The 5 Best Home Renovations to Increase Your Property Value
I want to talk about the five ways we can raise and jack up the value of your investment property, so you can make more money in your portfolio.
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We all know the three ways we can make money in real estate: cash flow, mortgage paydown, and appreciation. That’s the bread and butter of your real estate investing business.
But what if there was a fourth way you can make money in real estate? That’s exactly what I’ll be talking about today.
Here’s how you do it: smart renovations.
Which Renovations Are Worthwhile for Investment Properties?
So, the No. 1 thing we want to spend the majority of our money in our budget on is our kitchen—not surprising. That’s the hub of the home. That’s where the most people spend most of their time, which is why we really want to make it nice.
In the video below, I show you some clips of my past projects and kind of what we’re doing, what our style is.
What you want to do is use a light-colored kitchen (at least right now in 2019). That’s kind of what’s happening. We use white cabinets with a light countertop, as well. It’s very modern, very sleek.
If you’re doing a flip, you want to use a stone countertop. We’re also using a white quartz—again, super light, super bright. That’s what’s in right now. That’s what the people want.
It’s also a neutral tone, so it’s not going to offend anybody or turn people off. Everybody kind of likes it, and everybody can design their kitchen around a neutral white kitchen. So, that’s a recommendation I have for you, and spending all of your money here is a great way to really jack up the value.
For example, our average kitchen for a rental property (brand new cabinets, countertops, sink, taps, appliances, etc.) is around $8K to $10K on average. If we’re doing a flip, you know it’s probably about $12K to $15K, because we’re getting better quality appliances—fridge and stove and stuff. We’re spending a little more there, but that’s where the returns are really going to come.
Spending 10 grand in our kitchen, it’s going to add like $20-$25,000 to the value of the property. So, it’s very, very smart to put a lot of money here.
And if you don’t want to spend a lot of money, let’s say you’re redoing a home or you bought a property and your budget’s pretty slim. You don’t have the money to replace all the floors or all the baseboards or all the bathrooms, etc. At the very least, really make that kitchen pop, because that’s how you’re going to get the rental (or if you’re flipping, sell the property).
Spend all your money in the kitchen. Well, not all of it—but a lot of it.
The second place you want to spend it is—again—not really surprising.
The second place a lot of people spend a lot of time in homes is the bathroom. I recommend using double sinks. You’ve heard of his and her sinks—or his and his or hers and hers. Right?
We want to use double sinks. This is what really attracts the buyers and the renters. And again, make that color palette very light.
We typically use a white hexagon floor with a black grout. We’re using white subway tiles around the tub. We’re using a cool IKEA floating vanity in our properties—very trendy, very cool.
That’s the palette we use across all properties (even flips). You can see how important to me it is to have a really nice home.
However, I don’t advocate overspending on a property. But we do a lot on our properties. We always flip our rental properties top to bottom, because we want that high quality tenant.
I want someone who is going to stay and treat the home well. I want a family who’s going to stay for three to five years or more. That’s just my game plan.
I do that by doing these strategic renovations and really blowing my tenants’ minds when they come through the property or they see the property advertised online. I want them to think this house is this nice for this amount of rent?
That’s kind of the game plan. I want to have a boring business. That way, when I’m doing what I love, which is traveling—to Costa Rica, Hawaii, Bali—I don’t want to be getting phone calls from my property manager saying, “Mat, your tenant didn’t pay rent. They broke the toilet. They punched a hole in the wall.”
I don’t have those kind of tenants because of the value of renovations and the types of property we’re buying. Almost everyone in my properties always pays rent on time.
So far, guess how many times I’ve had a tenant not pay rent, I had to evict them, or they screwed me, etc.? How many times in nine years of investing and having 26 properties?
And it was very, very easy to get them out. It took longer than it should have, but they finally agreed to leave, we got the money, etc.
That was the worst experience I’ve had in the history of my portfolio. Again, it comes down to the type of properties we’re buying and how we’re doing the renovations.
Tangent over. Let’s get back to the third thing you want to spend your money on: flooring. This is also the order of importance, OK?
So, for flooring, I really like seamless floors. Something that’s a huge pet peeve of mine is when there is one type of flooring in the kitchen, another type of flooring in the living room, another type of flooring in the bedrooms, upstairs, etc. I hate that! I like one flooring throughout the whole house. It makes it seamless.
The house has flow. It seems bigger, it seems brighter, and that’s what you want when trying to sell a property or find a tenant. You want to make things look bigger, look better, than they are. So, we use a light-colored floor.
Again, in the video above, I show you some examples of what we do. It is a nice, modern gray floor—looks super real, super cool. It’s actually a crushed vinyl resin. It’s not even laminate. It’s like commercial grade. It is almost impossible to scratch (unless you really want to scratch it).
That’s what we want. We want good wear and tear materials in our rental. That way, they look great after three years, five years, six years. When I want to sell that property, the house should look almost the same as it did when we first did those renovations. So, we’re planning for the future and using smart materials.
As I always say, spend a little more on your materials because the labor is the same. If you buy a cheap, crappy laminate and put it down, it's going to cost the same for your contractor to put it down. If you're deciding between $25 or $30 an hour, if you use a better material, it's the same $25 or $30 an hour.
Spend a little more on the material, make it look cool, and make it stand up to wear and tear.
4. Feature/accent wall
The fourth thing I really like to do for our renovations is use a feature wall. We’re kind of getting into personalizing, which is not always a good idea. But again, we use a nice, neutral modern blue color. It really pops with the color scheme that we have: the light gray walls, the light gray flooring, the big baseboards. With it, that feature wall really pops.
And if my tenants want to paint over it when they move in? Fine!
It still separates my properties from the rest—which is the main reason why I use it.
When tenants are looking through dozens and dozens of properties online for which ones they want to move into or which ones they come and see (maybe even six properties in one day), they can’t really remember which property was what. They’ll remember mine, though, because of the feature wall. It will stand out in their mind of how nice it was renovated.
The last thing I want to talk about (although I could say a lot more) is curb appeal. A lot of people disregard this.
What’s a cool kitchen or bathroom or nice flooring if the outside looks like crap? You can’t have weeds growing over the windows or have the grass look terrible, etc. You really want to just pay attention. I don’t want you to spend as much as you did on the first areas I pointed out, but still. Pay attention to the curb appeal.
Cut the grass, take the garbage out, pull the weeds that are six feet tall, etc. Don’t spend a lot of money or a lot of time here—especially for a rental property. On a flip, though, we want to spend a little more time. For a rental property, just clean it up right.
You want the pictures to look good. It’s the first impression that your tenants have when they walk up to this property, so you want to kind of set the tone for when they walk into the house. Then, you blow their mind with your sweet renovations that I just shared with you.
So, that’s what I recommend. I hope you learned something.
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Which renovations do you believe have a high ROI?
Weigh in with a comment below.