As a property owner, your investment is critical to your financial future. To maximize your investment, you need to master two key skills: protecting its value and systematically growing your equity.
Continue reading below as this guide will help clarify what is normal wear and tear after 2 years, introduce you to the powerful strategy of house hacking, and give you the dos and don’ts on maintaining and increasing the value of your property in the long run.
Knowing what is normal wear and tear after 2 years can protect tenants from unjustified security deposit deductions. It protects you from unjustified repair costs and ensures you handle security deposits fairly and don’t get involved in any lawsuits.
Normal wear and tear is the gradual deterioration that occurs through standard use, even if a tenant is careful. Damage, on the other hand, is produced through abuse, misuse, or lack of upkeep of the premises.
After an average two-year tenancy, you can look for the following cases of normal wear and tear:
On the other hand, examples of what normally constitutes damage are large holes in walls, broken tiles, pet stains on carpets, or burnt-out burner units of stoves from misuse. These are chargeable against the tenant.
Image Alt Text: Couple Standing In Front of Real Estate Agent
Many first-time investors want to learn how to house hack to reduce their living expenses. House hacking is a fantastic real estate strategy that involves living in one unit of a multi-family property and renting out the other units or renting extra rooms in a single-family home.
The goal is simple: Have your tenant’s rental income pay for a considerable amount of your mortgage and housing costs. This drastically reduces your cost of living, therefore allowing you to gain wealth quickly.
Here is a step-by-step guide to get started:
The most common starting point is a multi-unit property (like a duplex, triplex, or fourplex). You live in one of the units and rent out parts of your home. You can also rent rooms in a single-family dwelling, or even finish a basement for a separate, rentable unit. Your choice will depend most on the local market, your budget, and your comfort level with sharing your space.
One of the best perks for first-time investors is access to owner-occupied loans. Many programs (such as the FHA loan) allow very low down payments, sometimes as little as 3.5%. When a buyer applies for these, they can often have a percentage of the income potential from the rental income of the other unit considered by the lender. This allows them to qualify for a higher loan amount.
Before you buy, be a smart investor. Analyze the financials of the property at length:
Since you are living on site, you can immediately assume the landlord's position. This is convenient but requires professionalism. Tenants should be screened thoroughly, with background checks, credit checks and rentals in writing that are compliant with the law.
You should respond to maintenance requests fairly quickly. It is necessary for you to set clear boundaries from the very beginning in order for the rest of the experience to go smoothly.
Proactive maintenance is the differentiator between an asset that depreciates and an asset that appreciates. As a landlord, your focus should be about preserving the condition of your property while avoiding costly emergency repairs and making strategic improvements that add long-term value and desirability to the property.
Instead of waiting for something to break down, create a seasonal checklist to stay ahead of problems.
You don’t have to do a complete renovation to get a higher market value out of your home and see higher rents.
Start documenting everything and start creating a separate folder for each property. This folder should contain a record of all repairs, warranties, and professional inspections. Having this record will prove invaluable in demonstrating maintenance to prospective purchasers, supporting rental increases to tenants, and simplifying the income tax preparation work.
Having a good network of plumbers, electricians, and handymen will keep you from paying too much for emergency services. Building a good relationship with reliable contractors can guarantee that repairs are done right the first time.
Overseeing personal property investment will take some time. Learn about wear and tear to maintain your asset and be fair to your tenants. Look into ‘house hacking’ to lower your overhead and increase property equity.
Lastly, keep the ball rolling with proactive maintenance of the property to maintain and even enhance the value of the real estate.
