7 Ways to Increase Rental Income by Renovating

Photo by Igal Ness

Regular people make home improvements for a more comfortable lifestyle, but not landlords. We undertake property renovations with one goal in mind—to increase our income stream and overall gains.

Whether the returns are from charging higher rent or growing the property’s value, upgrading a property is a sure-fire way to maximize the rental income you make… if you do it correctly.

Rental investors who go too far with home renovations are only digging themselves into a hole. When prospective tenants can’t justify the jacked-up rent, they'll just move to another home that has more reasonable monthly rent. You’ll also likely struggle to find new tenants, forcing you to lower the rent and operate at a loss.

So, what’s the secret to renovating so you can increase the monthly rent? Well, today we’ll discuss how to ensure that the improvements add value and will actually make you more money.

Know What Your Tenant Pool Wants

Tenants are looking for a great place to live. This includes the quality of the neighborhood, the structural soundness of the property, and the features and amenities that the property provides.

However, not all tenant pools are looking for the same thing. Depending on the location and demographics, potential tenants may be looking for an affordable 2-bedroom home with decent features or they may want a sizable 4-bedroom residence with a yard and swimming pool.

One way for you to determine what the tenants want is by taking a look at your competitors. Which ones are attracting more tenants? What do they have that your property doesn’t?

You can even ask around the neighborhood to see why a certain individual or family picked their home. What was the deciding factor for them? What were the deal-breakers that led them to turn down other rental options before?

Only when you’ve assessed the tenant pool can you create an action plan. Then you’ll be fully equipped to renovate your rental property according to the “customers” themselves for the most value-adding upgrades possible.

7 Areas to Focus on in a Renovation

Once you know what the tenants are looking for, it’s time to go through the list of the most common things that renters will gladly pay more money for. Fix these, and you’ll have a rental that attracts the best tenants and outperforms your competitors.

This list isn’t exhaustive and might not include some amenities or features that may apply to your neighborhood, but it’s a great place to start evaluating your renovation plans. Here are the 7 things to improve during renovations:

1. Replace What’s Broken: Your first priority is replacing or fixing anything that’s broken. This may include faulty appliances, broken light fixtures, malfunctioning locks, or seemingly insignificant leaks. Simple fixes aren't as expensive and can significantly boost the quality of your rental.

2. Clean or Update Flooring: See how you can improve the flooring without the expensive task of replacing it completely. You can hire professionals to sanitize carpets, polish hardwood floors, and remove grime from every inch. Even “less appealing” flooring options, like vinyl, ceramic, and laminate, look much better when they are spotless.

3. Refresh the Walls: A fresh coat of paint will always do the trick. It’ll make the home feel brand new and show you put effort into maintaining the property regardless of age. One tip is to stick with neutral colors, but don’t be afraid to see what’s on-trend or preferred by prospective tenants.

4. Update the Kitchen: Renters are always attracted to homes with great kitchens. The renovation doesn’t have to be pricey, either. You can just put on a fresh coat of paint, a simple backsplash, replace cabinet doors and handles, or throw in some new appliances that renters won’t usually expect.

5. Brighten Up the Bathroom: Bathrooms are just as important as the kitchen—and renters’ standards are just as high. Unless your rental is distressed, you can simply replace shower curtains, swap out shower heads, install new fixtures, and add a bigger mirror. That way, you will impress prospective renters immediately.

6. Add Parking Spaces: If your rental is in a high-density area, add parking spaces to increase the value of your property. The closer you are to the city, the more these spaces will be highly sought-after by renters. One way to do this is to add a carport or create a driveway—anything that will assure that parking won’t be a daily struggle.

7. Add Storage Areas: Tenants want to picture themselves living in the home, which means limited space for their belongings is a deal-breaker. Drop by budget-friendly stores, like Ikea, to add wardrobes, cabinets, and other storage space without breaking the budget.

Heightened Lifestyle = Heightened Rent Amounts

The main idea is to ensure that the renovations you make are things that your tenant pool will want. You can’t just add a sauna or a pool and expect to make your money back in a few months. Instead, focus on things that truly add value to the property and that elevate the entire home.

As long as you have a firm grasp on what tenants really want, you can be confident when you renovate your rental property that new tenants will actually pay a higher monthly rent. Then, you’ll make back your investments in the many years to come.

Got any other tips? What’s one special feature that you find attracts the most tenants?