Once you’ve had a property for a while, whether it is your own home or a rental you own, there are bound to be some improvements that need to be made. Some are necessary maintenance items like a new furnace or roof, while others can be more cosmetic, like replacing carpeting or outdated appliances. Where you get your real value, however, are in the capital improvements.
Capital improvements are defined as 1) renovations that add something that was not already there, 2) upgrading or adapting an asset for a new use, and 3) those items that will extend the “useful life” of the property for years to come.
Capital improvements can include:
Bathrooms, additions or upgrades
Heating and Air Conditioning upgrade
Additional electrical outlets
Tax Savings of Capital Improvements
Capital improvements can offer tax relief as well as they can be deducted over a set depreciation schedule. They differ from repairs, which is the maintenance required to keep the property in good working condition. Repairs can also be deducted, in the year that the repair was completed. Please check with your tax professional for details.
Consider the Renter’s Point of View
You must take into consideration how renters’ needs change over the years. Not only does new technology play a factor, aesthetics do too. Tenants notice things like avocado appliances, gold shag carpet or stuck windows. And they pay attention to energy savings, looking at old appliances, outdated HVAC systems and leaky windows as potential money pits.
With capital improvements you will be able to command a higher rent amount and get better quality tenants who will respect and maintain your property. Plus, if you decide to sell your property, you will be able to ask a higher selling price.
As your property manager, Propman Property Management can act as your advisor. We can note items during our regular inspections and make recommendations we believe will either save you money or make you money on your rental home. We will also look for areas for potential repairs, hoping to fix any problems early before they become disasters. Propman can even help you set up a fund for repairs and improvements, setting aside a portion of the monthly rent towards these expenses.
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