REHABBING THE INSIDE OF YOUR INVESTMENT PROPERTY
When purchasing an investment property with a Self-Directed IRA, the IRA funds will take care of any necessary repairs. Sometimes, investors like to use their self-directed IRA funds to pay for improvements or upgrades, making the property look more lucrative and attractive to renters and buyers.
This process is simple! The contractor(s) to invoice your self-directed IRA account. This invoice is emailed or faxed to us with a DOI Form and the IRA will pay contractor directly. The DOI form, also called a Direction of Investment form, can be found on our website 24 hours a day.
If it’s an ICO account involved in the transaction, a self-directed IRA with checkbook control, the contractor simply invoices the LLC and the account holder can immediately write a check from the LLC’s checking account.
If the self-directed IRA is investing in high-end or luxury areas, higher end upgrades and improvements are typically needed.
Here are some improvements and repairs to consider when investing in a rental property.
- Paint – Walls get damaged! That’s just the way it is! A fresh coat of paint can really help the property have a cleaner look. The least expensive way to paint is to use the same color throughout the house. Whenever paint goes on sale (or even better, on clearance!) buy in bulk. Buying in bulk will not only help with paint jobs for new investments, but will help with touch-up jobs as well. When choosing a color, do not add too much personality to the paint. Light, neutral colors that match flooring, cabinets and countertops are perfect! You can choose specialty paint with anti-bacterial qualities to reduce the risk of surface mildew and mold. Here are some other paint definitions that may help:
- Matte – This finish is most popular on walls and ceilings. It has a minimal shine. The downside is that doesn’t take much to show fingerprints and scuffs.
- Semi-gloss – This finish is best used on trim and doors. It can endure minor bangs and scrapes. Plus, it’s easy to clean. Available as an acrylic or enamel-based paint.
- High-gloss – This finish gives a very shiny look. It is the most durable. This finish can be used in the interior and exterior trim, as well as walls and doors. It’s available as acrylic or enamel-based.
- Satin – This is velvety finish and is more durable than matte finish. This paint is popular for high-traffic areas.
- Ø Carpets – Want to see a potential renter or buyer’s face scrunch up quickly? Show them a stained, smelly, and damaged carpet. Carpets are important! If you are going to allow pets in your rental consider using a lower grade carpet and keep a budget to replace it often. If no pets are allowed, try spending a dollar or two more per yard. Upgraded carpet has a longer life expectancy. Darker, multi-colored carpets can help hid stains. Alternates to installing carpet are laminates, vinyl or salvaged wood, which are cheaper and easy to install. If you something nicer, use porcelain tile. A darker grout with porcelain tile helps hid staining.
- Ø Layout – When dealing with a smaller house, sometimes knocking down a wall can really open up a room. The most common wall to demolish is the one that separates the kitchen and the dining room or the kitchen and living room, creating one big, open room. Another creative idea is to turn a small closet into a half bath. Instead of knocking down walls, some people open up the doorways, which is cheaper. Doorways around 32” wide appeal to renters with disabilities or those who have family members with disabilities. Doorways should be around 36” where ever the wheel chair or walker needs to make a turn.
- Ø Appliances – Appliances can get dings in them pretty easily, especially when moving in or out. Try appliance paint as an inexpensive cover-up. Old appliances cost more money to operate than newer energy and water saving appliances, so it may be time to upgrade. Check out the local stores for appliances that have been returned undamaged, or check out companies that refurbish appliances with a warranty attached.
- Ø Countertops– If it’s time to replace countertops, check out Corian by DuPont or a durable quartz. For a high-end look use Quartz Kitchen Countertop, this outlasts laminate. Granite is beautiful and a popular choice, but it can be high maintenance. The polyurethane or stone wax finish gives granite a great shines, but its prone to staining, it can be chipped or cracked and is not so easy to repair.
- Ø Cabinets – Replacing cabinets can be costly! Here are some simple repair tips. First, fix or replace any broken hinges. If there is a lot of chipping or denting, try painting them. Darker colored or darker stained cabinets give more luxurious look. You can also add handles for a classier look.
- Ø Light fixtures, Faucets, Towel Bars and Other Accessories – New and matching fixtures can really make a room go from drab to fab! Single lever, ADA-Compliant faucets appeal to renter with arthritis. Lighting that has a low glare helps people with vision problems. Rocker style light switches are not only less expensive but easier to use.
- Bathrooms –If you don’t think this room is important, ask anyone with daughters! Simply buying a fun or stylish shower curtain can make a big difference. Shower doors increase the value but make sure they are spotless when showing a property. Adding or upgrading the floor can add value to your investment. Ceramic, porcelain or natural stone will give you the most bang for your buck. Wood, carpet and laminates as they are easily water damaged not recommended. It’s time to upgrade if you see these in your rental. Spa shower heads can really catch a renter or buyer’s eye. Some are not that expensive, but add great value. Replacing a sink can add a lot of style and make the bathroom more appealing and add space. Installing balance bars by the tubs and toilets and having a high, comfortable toilet seat helps appeal to handicapped or older tenants.
One of the many great things about using your self-directed IRA to invest in a rental property is that you do not have to come out of pocket to replace, repair or upgrade your investment. Your self-directed IRA handles it all!
The bigger advantage is that your self-directed IRA reaps the rewards of all this hard work by receiving all profits. From the rent to the sale of the property, it’s all TAX-DEFERRED!
The goal when opening a self-directed IRA account is to build a retirement nest egg faster and bigger than stocks and bonds can offer. Real Estate is a skillful way to get that accomplished and we are here to help!
If you have any questions, please feel free to contact me directly or you can visit our website (www.Accuplan.net) and chat online with one of our knowledgeable IRA Specialist.
Jaclyn M. Grella