There’s a certain threshold in a given area regarding how much you should upgrade your home and how much it will make a difference in the competition. It would not make sense to put a $5000.00 stove in a $200,000 condomimium, etc. That’s just one example. So, when a prospective tenant or buyer is looking for a place to buy or rent, there’s also a threshold to their perception of value, and when something seems out of place, it won’t matter to them that you have the nicest property in the area, when it comes to considering the rent or price.
Most upgrades will increase the ability to sell or rent your home over the next door neighbors, but it won’t guarantee that you’ll be able to draw a premium based solely on those upgrades, especially if the area in which you’re renting or buying doesn’t warrant such upgrades.
For potential rental properties, if you ever find yourself saying, “I can’t drop the rent that low because my mortgage is more than that,” then it’s time to think about the cost of carrying a vacant property.
Let’s say your mortgage payment is $1500/month and your home can draw $1200/month in rent. That’s a loss of $300.00/month when it’s rented. If it’s not rented, it’s costing you $1500.00/month. If you rent it for $1200/month for one year, you’ll lose only $3600.00. Let’s see, $3600 divided by $1500 is 2.4.
You choose. You can be realistic about your asking price and get the property rented and lose $3600 in 12 months, or you could hope and pray you get someone to rent your house at your inflated price and lose $3600 in 2.4 months. Hmmm… 12 months versus 2.4 months.
If this is your way of thinking, it’s just not realistic and you may need to be innoculated from the virus, infection, or well whatever it is that’s keeping you from seeing the real market conditions.
Remember, time is money and the entire nation is getting a swift lesson in loss mitigation. Most of us are in a “collection” mindset. We want the full payment and we want it now, and we waste all of our time trying to hunt it down. The best method is to mitigate your loss by getting something going…anything.