This post applies to anyone of the following:
1. Someone who owns more than one property
2. Someone who inherited a property and doesn't need the space
3. Someone who owns a property they are no longer using maybe because of its condition
Here are the suggestions in order of appearance:
1. Make minor updates and rent out the space
2. Make a total renovation and sell for top dollar
3. Make minor updates and resell, using the funds as follows below
(#3 is actually the best option in my opinion)
Strategy 1: Make minor updates and rent out the space
This works for properties that are in decent condition but not quite up to typical household standards. Typical remedies would be paint, replacing light fixtures, replacing an old water heater, etc. In other words, these updates should stay under $10K, maybe even under $5k.
Rents for most spaces (in Louisiana) run from $800 to 1500 a month, depending on location. Many investors opt for Section 8 because the rent is more secure since its government backed funds.
You'll enjoy a steady income but in some cases you don't want to be a "landlord" or maybe you share ownership and it's just not useful to split rent between you and the other property owners.
So let's consider the next 2 options and see which one fits yoru goals.
Strategy 2: Make a total renovation and sell for top dollar
2 and 3 have some things in common, such as how I advise you to use the funds, but I'll save that for #3.
Strategy 2 requires cash or financing. If the repairs are minor (such as described in Strategy 1) then it won't take long or cost much.
But if the repairs are significant, this can take a while, and you might need multiple contractors. For some people, this isn't a problem. You'll use your funds or go the bank, lock in a contractor and await the work's completion.
On the other hand, some people just don't have the time or patience. And I get it. In your mind, you've heard you can sell for WAY more after renovation, so you're thinking it's worth the extra frustration. But let's look at strategy 3 and especially how you can make the money grow.
Strategy 3: Make minor updates and resell, using the funds as follows below
You can sell "as is" or make a few updates as described in Strategy 1 and lock in a decent price.
The great thing is you don't have to worry about the timeline and energy of getting contractors on board and hoping all goes as planned.
Let's say "as is" you can sell for $80k but after a full renovation, your agent says it can sell for $160K.
Let's compare the process.
Either way, you can use that money to reinvest in other properties. Even $20k can go a long way when used wisely. (Let's talk about developing a strategy.)
The positives of selling "as is" is that you get a faster sale, with less headache, and you leave with funds to reinvest in properties that need less time.
The negatives of selling "as is" is of course the price difference. You are definitely going to sell for less than after renovation.
So then what's the negatives of selling after renovation?
Well, the risk. What if you financed $30K for repairs, but the house sits on the market and you owe the monthly payment? Plus, your trapped because unless you have a lot of money lying around, you can't move on to other investments until this one sells!
What if you paid cash for the repairs? Maybe you'll be okay with the wait, but maybe you won't. Look at how much you have on hand, and ask yourself, is it worth the wait?
In short, here's what to remember...
If you have substantial funds available ($60K or more) maybe selling after renovation is the way to go. But if not...
You have to decide what it costs you if it takes too long to sell once renovations are done. Selling "as is" means you don't have to put any money into it, and you can move on to grow your wealth much faster.
Jessica Bordelon, Agent,