HOW IT STARTED…
My wife Betty and I have been property managers for almost four decades starting out as on site managers for an apartment complex in 1979. For the last 30 years we have been investing in rental properties as well.
We converted our first and second homes we lived in into rental properties and bought more rentals over the years. Since then our business has become the means for more than 2000 clients, rental property owners who chose to forgo the troubles of managing their own investments. They continue to enjoy the long term benefits of increased value and rent without all the hassles of dealing with tenants and maintenance.
…HOW IT’S GOING
Our first home purchased in 1982 for 50,000 is now valued at over 380,000 today. Selling is tempting as we would make a nice profit, but compared to the years of cash flow and a paid off mortgage we continue to have an income stream that has more than kept up with inflation.
Increasing Home Values
Since 2012, Arizona’s home values have increased by 151%. This means the value of the home we purchased in 1995 increased. Increasing values also meant increasing rent prices.
For 25 years, we rented out the house at market rent. In 2020, the house rented for $1500.
Yes, there are expenses
We have made several repairs to the rental since 1995. Real estate investing is for those ready to play the long game and take a few losses along the way. Repair and maintenance, as well as updates or full remodels, tend to increase the value of the home exponentially. As the value of the home increases, so does the opportunity to raise rent.
The Repairs
- New roof
- Painted inside three times
- Painted outside once
- Replaced water heater
- AC repairs
- AC replacement this year
Total cost of repairs over the last 25 years: $22,600
Best Practices
Generally, carpet will be replaced every 7-9 years and interior paint needs to be redone every 6-8 years.
2020 Remodel
- New kitchen
- New flooring
- Removed a wall
- Removed popcorn ceilings
- New baseboards, fans, switches
Estimated remodel costs = $30,000
Rent Increases
Rent increased in 2020 from $1,500/month to $1,900/month. The current rent increase alone will pay for the remodel costs within 6 1/2 years if the rent stays the same.
Return on Investment
Home Improvements and major repairs are great for ROI. For example, the average cost for a minor kitchen remodel is $14,000; this will increase the average resale value to over $13,000 in one year. That is an 87% return on investment. And just because a project is expensive doesn’t mean it will pay back more. Often, minor improvements can yield major dividends.
Prospective tenants are attracted to the idea of moving into a newly renovated unit but it isn’t necessary to renovate the entire home to take advantage of this. High-value renovations include the kitchen and the bathroom. In these areas, it may be worth it to install new flooring, tile, and appliances. In other areas, consider cutting costs, such as by having carpeting professionally cleaned rather than replaced.
When you do major repairs and remodels, your property will grow in value. Your cash flow will increase and it’s not short-term. They’re long- term.
Where Are We Now?
We are locally owned and operated and have been in business since 1986, caring for thousands of properties for hundreds of investors, as well as our own investment properties.
My wife Betty and I have incorporated TransCity Property Management because we wanted to provide superior property and rental management services to landlords needing help. Over the decades, we have built relationships with attorneys, connections with maintenance people, air conditioning people, plumbers, electricians; all of these relationships make for quick repairs, fast responses, happy tenants, and satisfied owners because things are done right and they’re done at a very fair cost. This assures that we get the best price possible.
If you would like to learn more about real estate investment or would like a complimentary rental analysis, reach out to today. 480-641-8830
