Upgrades and energy efficiency impact on rent

18 Replies

Hello everyone,

Would you please share any data you may have or any information based on your experience:

1. Do upgrades such as quartz countertops in the kitchen and bathrooms, stainless steel appliances command higher rent? If yes, by what percentage on average?

2. Would investing in energy efficient upgrades attract higher quality tenants and can those upgrades justify a higher rent? For example: energy efficient appliances, blow additional insulation in the attic, install a hybrid water heater. If the rent can be increased based on energy efficient features, what percentage of increase would be possible?

Thanks in advance.

It depends on your market and the condition of the property.  A high-end market may require some of these upgrades.  A marketing plan for a "newly renovated home" may also require them.  One-off upgrades, like a high end countertop in a ho-hum kitchen probably won't do anything.  Low-to-mid market probably won't see much of a benefit in rent.  You probably will see a benefit in shorter vacancy time if your property has a great "Wow!" effect.

In general, tenants don't pay attention to high-efficiency anything.  They want heat, hot water, air conditioning, etc.  They expect it to be there and the air is warm/cold whether it is efficient or not.

I don't have any market data to share with you, unfortunately.  It seems like it would be difficult to get such data as finding identical properties and tenant prospects at the same time, situation, etc.

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@Andrei Zamfir ,

There are a lot of variables to this questions and scenario.  Things to consider:

  • Utilities:  Who's paying the utilities: landlord or tenant?  I don't think there would be any value added for the tenants to save a few dollars month.  If landlord pays, perhaps over the long run it will pay off.
  • Market:  What does the market dictate?  If you want market rents then you need to meet market conditions.
  • Alternatives:  Are there more affordable solutions than Quartz that will still give off a rich appearance?

Here are some points to consider financially:

  • Cost:Lifespan:  What is the cost to replace this item and over what period?  Quartz is going to hold up a lot longer than p-lam counters.  You might have to replace p-lam every 3-4 years to maintain a nice appearance.
  • Absorb Utilities:  If you invest in an asset that reduces expenses, make sure you benefit from that reduction!  If it's solar, then raise rents and include electricity.
  • Replacement/Maintenance Costs:  Will higher-end or special equipment require more preventative maintenance?  That's additional time and money.

@Kenny Dahill

Brilliant advice! Thanks! The idea of raising rent and including electric if going the energy efficient route is very appealing.

One of the reasons for quartz was the durability. Still, had no idea laminate counters only last 3-4 years when renting.

Don't know what kind of junk laminate you're talking about, but the laminate counters we've installed lasted over 15 years (and counting). 

With added insulation, you could save 25-30% on heating and cooling bills. It's not just a few dollars, no matter who is paying. Have an energy audit and they will tell you if updating the insulation will be worthwhile. Plus, they will let you know what rebates you are eligible for.

On the one hand, most tenants only care about cosmetic stuff... new paint, floor, etc. These get you the best rent for the buck.

Then they get their summer electric bill, and they b*** about how high the cost is because the central a/c is old (but still gets cold enough). It's a dilemma I must deal with- lower the rent a little because they have higher electric costs.

On the other hand, if you advertise energy efficiency, you will attract a certain type of tenant.

However, for misers, they may wonder if they would save more money by paying a higher electric bill vs higher rent.

@Andrei Zamfir I blew extra attic insulation on every rental to save wear and tear on my older hvac units. Tenants have commented on lower utilities than their previous places. I think it gives them less reason to move as no complaints.

@Marian Smith this makes perfect sense. In my area, blowing extra R30 insulation in the attic of a 1500 sq ft home runs $700-$900. Had not considered this issue from the perspective of wear and tear on the HVAC. Will definitely do the extra insulation part of the energy efficiency approach. The ROI seems to be substantial for both the tenant and the landlord. Win win!! Thank you 🙂👍

@Andrei Zamfir

One school of thought on upgrades is that it is only justified if it commands an increase in rent. This is probably true in lower class markets.

Where I operate I often have to upgrade dated yet functional units just to stay competitive with my competition and keep my rents at market levels.

I also believe (anecdotally) that having shiny units decreases vacancy time between tenants and attracts a higher quality applicant.

@Max T. Thanks for the words of wisdom. Yes indeed, having lower vacancy is a major benefit that can more than cover the initial cost of the upgrades.

In my area, upgrades are not expected although I imagine they are welcomed. Who does not like nicer countertops and appliances.

Is there anything cost wise in between laminate and quartz?

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@Andrei Zamfir

I use granite when changing countertops. Cheaper than quartz and only a bit more than laminate. Also super durable. Have never had damage done to granite before.

Very few tenants will give any attention to high efficiency items when they are looking....its going to be very low on the list of items that influences their choice.

Home buyers.... that's different. So when/if you change out items, going more energy efficient may help you in the long run when you sell....but when renters are looking, they rarely care about that stuff.

Or, you can make the place very efficient, market it that way, offer garden space, promote bicycling (bike storage?) and recycling, and then you'll get green-minded tenants. That's what we do. Maybe even put in a car charger? 

Our tenants stay for many years and take excellent care of the place. Don't know if your market has many tenants like this. Ours certainly does.

@Tanya F. I’ve considered the perspective of a tenant who values energy efficiency. Some of them may be electric car buyers, so having the setup in place would be a bonus.

For my area, I think the answer for now lies somewhere in the middle. Insulation in the attic is a minimum, very cost efficient and yields good ROI. Thanks for the input.