Your Investment Is Not Your House

One of the things that can screw up a good real estate investment is to treat it like it’s your own home. Treat it like a serious investment, and it’ll treat you better.

People often make improvements that don’t make their investment properties more valuable. When you make an improvement, it needs to be made for the sake of your bottom line. So, before you make an improvement, you just need to ask your self the right question.

When I say “your investment is not your house,” what I mean to say is that you don’t have to do the same improvements to your investments that you would for your own home. In your house, you do all sorts of little things to make it look better, feel better, or make it feel more “homey”. And your house is the place to do change things “just because you like it.” Many investors feel the same urges for their investments. The urge to needlessly improve must be resisted. This goes for properties that you are planning to sell and properties you are planning to keep.

Here’s an example. A friend of mine was attempting to buy an empty home in his neighborhood to renovate and then rent out. The house was at a great discount because it had been empty a long time. When we talked about it, he rattled off a long list of improvements he wanted to make. Fix the roof, redo the electrical system, paint the interior, move a wall in the kitchen… on and on. Now, the roof needed to be fixed. The interior walls needed to be scraped and painted. The kitchen was small, yes, but it was a small house. The electrical system was not brand new, but it was still functional, passed code, and safe. These two improvements would have cost a bundle, and with no real benefit for him as an investor. The house wouldn’t sell for that much more and renters wouldn’t pay any more at all if he had done those things. He would just be puring money into the pit.

The best way to protect yourself from making unnecessary improvements is to ask yourself the obvious question: Is this improvement going to mean more money for me? That can mean “Will it rent for more?” “Will it sell for more?” or “Will it sell faster?” If you can make a good case for a “yes” then go ahead and improve.

Remember, your goal should be to make money, not make the world a cuter place to live or to increase the Feng Shui of every investment you do. Make only the improvements that will fatten your wallet. It’s not your house, it’s your investment.