As the owner of a property, you’ll be fully in charge of its renovations—which means you’ll be the one to spend the time and money making the renovations, and the one earning the benefits from them. If you want to maximize the profitability of your property (and limit your risks in the process), you’ll need to be discerning about which renovations you take on.
Generally, a renovation will be “worth” doing if it does one of two things:
- It makes the property more attractive to tenants. If your property looks better to prospective tenants, you’ll be able to fill your vacancies faster, your current tenants will be more likely to stick around for a longer period of time, and you’ll also be able to charge more rent. That means you’ll make yourself more profitable throughout the duration of your property ownership.
- It objectively increases the value of the property in the long term. Some home renovations will carry a return on investment (ROI) near 100 percent, which means you’ll increase the value of your home by almost as much as you paid for the renovation. Combined with even a slight increase in tenant interest, this could easily make the renovation “worth” doing.
That being said, which renovations are most likely to accomplish one (or both) of these goals?
The first thing most tenants will see when evaluating your property is the front of the house or building. The “curb appeal,” or aesthetic of the exteriors, is going to form their first impression and potentially make or break the deal. Tenants will be willing to pay more for a property that looks pretty on the outside—which means anything you can do to beautify the exterior will probably be worth it (especially since many of these upgrades are inexpensive). Invest in a fresh coat of paint for the siding if you can, and make sure to keep the lawn in order. Adding flowers and other greenery is a great way to close the deal here—and it won’t require much time or money.
According to HGTV, kitchen remodels are capable of returning up to 93 percent of your total investment—meaning your total out the door cost (once you sell the property) will be approximately 7 percent of what you originally paid. Kitchens are also a powerful selling point for prospective tenants, because they’re the main area for eating and socializing, and should be a beacon of cleanliness. New appliances, preferably stainless steel, can make your kitchen seem much more modernized, and enable you to charge more in rent. New countertops and sinks will also be beneficial. It may be costly, but it will eventually pay for itself.
The next area most tenants evaluate is usually the bathroom, where they’re going to spend most of their time cleaning up and getting ready for work. It might cost you a few thousand dollars to put in a new shower, toilet, sink, and vanity, but your prospective tenants are going to be impressed by the showcase here. Even if they aren’t fully sold by the new fixtures, they’ll probably be willing to pay more in rent because of it.
If your property already has windows that were built within the last decade or two, you probably won’t need to replace them. If they’re older than that, you can consider window replacement as one of the most valuable remodeling moves you can make. New, energy-efficient windows will be easier for your tenants to open and close, which can be a luxury compared to old, sticking windows. They’ll make the apartment more energy efficient, which means lower utility bills, and the double-paned glass will be able to filter out more sound (which is important for urban buildings). On top of that, new windows carry a high ROI for the overall value of your home.
A new roof will cost you a few thousand dollars, but if your roof is in questionable shape, it’s worth the upgrade. No tenant is going to spend much time evaluating your roof, but if you proactively prevent a leak, you could save yourself tens of thousands of dollars in future repairs—and you’ll increase the value of your home while you’re at it.
Heating and Cooling
No tenant wants to be excessively hot or cold, so make sure your unit is equipped with a solid heating and cooling system. If one component of this system isn’t working correctly, the repairs and renovations necessary to make it operational are probably going to be worth it. Otherwise, you’ll find yourself with a ridiculously high tenant turnover rate.
The aesthetics of curb appeal also apply to the color of the interior walls. A fresh coat of paint will make the interior of your apartment or home spring to life and seem more modern; it will also cover up any damage or marks left by previous tenants. Best of all, this is probably a “renovation” you can handle yourself, for less than a few hundred dollars of paint and materials.
Stained carpet or damaged linoleum can make even a respectable living space seem dirty and worn. Replacing those floors with hardwood or nice carpeting can instantly increase the value of your home. You’ll likely spend a few thousand dollars here, depending on the materials you choose, but the increase in rent prices will probably have it paid for within a year or two.
Any Ongoing Maintenance
It’s also worth mentioning that any ongoing maintenance or repairs you need to do to make your tenants happy and your property livable are worth making. They’re bound to spring up from time to time, and they’ll likely range from mildly annoying to painfully expensive, but they’re always worth taking care of proactively to prevent any further damage and protect yourself from any legal issues.
There are many home renovations, repairs, and upgrades that can simultaneously increase the value of your home and increase the rent you’re able to collect from tenants, but it takes a lot of work to maintain. If you’re interested in getting a little help, make sure to contact Green Residential. We take care of your property for you, so you can sit back and keep collecting rent, hassle-free.