If you own rental property or investment property within a Real Estate IRA, it’s important to be careful with the money you spend making improvements. While many people make improvements and upgrades to their own homes to increase their enjoyment of their homes, not every home improvement immediately adds to the dollar value of a home, net of costs.
But some do, depending on the property and the market. This is especially true if you are bringing a home up to the standard of the surrounding neighborhood. Knowing which upgrades add value to your Real Estate IRA are key in maximizing profit.
Except in special circumstances, or when transforming an unlivable home to a livable one, most major renovations don’t add immediate resale value once you account for the costs of professional work, licensed contractors, etc.
However, there are a few projects that have proven themselves over time, when used in the right homes – chiefly things that improve the cosmetic appearances of a home and enhance curb appeal.
- A beautiful exterior. If you can only afford to do one thing to your Real Estate IRA property to prep it for rent or sale, invest in a fresh coat of paint. Concentrate on the exterior, and do the trims, as well. If painting isn’t appropriate given the material, give it a good pressure wash. New siding works well, too.
- Good landscaping can add significant value for a Real Estate IRA, and by ensuring that water drains away from the structure, it can also help prevent water and basement damage in the event of heavy rain. A good rule of thumb is to allow a budget of 5-10 percent of the current value of the home for a good professional landscaping job. Concentrate on using local plant life that does well in your climate without requiring much water or maintenance.
- Insulation upgrades. This is a particularly good investment for Real Estate IRA rental properties where the Real Estate IRA and its owner is including utility costs with the rent. According to the 2015 Remodeling Impact Report, put together by the National Association of Realtors, the average cost of an insulation upgrade is $2,100, which essentially pays for itself at resale, with the project recovering about 95 percent of the investment when it comes to the final sales price of the home.
That means you as the landlord will enjoy the benefits of the heating and air conditioning bill savings essentially for nothing. A number of other studies indicate that homebuyers are paying a premium for ‘green properties,’ so this project along with some other moderately-priced environmentally-friendly upgrades to ‘green up’ your property may add value.
- According to the National Association of the Remodeling Industry, the average cost of a new roofing project was $7,600. However, the National Association of Realtors estimates that the project more than pays for itself upon resale, recovering an average of $8,000, for a return on investment of 105 percent. If you’re selling shortly after you do the project, this is a quite attractive use of capital when you consider the ROI on an annualized basis.
With offices in Charlotte and Asheville, North Carolina, American IRA, LLC works with successful, experienced Real Estate IRA investors from coast to coast. For more information about Real Estate IRA investing, contact us today at the link above, or call us at 866-7500-IRA(472). We look forward to working with you.