Profitable Real Estate Investing Tip 3: Save for Capital Improvements Monthly!
Successful Real Estate Investor’s number one goal is to make a profit. The past two weeks we have shared important traits all profitable investors share including reviewing leases annually and setting up a budget for property issues. Today we will share the benefits of setting money aside for capital improvements. A foolproof way to maintain and add value to your investment and increase profits is to make major improvements to your properties, capital improvements.
Tip 3: Set Money Aside for Capital Improvements Each Month!
*Capital Improvements are major renovations or replacements to your rental property to enhance its value and usually come as at a larger expense. This is not a maintenance repair, this improvement is capitalized into the value of the building; adding their cost to the value of the property and will depreciate over time. Capital Improvements include the following:
*replacing the roof
*updating the furnace
* updating appliances
Not putting money away for these types of improvements can cause you to blow your budget if something such as a leaky roof or a furnace breaks.
Open a savings account and put money aside for capital improvements each month. The industry standard is $400 per unit per year. However, take a look at your property and know the age of the roof, furnace, condenser, appliances and the useful life of each. This will aid you in preparation for when you will have to replace these large ticket items.
As a long term real estate investor consider making capital investments a part of your business plan. There should always be room for capital investments and your property management company can help you map out a course of action to help you add value to your investments. Feel free to contact Sovereign Management to help you map out a course of action and build your profit margin one home improvement at a time!
Next week we will discuss the importance of preventative maintenance.