5 Ways to Increase the Value of an Investment Property

Investment properties can, of course, make you money in the short term, if you are collecting more in rent than the monthly mortgage payment, but the long term goal is generally to increase the value of the property in a manner that increases the return on the investment upon final sale. Here are five upgrades that are more likely to pay off in the medium to long term:

1. Make the property more energy efficient

Energy efficient upgrades provide a double benefit: 1. They decrease monthly expenditures while you own the property, and 2. Are a perk that is likely to entice more potential buyers and, ultimately, a higher sales price. But what does it entail? Some ideas include swapping out windows for low-E models, sealing up gaps around doors, windows, and in the attic, basement, and crawl space (if they exist), add in solar panels or solar-powered water heaters and appliances (you can also receive tax credits for this upgrade), install a smart thermometer, and install low-flush toilets and showerheads.

2. Invest in long-term landscaping

Curb appeal, as I have previously mentioned, plays a huge role in your home's value, but it can also be very expensive -- especially if you're updating it every season or even annually. A better option is to invest in more durable landscaping now -- things like large shade trees (this can eventually cut down on your HVAC bills, too), gravel gardens, perennial bushes and ferns, and other plants that will stand the test of time. You could even hardscape or xeriscape the yard entirely -- because what renter really wants to mow the lawn anyway?

3. Improve the home’s health features

Most people want a home that helps them lead longer, healthier lives, and they'll typically pay more for it. Consider making some health-focused improvements, like adding an air purifier, installing a water filtration system, or putting in a carbon monoxide monitor. Even little additions can make a big difference for your next tenant, or the next owner.

4. Make some high ROI upgrades

Lots of home upgrades can boost your property's value -- not just health-focused ones. For some guidance, look to Remodeling Magazine's Cost vs. Value report. It takes into account average costs for various projects as well as the resale value they add to a property. This year, replacing your garage door, adding stone veneer siding, remodeling your kitchen or installing a wood deck topped the list for highest-ROI projects.

5. Update older and outdated systems

Older HVAC, plumbing, electrical, and other systems mean three things for your future tenants or buyers: more problems, more hassle, and more costs. Whether the system holds on for one more year or five, eventually it will break down and need to be replaced. That breakdown might mean a flood in the laundry room, a week without A/C in the middle of summer, or an overflowing toilet. Whatever the issue is, you can bet that your tenants don't want to deal with it (and they'll probably pay more to make sure it doesn't happen).

Word/Phrase of the Week

Due Diligence

A due diligence period might be available in the purchase agreement, which is a time frame provided to a buyer to fully examine a property, often by hiring experts to inspect the property, perform tests, etc., so that a buyer may decide on how to proceed. A buyer might also be afforded an opportunity to renegotiate the contract based off their findings or possibly even to terminate within a specified period, to not be considered in default of the contract. Due diligence allows a buyer to fully understand what they are buying.

Useful Links

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