Have you ever walked into a mall somewhere and in the window, there were these awesome, fantastic, amazing, beautiful shoes? They were to die for! And then they are only $795.00. (I would never spend that much on shoes!) You may start convincing yourself that these are a great purchase for that price because you want them so badly. I personally don’t think that’s the best way to make a financial decision and certainly not a good business decision to buy something because you really WANT it. When purchasing rental properties, you should consider what is a want and what is a need.
A pair of $800 shoes although they might seem like a need, they really are a want. We need our shoes to do our everyday duties, but do you NEED shoes that cost $795? This might be excessive. Looking at features on a rental property might also prove to be excessive.
So how do we differentiate between a want and a need? A want is a feature that could prove excessive and require a tenant to take on more upkeep. A need is a feature that provides value without added upkeep.
A large yard could prove to be a want. Although you may want to provide the option for a family who may become a tenant with a large yard for them to run and play with the children, a large yard could turn out to be just more yard for a tenant to mow, water, shovel snow out of and provide something more than just a fun space for your tenant.
A swimming pool can also be a want that you can prove excessive. Although you may think that a swimming pool is a feature that could bring you more rent, it also may bring more maintenance. I personally do not buy properties that have swimming pools because they can be a huge liability for me. With the chance of young children or pets drowning, this is just something I don’t want to worry about at night for a few extra dollars in my bank account.
What is something that I consider a need? “Would I be comfortable with my family and my children living here? If not, what needs to be changed?
An essential feature of a rental property is a dishwasher. I have a large family, we love to entertain, we produce a lot of dirty dishes, and I hate handwashing dishes and leaving them around to dry. When I purchase an investment property, I make sure that it either has a dishwasher or I can easily install one.
Yours might be different. Maybe your father-in-law is a roofer and you feel that your rental property needs a new roof.
Think about the kind of tenants your property is going to attract. If you think that the market is going to bring in new or large families versus young couples or singles to rent your home, you might want to think about the number of bathrooms. For families, 2 bathrooms are important but at least one of those needs to have a bathtub. Mothers, you know how important bathtubs are!
If you think that possibly the market is going to bring in young, professional millennials who may be single, think about what their needs are going to be – will they want a 3 bed / 2 bathroom home with a large yard? Probably not. They most likely will want a dishwasher, higher-end finishes and possibly some smart home features. There are many things you might find are wants or needs over time and this list will change as you develop your rental inventory.
Keep a running list of wants vs. needs for each purchase and it will help you make sound business decisions with your rental properties. Everyone’s wants and needs will be different but do not make these costly decisions, because you want something really really badly.