Updating your Home vs Updating your Investment Home

We bought our home in July of 2012 and when we bought our Investment Home learned very quickly that many of the decisions made were going to be different than if we owned a Home.  Sound a little confusing, here are a couple definitions to help:

Home-This is the house that you buy where you see your kids playing in the back yard, adding your man cave to the basement, and imagining what your grand piano is going to look like in the family room.  Every decision you make is for the sole purpose of your happiness and hopefully your budget.

Investment Home-This is the house that you buy based on if the neighborhood is up and coming, rental income, and the amount of work needed versus wanted to make the investment house sparkle.  Every decision you make should be for the return on your investment.

We were faced with difficult decisions and expensive ones at that.  Initially we had a $50,000 budget to renovate (FHA 203K Loan, which includes the renovation loan in your mortgage), which is a lot of money, but when the home is a foreclosure built in 1912 with 2 floors, a garage, a semi finished basement, and an outside area, you find out that many of the build your dream house attitude become a Home vs Investment Home decision.

In our decision to buy a multi-unit property in Chicago, we were faced with an immediate Investment Home decision.  What floor do we want to live on?  When you are buying a Home, this decision would never come up, because you can live on whatever floor you want, if you want to setup your bedroom on the first floor next to the TV room because you watch ESPN non-stop then go right ahead, all of the floors are yours.

When buying an Investment Home, we had to ask ourselves multiple questions, like:

  • What floor is nicer and needs less work?
  • Would we want the nicer floor or fix up the other floor to our specifications?
  • Top floor or the bottom floor?
  • 3 bedrooms or 2 bedrooms?
  • Central Air or Radiator Heating?

These were some of the questions we faced early on, what decisions would you have made?  Don’t read on till you make your decision.

In an Investment Home all of our decisions were made with an investment state of mind.  We decided to go with the 2nd floor even though we were told this is not traditional of most owner occupied homes, because it made more financial sense.  We did so because we are young and don’t mind going up a few stairs, this allowed us to have 2 bedrooms instead of 3.  Our unit required a little more fixing up and possible future renovations, but we can do that at any time.  If we would have chosen the first floor unit the only time updates or fixes can really be made is during vacancy, something that investors certainly want to avoid.  The decision to live in the unit with 2 bedrooms was also made because we would make more rental income from a 3 bedroom than a 2 bedroom and more rent means a faster pace to financial independence.

The decisions you make with an Investment Home can be the exact same as your Home in many situations.  For example our boiler went out last winter and a replacement was needed as soon as possible.  Whether this would have been for our Investment Home or Home, the boiler we bought would not have changed, the only factor that had a major effect on our decision was the quickness and time allowed for the replacement of the heating system.  If for example the boiler would have been for our Home instead of Investment Home we might have dressed a little warmer in the house and been more flexible on the time frame for installation or even attempted a DIY installment of the boiler.  When the Investment Home needs a fix and it involves those that rent we have decided to use our trusted contractor, other items such as landscape or painting is a DIY project waiting to happen.

My parents are in town and since my Dad misses grass, since he now lives in Arizona, and loves to do landscaping, I saved a small project just for him to do almost whatever he wanted.  Before he started to do the work, we developed a game plan so we were on the same page, this is where the Home vs Investment Home came up again.

Home-Let’s plant some tomatoes, I’ll put in all the tomatoes with the wire cages and in no time you can have fresh tomatoes right off the vine.  That sounds great I want my own mini-garden.

Investment Home-Anything that we plant needs to be as hands off as possible, if we buy plants make sure they are perennials, plants that come back year after year (Hopefully).  Another example of hands off is we don’t buy the regular mulch we instead buy the rubber mulch which in the long run saves time and money.

In the end, we went with the Investment Home choice, because that’s what we have and that’s the best decision for our bottom line. Down the road when we are less focused on Financial Independence and maybe even live in a Home that we can focus more on the gardening, man cave, and where the grand piano will go, the decisions will be different.

Do you own an Investment Home?  Do you still make Investment Home decisions even though you own a Home?



14 Responses to “Updating your Home vs Updating your Investment Home

  • Our house has a studio apartment built into the basement and we’ve been renting it for three years now. I will always prioritize the rental unit because it has actual ROI, while the rest of our house is for our enjoyment. It’s also easier to invest in the rest of our house but we can only renovate and change the area between renters.
    DC @ Young Adult Money recently posted…8 Ways to Make Money BloggingMy Profile

    • EvenStevenMoney
      3 years ago

      This makes a lot of sense to me, I think you have a little more Home in the aspect for the surroundings since you have 75% or more of the property. I think more people should do what you did, it makes financial sense.

  • I have bought foreclosures for my last two houses. I did this for a couple of reasons, but the potential for a bigger return when I sell and a cheaper price upfront were major factors. I don’t mind doing some cosmetic work as long as the structure and large systems (electrical, plumbing, HVAC) are in pretty good shape.

    I still try to think of what happens when I sell before I pick my flooring or a paint color.
    Vawt @ Early Retirement Ahead recently posted…Travel Rewards UpdateMy Profile

    • EvenStevenMoney
      3 years ago

      Spot on with how we think. I wouldn’t paint the walls orange because it’s going to detract potential buyers and renters, many of the things we do look ahead into the future for our investment.

  • We have a rental home and we have done a lot of updates with the investment home mindset. We removed the wood mulch and put in rock. Installed new gutters with gutter guards prevent the need for cleaning out the gutters. We still need want to replace the wood deck with a composite one so we don’t have to stain and seal any more….that will be a future project.

    • EvenStevenMoney
      3 years ago

      I like the idea of rocks, definitely keeps it simple and affordable. I really like the idea of a composite deck, we have toyed with putting something like this in the back instead of the grass that is currently there now, but it makes sense. Have you gotten any quotes on the deck yet?

  • I take a completely different view when it comes to updating my primary home vs. the rental property. Primary home is more about look, feel and my personal tastes. The rental is more about appealing to as many others as possible, practicality and of course cost. Luckily here taxes work well for an investment property…….a major reno on an investment can be capitalized and added to the cost of the property (which decreases the gain when it’s sold) – none of that is available on a primary home
    Dan @ Our Big Fat Wallet recently posted…Banking Signup Bonuses: Easy Ways to Earn CashMy Profile

    • EvenStevenMoney
      3 years ago

      All good points, it’s interesting to see how minds switch when they own a home and a rental property, money certainly is a factor.

  • We own a rental house, but it’s occupied by someone we know. That said, we definitely make different decisions for that home than we would for our own. The biggest thing is having the urgency you talked about to make repairs, instead of DIYing them or even postponing them if they’re not critical. But even with our primary residence, we’re not sure we’ll stay forever, and so if we make any updates, we’ll go with what will appeal to more buyers, rather than what would be super personal to us. We had a lot of success getting a high price for our condo in the city a few years ago, by making design choices that would appeal to the most people (neutral colors and stainless steel appliances, to name a few choices — we would have chosen differently if it was just for us!).

    (P.S. We’d LOVE if you’d take off the requirement to reload the page before commenting on a post. Seems like it’s an unnecessary step when you have the “I’m not a spammer” checkbox.) 🙂
    Our Next Life recently posted…planning for early retirement means living a double lifeMy Profile

    • EvenStevenMoney
      3 years ago

      That makes a lot of sense even in your primary residence to appeal to the masses, especially if you plan to move in a few years rather than keep the place to you are old and gray.

      Thanks for the request, I will look into it…..I actually didn’t know it was happening so good to know.

  • With several rentals, I always allocate the money where I get the most return. My own deck at my place is a wreck, and needs to be replaced. It is functional, but barely.

    I have replaced several decks at the rentals. They make more money than my own home…

    Everything in a rental needs to be industrial strength, but cheap. Low maintenance. Think about how this improvement will lead to a faster turn between tenants, less expense later, higher rents or faster renting.
    No Nonsense Landlord recently posted…April – May 2015 Rental Cash FlowMy Profile

    • EvenStevenMoney
      3 years ago

      I like that you added industrial strength and low maintenance, couldn’t agree more.

  • I’m a bit different. I owned an investment home in Michigan when the economy tanked and things didn’t work out how I expected. I’ve soured own owning any kind of home until recently. I’ve actually rented out of necessity the last few years since I moved out of the country and wanted to stay in apartments until I was sure of where I definitely wanted to be. I’m in the Dominican Republic and I’m now happy in the 3rd city I’ve lived in within the country and now I plan on building a HOME. I won’t have to worry about anything but living in it and enjoying it.

    • EvenStevenMoney
      3 years ago

      Renting certainly avoids any of the expenses usually spent on the Home or Investment Home, but it did give you a chance to see the other side on what was updated. Good luck on your future HOME:)

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