What improvements are profitable for rentals?

Member since 2020 · 89 posts · 45 votes

How do you evaluate what improvements are profitable for rental units?

Assuming everything is repainted & clean, what is a good framework to understand the impact of:

-new kitchen countertops

-bathroom updates

-landscaping

-etc

What are some renovations you’ve done that have paid off?

What was a waste of $$?

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Anthony Vicino

Investor · Minneapolis, MN · Member since 2017 · 95 posts · 130 votes

A lot of the value you can charge for will be dictated by your local market.

For us, with Class B and C assets, we see the most bang for our buck with flooring, appliances, cabinets/countertops, fixtures, and paint. The areas in particular to pay attention to are kitchens and bathrooms.

Avoid the renovations that are invisible to the tenant or that make the unit "too" nice (no need for granite countertops if none of the nearby competitors have the same).

A great way to determine market baseline is to go visit comparable properties renting at market rate to see what the generally accepted standard is in your area.

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Anthony Vicino
Investor · Minneapolis, MN · Member since 2017 · 95 posts · 130 votes
6y
A lot of the value you can charge for will be dictated by your local market.
For us, with Class B and C assets, we see the most bang for our buck with flooring, appliances, cabinets/countertops, fixtures, and paint. The areas in particular to pay attention to are kitchens and bathrooms.
Avoid the renovations that are invisible to the tenant or that make the unit "too" nice (no need for granite countertops if none of the nearby competitors have the same).

A great way to determine market baseline is to go visit comparable properties renting at market rate to see what the generally accepted standard is in your area.
20 Reply
Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6y
@Charlie Anne
It depends on your property and area. Look at other rentals in your market, how are they finished. If your utilizing the BRRRR method, the appraised value is important. Kitchens and baths always give you a great return. You want a clean property. No maintenance to be done. It's 100% ready. Don't overdue the rehab. It's all based on your market area.
1 Reply
Heather O.
Specialist · White Rock, British Columbia · Member since 2017 · 99 posts · 34 votes
6y
Excellent questions with a plethora of answers because it depends.
No hard and fast rules. You'd think paint is inexpensive and always worth it but the new tenant may repaint.
I agree with Vicino.
1 Reply
Account Closed
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
I managed 25 units in a 26 unit building in Silicon Valley for many years. We mainly rented small studios. They were really bare-bones, but clean and well-maintained - with cheap carpet put in new for every tenant.
The one thing applicants wanted more than anything else - and these units didn't have washer/dryers, disposals, dishwashers, bathtubs - which nobody complained about - was hardwood floors.
If the only thing I ever changed was convincing the owner to put in hardwood flooring - or anything similar that just wasn't carpet but was similar to hardwood flooring, like laminate - I could have increased rents significantly.
But, I'm telling you they don't care about dishwashers or counters or bathtubs or disposals or even washer/dryers in-unit as much as they care about hardwood-type flooring.
The next thing the care about is in-unit washer/dryer of any kind or size.
Next, a dishwasher.
And I highly suggest you don't paint in any color other than basic beige. Not everyone likes gray. Many people hate stainless steel. Just go with basic beige and white appliances, which are timeless. You'll be able to keep them far longer without looking outdated than if you go with some current popular color. White just doesn't go out of style. Gray and stainless steel already have.
For what it's worth.
10 Reply
Jonathan R McLaughlin
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
add parking
1 Reply
Joshua Ferrari
Rental Property Investor · Mobile, AL · Member since 2018 · 121 posts · 136 votes
6y
Definitely depends on your local market. Look at other rentals in your area with the same bedroom/bathroom count that have some amenities that you would like to add. See what they are able to charge and give them a call and ask about their occupancy rates.

Sure they might have a really nice rental in your area, but are tenants even interested in renting such a property?

The absolute biggest value add component that you can administer is adding bedrooms. If you can buy a 3/2 and turn it into a 4/2 or 5/2, you can charge a SIGNIFICANT amount of rent more then you would be able to if you just kept it a 3/2 and made it look nice with vinyl or hardwood flooring, a brand new kitchen, a spruced up bathroom, and a new paint job.
If you want to go that route, see what other 4/2 or 5/2 rentals are going for and what their amenities are. See how their occupancy rates are and what might you be able to do to your rental to allow it to cash flow the same.
I’ve seen a spike in rent as much as $3,500 more per month due to 1 or 2 additional bedrooms. Granted, those were in primary markets, but the principal is still the same.
In the units that we have renovated in my market, the thing that got us the biggest “bang for our buck” was adding washer & dryer hookups, adding new vinyl flooring or refinishing old hardwood flooring, new paint job, new appliances, countertops, & cabinets in the kitchen, & repaving the parking lot.
6 Reply
Adam Blachnio
Rental Property Investor · North East US · Member since 2019 · 114 posts · 31 votes
6y
@Charlie Anne
I would do comps from area how your units are compared in terms of price and amenities...
To know the answer: how your units are differentiate from area to attract tenants❓
0 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
Adding a washer/dryer is a pretty inexpensive boost. In my market, I can add a quality, used set for under $400 and increase rent $50 - $75 per month.
I'm in a cooler climate so a garage adds value, particularly if it's attached.
Storage space. Even people in apartments want room to store their bike, fishing gear, or Christmas tree.
Quality flooring and appliances make a difference but don't over-do it.
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Dawn P.
Rental Property Investor · Sumter, SC · Member since 2015 · 334 posts · 531 votes
6y
Around here, B class -
- ceiling fans
- LVP flooring throughout, sometimes tile on bathroom floors
- tiled backsplashes/showers
- medicine cabinets, shelving, hooks, any kind of extra storage!
- washer/dryer hookups
- gooseneck faucets, updated lighting - I snoop around Amazon Warehouse for returns. I've got a really nice $120 light fixture for $16 just because it was missing a stupid mounting screw.
- some won't agree but I install glass top ovens and a fridge with water/ice maker. Haven't had anyone break or misuse them *knock on wood* and the filtered water/ice is appreciated in the summer here, especially those with kids...
I like to see what other rentals in the area have and go just a bit nicer so I can stand out.
1 Reply
Michael Tempel
Property Manager · Minneapolis, MN · Member since 2014 · 380 posts · 167 votes
6y
Like many stated it depends on your market and the property you are adding value to. We used to take B-C class buildings and put in the whole kitchen, granite, stainless steel and new flooring, it typically at the time added 1-30% higher rents.

Here is an example of a class A we did this way to show typically what we do....just imagine the same in a B or C class with smaller appliances/kitchens - https://my.matterport.com/show...

I think you need to look at cost of materials and labor. Based on that make a decision. Baths and kitchens always make the most impact. One overlooked item at least in the past is going to a vinyl planking that is water proof, but looks like wood. Carpet will need to get replaced every few years typically, but we have floors that are in from 10 years ago that look brand new.

Another improvement for the owner is putting in meters or setting up a RUBS program to capture and make utilities a recoverable cost. If done correctly you can have rents stay the same, but capture water, trash and even gas (electric is normally paid by resident). Ideally putting in meters in a duplex etc. works the best and adds value to the resale, but in a large multi-unit property there are many RUBS options from companies that will manage this for you. AppFolio and other management software companies are adding these features into their software as well, so you can self management this, but look closely at regulations/laws in your area to make sure you are not doing something incorrectly.
2 Reply
Avery CarlBusiness Member
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
6y
Kitchens and flooring make a big difference. Paint dated blonde cabinets white, granite-look laminate or some cheaper solid surface counters, LVP floors. We have a lot of luck in the scratch and dent section of Lowe's and Home Depot for updated appliances.
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4 Reply
James G.
Investor · St Louis, MO · Member since 2017 · 250 posts · 181 votes
6y
@Charlie Anne Looking at rental comps in your area, and seeing what kind of improvements they have done is going to be important to understand when deciding what kind of improvements to make to your property. Kitchens make a big difference, some paint and flooring can make a world of a difference, and people want to live in a safe, clean environment. Hope this helps.
0 Reply
Matt Wanner
Rental Property Investor · Pittsburgh, PA · Member since 2019 · 9 posts · 8 votes
6y
@Charlie Anne
There is something about a tile backsplash that makes prospective tenants lunge for a property. Assuming everything else is clean and well maintained. They can be installed for very cheap and in only a few hours.
2 Reply
Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Charlie Anne. For me, the simple things like new paint and flooring has been a big hit. When I do that, I also go ahead and change out all the outlet and light covers. Other small things while turning over a unit is; new toilet seats, new lighting in bathroom, new handles on all doors, new fixtures on sinks, ceiling fans in all bedrooms, supply a washer & dryer in my duplexes, and clean up the entrance area for a good first impression.
Some bigger items for a more profitable/less expensive future is the hvac and roof. I have negotiated new hvac's on a couple different units at purchase. Even upping my offer a small bit to encourage this, which allows you to not worry about capex right away. I have also negotiated a 12 month homeowners warranty for the seller to pay for at close. I do not renew the warranty once it runs out.
2 Reply
Ron Graf
Lender · Westchester IL · Member since 2014 · 7 posts · 0 votes
6y
here is a great article 5 Important Property Upgrades That Maximize Your Property’s Rent Rate https://www.onerent.co/rental-...
0 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
6y
Laminate flooring, paint, fixtures, w/d and trimming trees /bushes are my go-to's that are easy and have great returns.

Good thread👍
1 Reply
Account Closed
Member since 2020 · 2 posts · 1 vote
6y
@Michael Tempel what determines the class of the rental property? I have seen other members discussing different classes of rentals but have no idea how it is determined.
1 Reply
Michael Tempel
Property Manager · Minneapolis, MN · Member since 2014 · 380 posts · 167 votes
6y
@JonDerek Sallee
Mainly age of asset. Brand new new construction is typically class A. A 80-90s building on good shape is a class B and a older building that needs some TLC is likely a class C. It can be a little subjective, but this is at least how I look at it.
You can also look at area as well in this way. For example a class C in an A location is often a great investment while a class A in a C location is often not since the area will pull it down.
A would be in a nice upcoming neighborhood or area with high income/low crime. C is opposite.
2 Reply
Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Account Closed. I would say the "class" of property is completely subjective. Location, rent rates, schools, crime rate, amenities. I live in a very nice community with B class duplexes. Rents are $1,110-1,500. There are no real amenities like a pool or landscape service. But it's also very low crime with good schools.
1 Reply
Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Charlie Anne
If they see it, touch it, smell it make sure it doesn't suck. Aside from that your next step is minimizing turnover. So yes, at some point things like the water heater and laundry machines DO make a difference. One piece of "bling" per room, for bedrooms make it a nice light fixture with ceiling fan or similar. For kitchen make it a nice backsplash and one of those stupid squeeze pull down has the coil deal taps. For living rooms I do a nice simple barnboard feature wall. Hallways make sure it's bright enough. I do quartz counters just because they're the same price and 21 days faster than laminate for me (I have a connection). Dishwasher: always. Spray the base & casing every 5 years at turnover. You'd be amazed how $100 of paint can freshen a place. Painting is dirt cheap. Sometimes the simple things are overlooked. Take a look at your target demographic and market and adjust accordingly. My competition is fairly limited as I do pet friendly exclusively, but mainly it's the big REIT's that do commercial grade grey low pile carpet, white walls and base (same tint), and $12 light fixtures only. ... it isn't that hard to be better when that's the standard.
1 Reply
Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Matt Wanner
One of the best pieces of advice I ever got was to pop the extra $.03 / sq ft for a 3x12” tile for backsplash instead of the cheapest 3x6”.. looks FAR more expensive than it actually is and it actually saves install time. Another trick if you’re replacing counters but not cabinets is to have your counter guy build your backsplash to appropriate height so that you’re not long cutting any tiles. Leave 3/16” for imperfections and buy matching grout/ caulk that doesn’t require annual sealing.
1 Reply
Patrick M.
Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Dawn P. hit the nail on the head with one of the cheapest and most desired- ceiling fans! It is one of the things I hear regularly when showing.

We did as others said- looked at our market. After about a year of renovations we started watching as the others started looking like ours... that's when we knew we were doing it right!

Best for me- white kitchen, granite, tile backsplash, stainless steel appliances with dishwasher, ceiling fans, central air, LVP.

Waste: shower doors.

Quick: Throw some USB/electrical receptacles in throughout the unit.

Fresh paint... potential tenants love the smell of fresh paint.

3 Reply
Account Closed
Realtor · Portland, OR · Member since 2020 · 87 posts · 43 votes
6y
@Charlie Anne “always Carpet and Paint. Never granite counters...” say that 10 x in a rown and that should lead you in the right direction.
One person I was working with said she “updated” the roofing shingles to get more in rent lol.. dont do that.
Clean. Simple. Safe = perfect rental.
0 Reply
Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
6y
@Charlie Anne
I just finished a house I bought. Complete renovation. New kitchen (big box store inexpensive white cabinets, Formica counters, new stainless DW and stove, LVT floor), new bathroom ($160 white steel tub, $60 tile, $60 vanity, $15 light bar, $100 toilet, LVT floor)
Refinished hardwood in the entire house, fresh paint, all new light fixtures/outlets/switches, new windows, Fresh painted front porch, new deck boards/railings on tiny back deck etc etc..
There are a bunch of these same houses in this area. I believe I got the most money in rent I’ve seen yet for these houses (and it’s a tough time right now!). Everything is all fresh and new, on a budget. No fridge, no washer and dryer, no off street parking, no landscaping done.
Purchase price $60k, rehabbed myself under $15k. Rented for May 1 at $1450/month.
3 Reply
Gary L Wallman
Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
6y
Originally posted by @Account Closed:
@Charlie Anne “always Carpet and Paint. Never granite counters...” say that 10 x in a rown and that should lead you in the right direction.
One person I was working with said she “updated” the roofing shingles to get more in rent lol.. dont do that.
Clean. Simple. Safe = perfect rental.

Benjamin,
I respectfully disagree. Never carpet (LVP everywhere) granite where appropriate. Both materials are extremely durable and come off as high end.
I typically renovate to one class above the property. "B" properties get "A" finishes, etc. This has created a portfolio with unbelievable rental demand. 120+ properties, 1 current vacancy (small "C" class efficiency). Primary portfolio is 15 percent "A" and 85 percent "B". Typically rent my stuff in 5-7 days with 600+ credit score non-smokers, fully screened and vetted.
Gary
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