Shrewd residential real estate investors know how to choose effective home renovations for their properties. A new kitchen, new bathrooms, or a window upgrade – all these generally add considerable value to the property, while also improving your monthly cash flow as an investor. Wondering whether Boston home renovations are worth investing in? Keep reading to learn the advantages of putting your dollars into this particular market.
Why Are Boston Residential Investment Properties A Smart Move?
The Boston Housing Market Area (HMA) is an established real estate market with a fresh source of new potential renters moving into the area every year. New students from the over 56 institutions of higher learning seek housing in the HMA at the start of each fall semester.
If your portfolio caters more to a family client than it does students, you’ll be happy to know that the total HMA population has surpassed 4.47 million at the start of 2019.
How Do Boston Investors Maximize ROI With Effective Renovation Projects?
According to the US Department of Housing and Urban Development, available jobs are on a steady incline, as are home sales and overall rents. With home values and rental values already increasing, a smart home improvement project has the potential to compound your returns.
Let’s take a fictional example and see how it plays out. Suppose you decided to invest $100k into a renovation project, but you projected that you could earn an additional $4800 in rents each year thereafter. Suppose, also, that the standard 60% of your investment would drop immediately to the bottom-line value of the property.
So, without considering rental increases, you’ve banked $60k out of the $100k in increased property values, and in just a little past 8 years, you’d have recouped your entire initial investment. Then, each month thereafter you’ll be more than $400 ahead of the game. But that’s not all- you’re going to be increasing a greater principal amount as the overall market value continues to grow. So that $60k in added value mentioned is itself also growing at the same prevailing market rate.
Even with a conservative 2% year-over-year rental value increase, that also brings your $400 monthly rental increase up to about $470 after those 8 years.
Aside from increased rents, you’ll also get the benefit of reduced vacancy rates. Homes with modern fixtures, amenities, and styles attract more viewing and faster rentals. Even beyond this benefit, some investments may also improve the overall efficiency of the unit, thereby reducing the cost of utilities. These savings could be direct in your pocket as the investor, or it could come to you in the way of even more increased rents due to the resident having less to pay in their own utility bills.
Suffice to say, a real estate rental property increases in value immediately after a successful renovation project, but that ROI is compounded with the benefit of an already strong real estate market. Boston home renovations make even more sense than a similar project might in other less competitive markets.
We here at R.H. Blanchard Contract and Design welcome you to contact us to discuss how a home renovation project could put more cash flow and home value into your investment portfolio.