This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!
Question: After reading your article two weeks ago about remodeling before selling a property, I was wondering what your thoughts are on remodeling our rental property. It’s a 1BR + den a couple blocks from the Virginia Square metro with a perfectly functional bathroom and kitchen, but about 15 years old.
Answer: A couple of weeks ago, I warned about spending money on major remodeling projects before selling your home and you should be equally cautious about making major updates to a rental property. In your case, it doesn’t sound like spending $15,000+ remodeling the bathroom and kitchen is a good investment at this time. Here are some of the questions/factors you should consider:
How long will it take to break-even on your remodeling expenses based on projected increase in rent? A moderate remodeling of your bathroom and kitchen is likely to increase the amount you can rent your unit by $150-$200/month (this is case-by-case), meaning your pay-back period is likely 10+ years. Keep in mind that the market value of your updates will depreciate annually and usually at a faster pace under the wear and tear of a rental unit.
The ROI of remodeling is heavily based on the type of tenant you’re most likely to have. Your tenants will most likely place more value in convenience, affordability, and functionality than they do aesthetics and upgraded finishes/appliances. As the tenant profile shifts towards families and higher-end properties, the ROI of upgrades increases.
Length of Stay
The less time a tenant plans to stay in a property, the less concerned they’ll be with updates, but tenants planning to stay for three or more years will consider their rental to be more of a home and place great value in an updated kitchen and bathrooms. As the tenant profile shifts to longer rental periods, the better the ROI on remodeling. In your case, the tenant profile is more likely to stay for 12-24 months, diminishing the value of remodeling.
According to Joseph Aiken, CPA with Aiken & Company, the current tax code considers any capital expenditures on remodeling to be depreciable assets, meaning you can’t write off the cost of your remodeling in the year you spent the money, rather deduct it over a 27.5 year depreciation schedule.
My advice for investing in a rental property is similar to investing in pre-sale improvements. Fresh paint, quality floors, lighting, and a deep clean go a long way on a rental property without breaking the bank and can usually be written off as maintenance expenses on your taxes. Check out IRS Publication 527 for tax details on rental properties.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.
Everyone has flat screen TVs already so how about a more interesting Black Friday special? The ARLnow Press Club for free, to try out the daily Early Morning Notes email…
There’s not a whole lot going on in Arlington today, save for activity at local shopping centers, so we’re going to fast forward right to the top story countdown. Here…
Statues of Liberty gives thanks this holiday season and grateful for a few things this year.
It’s turkey time. Thanksgiving Eve is upon us and extra revelry can be expected at some local bars tonight, ahead of the holiday. Please be careful on the roads and…
The Optimist Club of Arlington is holding its 76th annual Christmas tree sale!
This year, the tree sale will be held at the Knights of Columbus (5115 Little Falls Road). The lot opens for sales on November 25th. The Optimist Club is selling small and large trees ranging from tabletop size to huge 14 foot tall trees! Wreaths, garlands, tree stands, and White House Christmas ornaments will also be for sale.
100% of all proceeds go towards helping Arlington County youth.
For more information, please visit the Arlington Optimists website at https://optimistclubofarlingtonva.org/.
Art House 7 is a small art studio in Arlington – offering instruction in painting, ceramics, sewing and more. We are looking for kind, dedicated people who love both creating and teaching.
Ceramic Teachers are needed to teach wheel-throwing to adults and 6-12th graders and to teach hand building to elementary grades. Classes have 3-8 students.
Drawing teachers are needed to teach either kids or adults. For kids, we offer cartooning, manga or traditional drawing. For adults, we only offer traditional drawing.
Painting teachers are needed to teach either kids or adults. We offer oil, acrylic or watercolor for adults or teens. All elementary classes use acrylic and tempera.
NCE’s Holiday Concert will bring the finest classical masterpieces and holiday favorites together for the whole family. The festivities begin with Leroy Anderson’s classic “Sleigh Ride” and “Chanukkah Festival”, music from the Nutcracker and by J.S. Bach.
Outstanding Young Artist