Want to lower vacancies, increase rental rates, or both?
Renovating your rentals might be the best thing that’s happened to your portfolio since sliced bread.
That doesn’t mean you should turn your Class C properties into the Ritz-Carlton. Certain renovations are worth more than others, and not knowing the difference between what’s worthwhile and what’s superfluous can end up costing you big time.
Whether you’re aiming for higher rent or lower vacancy at a building you currently own, or you’re planning a few steps ahead for a fixer-upper you intend to buy, here are the top renovations you should — and shouldn’t — consider when it comes to getting the most bang for your buck.
Adding a Bedroom (If Legally Possible)
If your property already has 4+ bedrooms, you probably won’t get a ton of ROI for adding one more. But turning a 1-bedroom into a 2-bedroom, or a 2-bed into a 3-bed, can bump your rental listing up into the next pricing tier.
Obviously, apply for a permit before starting the job, and work with the inspector to make sure your room is up to code. In Atlanta, GA, this includes having a ceiling height of at least 7 feet, a closet, a method of egress (like a window) and a dedicated, securable entry.
(If you hire a general contractor, he or she can help you through this process; in some locations, only GCs and owner-occupants can receive permits. Check your local laws.)
Bathroom & Kitchen Renovations
Bathroom and kitchen updates don’t just sell houses; they also “sell” rental properties.
A modern, up-to-date bathroom or kitchen can give your property a competitive edge. You can redo these rooms without spending a ton of money. Resurfacing the cabinets, adding new fixtures and updating the paint or flooring can make a big difference.
If you need to replace the appliances, opt for black appliance models, which often cost the same as white appliances, but are perceived as higher-quality. You can also mix-and-match stainless steel and black appliances, such as installing a stainless steel stove in the same kitchen as a black dishwasher.
Adding an Extra Bathroom (Sometimes)
Renters often prefer maximizing their bathroom space, especially if they’re sharing the home with either roommates or their children. Adding an extra bathroom proportionate to number of bedrooms in the home can make your listing much more appealing to potential renters.
Not only does hardwood look more modern than carpeting, it’s also easier to clean, and it relieves tenants from the risk of losing their security deposit on accidental spills. (Of course, they may horribly scratch the hardwood, but that’s another story.)
Flooring outlet stores often carry basic hardwood options at reasonable prices. If this is still out-of-range relative to the neighborhood and price point of the home, either look at bamboo flooring (which is cheaper) or buy heavier-weighted, dark carpeting, which doesn’t show stains or wear as easily.
If it’s not readily available, providing a garage, carport or extra-wide driveway can be a big perk. A full garage is obviously a sizable investment, but a carport can be a budget-friendly alternative.
Extra closets, built-in shelves and wardrobes can make even a smaller property seem able to accommodate a renter’s lifestyle.
Don’t underestimate the importance of good curb appeal. Plenty of renters have made snap decisions on a property based solely on how it appears when they first pull up. Make sure your siding is in good shape, your landscaping is maintained and your walkway is clear. A poorly-kept exterior can make renters worry about how likely you are to address any repair needs they might have while living in your property.
A Basic Spruce-Up
Lots of easy, inexpensive cosmetic fixes can make a big difference in how well your property shows. This includes repainting, replacing old or worn-out blinds, changing out yellowing outlets and outlet covers and putting fresh caulk in the bathrooms.
Waste of Money
High-end upgrades won’t net you a higher rental income if they’re not in keeping with the other properties for sale in your neighborhood. Renters in ritzier, Class A areas may expect all the bells and whistles, but Class B renters are less likely to pay more for luxury features.
Materials That Won’t Wear Well
A dark granite countertop may look nicer, but it can chip and scratch more easily than resilient materials (or lighter colors that hide scratches). Renters come and go, so if you’re going to purchase something, make sure you can get as much use out of it as possible.
Replacing Things That Can Be Repaired
You can re-face kitchen and bathroom cabinets for a fraction of the cost of installing new ones. You can re-seal decks and patios — using 2x, 4x or even 10x sealant – rather than demolishing your current structures and building new ones. As long as something is working properly, consider fixing any issues and sprucing it cosmetically before spending the extra money to replace it altogether.
The major takeaway: some renovations will improve your ROI more than others. Consider your options carefully, and when in doubt, speak with a trusted agent, mentor or mastermind group about your next steps.
Investors: Which renovations do you find give you the most value? What about the least?
Be sure to leave a comment below!