Buying Real Estate is Just the Beginning
You’ve just invested in an older real estate asset that could use some work. It’s in need of updating, has some vacant space that needs to be leased up, and you’d like to increase the rental revenue.
It’s time to roll up your sleeves and get to work—but where do you begin?
The beauty of investing in an undervalued building, even when market conditions are competitive, is that strategic renovations, rebranding, and effective management can be used to increase occupancy and return on investment—a process called stabilization.
Knowing how to stabilize real estate assets comes from experience, something we at Trion know all about.
It’s easy to feel overwhelmed by a renovation and stabilization project when you haven’t done it before.
With that in mind, here are four rules about renovating and stabilizing real estate that we’ve learned through years of experience:
- Recognize that renovation jobs of all sizes can add value to your property. Smaller jobs—such as replacing carpeting/flooring, paint, windows, doors, locks, cabinetry, and appliances—can be done without major construction and are a good place for investors who are new to real estate investors to start. Large jobs requiring construction, such as adding floors or units or reconfiguring space, add time, money, and permitting to the process.
- Be prepared for remediation. When you’re renovating a significantly older property, there’s always risk because you don’t know what’s behind the walls you may be tearing down. There could be mold, rodents, or termite damage with which to contend. Each of these negatives requires remediation to eliminate the problem and prevent it from recurring. Good due diligence work before completing the acquisition can circumvent many of these problems, but some issues don’t present themselves until after the demolition process begins.
- Be prepared to uncover hidden treasure. The demolition process could also reveal something positive, like evidence of a property’s historic significance or rare materials that can be used to add unique charm to the property—that’s the serendipitous part of renovating an older asset. A building’s historic significance is meaningful to the cities in which the property is located, the residents of those cities, and the stakeholders in the property and can truly add value to the asset.
- Call in the experts when necessary. Professionals who have renovated real estate before can provide advice and assistance in getting the job done in a manner that’s sound, timely, cost efficient, and minimally disruptive to building tenants. Don’t be afraid to turn to these experts if you’re getting into unfamiliar territory with your renovation and stabilization efforts.
Just like any other project, renovating and stabilizing real estate requires a mapped-out plan comprising a logical series of steps designed to get you to your goal.
With a little forethought—and help when you need it—realizing your investment’s vision is within reach.
Related: What is Good Cash on Return for Real Estate Investing?