Budgeting is an essential step in any financial undertaking. It helps you stay on track, avoid overspending, and even save money. In other words, it ensures that your money is doing what you want it to do. There's no use looking up the cheapest way to renovate your kitchen if you don't have a handle on your finances. You'll most likely still spend more than you should if you don't have a tightly knitted plan for your investment.
In this article, we've taken the liberty of outlining how to budget for rental property renovation in five simple steps.
Establish your objective for renovating
The first thing to do when making a budget for a rental renovation is to establish your objectives. In other words, outline what you hope to get out of the cosmetic changes you make to your apartment. Knowing these goals will help you in the next step, which is deciding what you want to upgrade and what you don't.
For example, if your purpose for undergoing a renovation is to justify an increase in your rent, you should consider luxury upgrades. Outdoor upgrades like painting your exteriors, updating your vinyl sidings, and renovating your deck can massively improve your ROI. On the other hand, if you want to cut back on utilities and other expenses, you should lean closer to installing energy-saving appliances and light bulbs.
Clearly defining your objectives will help you avoid taking on unnecessary projects and effectively budget for those in line with your vision.
Determine what you want to change
Following the establishment of your renovation goals, the next thing to do is decide what you want to change. There are several ways to achieve your objectives, so it's not enough to determine what you want the outcome of the renovation to be. As the famous saying goes, "there's more than one way to skin a cat." You can increase your apartment's ROI by changing different sections of the house. But that doesn't mean you have to.
There are a handful of renovation ideas for each part of your house, but tackling them all at once can be exhausting, not to mention expensive. Instead, try focusing on one space at a time. If the bathroom has the most outdated features, you may choose to start there and hold off on the kitchen a bit longer.
Create a detailed plan
After deciding what you want to change, focus on creating a detailed plan. Having a roadmap is crucial to the success of your project. At this point, you should determine what you want to replace or upgrade. For instance, if you're focusing on the bathroom, you might decide you want to swap to LED bulbs and add some shelves. Or you could give the entire room a facelift by changing the tiles and switching to a low-flush toilet.
At this point, you should have a rough idea of how much your renovation will cost. It would be in your best interest to be as specific as possible regarding the fittings you wish to install, as the materials would most likely have different costs and labor requirements.
Consult a professional contractor
Once you've determined what exactly you want to change and sorted out the specifics of your plan, you can reach out to a professional contractor. Ideally, you should shop around for more than one option and compare their prices. Although, it's essential you keep in mind that the cheapest service might not be the best deal out there. Ensure that you consult with other homeowners and read previous customers' reviews before settling on a contractor. Thorough research would give you a more concrete estimate of your renovation costs.
Also, this stage would be an excellent time to start seeking financing for your renovation, if necessary.
Make room for miscellaneous expenses
No budget would be complete without some room for unexpected expenses. A sudden hike in the price of materials could increase your expenditure, a miscalculation could leave you short on supplies, and a ton of other unforeseen events could unfold. The benefit of having an extra stash of cash is that you won't have to halt your renovation altogether or throw your entire budget out the window.
That's it! Budgeting for your rental property renovation doesn't have to be a task you embark on with dread. With the tips we've outlined above, you should quickly create a flexible financial plan and stick to it. Another valuable tip to note is to prioritize your tenants' taste. Remember that it is a rental property in the end, and it would be best to go for things that are more generally appealing.
If you have any doubts, discuss rental property ROI with your property manager before moving forward. They can provide some much-needed guidance during the planning, budgeting, and supervision phase of your rental renovation.