What are top upgrades for buy-and-hold rental property?

25 Replies

Curious to hear what the BP community thinks about some of the top upgrades for buy-and-hold rental property. We own a property management and real estate brokerage firm in Denver, Colorado that serves real estate investors. We are writing a new article to share with our clients about some of the top upgrades for their rental property portfolio. I am working on a plan for each of our clients over the next 10-years, so they can budget for some of the upgrades. Most of the properties we manage are in neighborhoods that achieve rents from $2000 to $5000+.

I also have a single-family investment property that is approaching 20-years old and will need some love soon. We have done some work to it by investing in a new roof, exterior paint, flooring throughout, and new appliances. Curious to hear what everyone thinks about future updates over the next 5-years. The rent is $2650 and in a strong Denver neighborhood that continues to see rent appreciation. The homes have above average finishes in most of the rentals in the area (i.e. granite countertops versus laminate, hardwood versus carpet). My thought is start with some inexpensive items, such as: master bath and kitchen light fixtures, ceiling fans, and landscaping. Looking forward to hearing your ideas.

Greg,

We operate predominately in the Greater Houston market. Our property values range from $60,000 to $500,000, with the majority falling between $150,000-$250,000. 

The biggest value adds we have completed (either for our own or clients properties) are LVT/LVP floors, stainless steel appliances, granite countertops and tile bathrooms. 

Interested to hear what others say!

In my properties, the best upgrades have been:

1. All floors into either hardwood (if existing) or luxury vinyl plank (totally waterproof). Removing all carpeting and cheap sawdust-based laminate.

2. Making sure all properties have what I consider common amenities. As an example, I am shocked at the number of flippers around here who won't spend a couple more bucks and put a dishwasher in an old kitchen. It kills their resale.

3. Upgrading property status when possible. Going from 2/1 to 2/2 or 3/1, or from 3/1 to 3/2 has been huge for us. 

    Outside of the basics that have been covered like floors and paint I think I get the most value from a fence. I target renters that have dogs, if you have a no pet policy I would skip a fence, but it really seems to attract tenants.  I have a dog and don't want to have to let him out in the cold and snow and neither do tenants.  I tried going cheap on one and didn't get a lot of interest however once I put in the add I was having a fence added I got a lot more messages.  I have found in my area allowing dogs helps rent the property faster, for more money base plus pet rent.  

    @Greg Pond - I install a open concept living area. Spouses  (man/woman) like to be involved in discussions while still in being in the kitchen. 
    I also provide a outdoor kitchen/grill/fireplace.
    Many people love to be outside with children as they are cooking outside and this brings in the family or friends closer. “Family Value“ I call it.

    Thanks,

    -Bennie 

    Don't forget about the outside, paint main entry, garage doors, point masonry etc, landscape, paint and carpet common areas-halls-laundry, does not need to be expensive but first impressions count, like when they first drive up to the building or complex.

    First I ensure that the property is well maintained so that it is safe, clean, and operable.  The first upgrade I always look at first is interior painting.  Second, stainless steel appliances and new washer/dryer.  And third, new floorings.

    Originally posted by @Stevan T. :

    @JD Martin hello! How much does it’s usually run you to add a bathroom?

     Assuming that the basic infrastructure is already in place, meaning I don't have to add on to the house, I can get in and out for less than $10k including adding/moving plumbing. That's everything - floors, vanity, tub, toilet, fixtures, paint, drywall/hardiboard, etc. I've done a couple that were under $5k. This is with tiled tub & shower, not insert. I could probably cut a grand if I did insert instead but I prefer tile. 

    These days I'm doing less of my own work. If I do everything - and I can do everything, including electrical and plumbing - I can add a full bath for under $2k. But I'm getting too old and too fat to be crawling around in crawlspaces these days :)


    Originally posted by @Adam Martin :

    Outside of the basics that have been covered like floors and paint I think I get the most value from a fence. I target renters that have dogs, if you have a no pet policy I would skip a fence, but it really seems to attract tenants.  I have a dog and don't want to have to let him out in the cold and snow and neither do tenants.  I tried going cheap on one and didn't get a lot of interest however once I put in the add I was having a fence added I got a lot more messages.  I have found in my area allowing dogs helps rent the property faster, for more money base plus pet rent.  

     That's a good point, I completely forgot about the outside. I like to add decks, fences, paved driveways, and fire pit if allowed/appropriate. Driveways and fences are expensive but add some value to the house. Decks are my biggest bang for the buck outside, as the material isn't that expensive and I can build a standard lumber dimension deck in a day (8x12, 10x12, 12x16). 

    Hi Greg

    Most of what I add inside has been covered already granite counters etc.

    In one of our rentals we had a open dining room off the living room. We wanted more flexibility, so we partially enclosed and added large double doors. When open you have a large space that flows thru, when closed you have privacy and a flex space to be used however the tenant wishes.

    Our current tenant uses it for office space, he works at home a few days a week. More people may be working at home now, but this could also continue, so space for an office could be a plus.

    We're usually on a budget but we paint it, refloor it, and get rid of old light fixtures.  If you have old, dated bathroom vanities or sinks/tubs, redo them also.  

    @Greg Pond

    Throwing out the obvious non-sexy repairs -- roof, sewer, etc. -- that nonetheless matter a lot, I'd say there are four big renovations that bring a nice return on investment for properties in Denver and Colorado Springs.

    1. A moderate kitchen update. Nothing crazy. Granite countertops, stainless steel appliances, more modern-looking cabinetry. 
    2. A moderate bathroom update. Again, don't go luxury with this. Just bring it up to the contemporary style.
    3. Finished basement. This might be more true for resale value. You can finish a basement for $25/sf. As an example, I just looked at some homes in a newer development on the east side of Colorado Springs. Most had 750sf basements, some finished, some unfinished. The finished basement homes seemed to get about $30k more. If you finished it for $20k (roughly 750sf at $25/sf), then that's a $10k return.
    4. Outdoor space. Again, don't go crazy. But a xeriscaped yard with a seating area is a huge bonus in Colorado where the weather is amazing.

    I'm interested to hear what others think. 

    Originally posted by @Greg Pond :

    Curious to hear what the BP community thinks about some of the top upgrades for buy-and-hold rental property. We own a property management and real estate brokerage firm in Denver, Colorado that serves real estate investors. We are writing a new article to share with our clients about some of the top upgrades for their rental property portfolio. I am working on a plan for each of our clients over the next 10-years, so they can budget for some of the upgrades. Most of the properties we manage are in neighborhoods that achieve rents from $2000 to $5000+.

    I also have a single-family investment property that is approaching 20-years old and will need some love soon. We have done some work to it by investing in a new roof, exterior paint, flooring throughout, and new appliances. Curious to hear what everyone thinks about future updates over the next 5-years. The rent is $2650 and in a strong Denver neighborhood that continues to see rent appreciation. The homes have above average finishes in most of the rentals in the area (i.e. granite countertops versus laminate, hardwood versus carpet). My thought is start with some inexpensive items, such as: master bath and kitchen light fixtures, ceiling fans, and landscaping. Looking forward to hearing your ideas.

     Just to throw an idea out there that's a little outside the box, I've had a lot of intrigue from adding smart home features. Ring doorbell, Nest Thermostat, (I forget the brand but) smart wall plugs/light switches got A LOT of attention in our latest rental and cost very little. Got the idea from a friend of mine and he has several of his renters to paying $75 more a month in exchange for having smart homes features installed. 

    I have rented for several years before buying my first home and the one thing I hated most was not having enough storage space. I have knowingly chosen several dwellings based on the amount of storage. Any size garage, a large shed or lean-to is money. I have even utilized a moderately sized crawl space to store the x-mas tree and accompanying holiday boxes. My current residence (a live-in rehab and hold) just had a detached 2 car garage erected in the back last month. I feel it's a huge addition to the ARV and future rents. I have also noticed in this particular neighborhood that the homes with garages and sheds are tidier. No storage leads to a lot of outdoor clutter i.e. bikes, BBQs, Lawn maintenance equipment etc. Neat yards increase curb appeal dramatically. In my opinion that is. Much love BP. This is my favorite place.

    I would always lean towards kitchen and bathroom upgrades for 2 reasons. They add the most recoverable equity (80-90% of that invested) and those are the areas that people tend to want the best in.

    I upgrade all of my homes with granite countertops and new appliances in the kitchen and came up with a cookie cutter look for my baths years ago (time to update with the trends). This helps me get my homes rented fast and aids in retention of my tenants. I also get top of the market rents too btw.

    @Greg Pond - This might just be one of the most valuable posts on BiggerPockets. I love this! 

    I think the biggest things have been hit. However, I think some repairs increase rent while others increase property value. Here are my thoughts on each: 

    Rent Increases:

    1. Finishing a basement/adding bedrooms
    2. Kitchen Update (cabinets, countertops, appliances)
    3. Bathroom update (tiled bathrooms) 

    Price Increases: 

    1. Large, obvious, big-ticket items such as the roof, water heater, furnace, plumbing, electrical, AC, etc. 
    2. Finished basement/adding bedrooms or square footage
    3. Kitchen Update (cabinets, countertops, appliances
    4. Bathroom update (tiled bathrooms)

    Many of the old houses (1920's - 1950's) I've rehabbed in Houston have window units and just look bad. I've found that replacing those with ductless mini-split units has been a great way to go. They are much cheaper than a central unit and still allow for zoned climate control.

    "Curious to hear what the BP community thinks about some of the top upgrades for buy-and-hold rental property. "

    In OR in terms of rent adder:

    1) Extra FULL bath = $30/month

    2) Split heat pumps w A/C = $40-$50/month.  Tenants get A/C and lower electrical bills, especially winter.  Owner gets dehumidifier and less moisture - Win-WIn if you can get past the $5K cost

    3) Washer/Dryer = $50/month.  However, if you are NOT billing for water use, you may lose $30/month since tenant's friends may use the W/D

    4) Locked garage = $100/month.  Bigger (for storage) = better.

    5) Nicer appliances = $0/month but you can rent quicker

    6) Nicer landscaping = negative $/month.  You can rent quicker, but the more you put in landscape the more it costs to maintain.

    Originally posted by @Adam D Rinehart :

    Many of the old houses (1920's - 1950's) I've rehabbed in Houston have window units and just look bad. I've found that replacing those with ductless mini-split units has been a great way to go. They are much cheaper than a central unit and still allow for zoned climate control.

    Never thought of this.  Good stuff here.

    I see a lot of great posts.  JD I love the idea of going from 2/1 to 3/1 or 2/2.  I commend everyone and learned a couple things.  THANKS!

    But we should go back to Greg's situation.  This is a rental in a pretty strong market.  Things he does today probably wouldn't bring much appreciation in 5-10 years.  He is also getting 2650/month.  In most of my markets, that is a very good rate.  So I think there is strong rent demand regardless of any improvements.  Lastly, he fixes things as needed like the roof.  So he is not a slum-lord.

    My advise to you is look at what your competition is offering and consider the return on investment.  Don't forget that this is a business.  Also, I would limit improvements to things that help the well-being of the property (investment).  Things like LVP or adding a 1/2 bath would get my vote.

    Good luck.

    Uh, folks, we're missing the obvious renovation ... in-bedroom sauna. Super expensive, total space waster, rarely used, and difficult to maintain. No-brainer!

    I kid, but I seriously have a friend who installed a tiny little sauna in her 1br condo and loved it. Ridiculous!

    @Josh Bakhshi

    Best advice yet! Renovations done today ain't doing squat for your resale value 10 years from now. Because any "cool" updates you do now will by then be "like, soooo 2020."

    That's $2,650 sounds pretty good, but you've got to look at whatever Denver neighborhood he's in. If you're Golden Triangle or Cherry Creek or LoDo, average rents are all in the $2,000s. 

    I think in the end, it's simple math. Review comps in your Denver area. Are some getting meaningfully more rent? If so, what's different about them? Kitchens? Bathrooms? In-ground pool in the bedroom? Whatever it is, price it out and see if what you spend will be made up plus some in rents during the time you plan to own it. 

    Great thread.

    @Greg Pond Both tenants and landlords want durable, low maintenance finish outs in light neutral colors and not too much solid white to keep clean. Paint is on trend tones and floors are Ideally vinyl planks in a distressed wood look with grays, browns and beige to hide dirt/damage and go with everything. I upgrade old recessed lights with LED kits. Add a second clothes rod to closets if there is only one. And a rod to the laundry room if possible. I think if I were to upgrade a rental to granite I would go with black. Avocado green, pinky beige, yellowy almond, tuscan gold, gray. or white quartz.