More Doors vs. Higher Cashflow

[Chris T.]

I am in the (good) situation in that one of our rental properties is in a very desirable and improving neighborhood.  It is an older house with a very basic interior compared to the recently rehabbed/new construction in the area.  The question I am debating is if it would be better to purchase an additional property (not in the same area as prices are now too high) or use those funds to improve the property in question so I can raise the rent to match the nicer rentals in the same neighborhood?

I am estimating that if I use the funds to improve the property, I could increase my rent $300-$400 and still  be at or just below average market rent for similar properties.  The benefits I see are I can increase cashflow without increasing the number of tenants (I self manage).  The improvements might also reduce some maintenance calls as well.  The increased cashflow would be what I would be expecting in cashflow from an additional property in the areas I have been looking.  The increased rent would pay back the improvement costs in ~2 years in which time I would then have the initial funds to go back to adding additional properties.

Just thought I'd seek the feedback of others here on BP and see if there are pros/cons that I might be overlooking.  Thanks.