to charge on a monthly basis must be in line with that.

Conversely, when you spend more on improvements, and it has an obvious effect on raising the quality of life in the residence, this means that you are justified in charging more for people to live there. So, the type of residents you want to attract and the demographics you want to serve can play a role in your expenditure.

Getting A Return

Of course, deciding to invest in renovations and other improvements doesn't yield immediate profits. There is a waiting period as income is generated before any investments eventually become profitable. But how long should that period be?

Depending on how you've calculated your costs, the general advice here is that a reasonable ROI period is between 3-5 years, depending on your patience and your commitment to a property. Of course, many additional variables factor into this, such as the regional market, the state of the economy, the location of the property, and many others. Your best chance of success is to understand and adapt to the financial environment you find yourself in.

Avoiding Long-Term Problems

A final issue to factor into your renovation calculations is whether or not an expenditure now will avoid bigger financial headaches in the long term. For example, if you are informed now that there is an issue with the foundation that can be easily remedied for additional cost, this is an expense you should seriously consider. Foundation issues can become both huge and enormously expensive as time passes, so if you are lucky enough to have a professional "catch it early," you can save yourself huge repair costs later by spending a little bit more to improve the situation now.

If you want to make sure you're getting the most out of your property rental investments, contact Occupancy Solutions and let us help.