Rental Renovations: Which Maximize Rates & Lower Vacancy – And Which Don’t?

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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.

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Worth It

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.

bathroom-renovation

Related: 4 Inexpensive Renovations Guaranteed to Maximize Resale Value

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.

Hardwood Flooring

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.

Off-Street Parking

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 Storage

Extra closets, built-in shelves and wardrobes can make even a smaller property seem able to accommodate a renter’s lifestyle.

Curb Appeal

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.

renovation

Waste of Money

Luxury Upgrades

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.

Related: 10 Renovation Tips That Will Save You Time and Money

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!

About Author

Joshua Keen

Joshua and his brothers have worked as Atlanta real estate brokers for more than 15 years. As real estate investors themselves, they are experts in helping investors navigate the dynamic real estate landscape of the metro Atlanta and Decatur, Georgia area, particularly the Intown Atlanta neighborhoods. When Josh isn't following the Atlanta real estate market, you'll find him running, playing with his dogs, or hanging out with his family.

16 Comments

  1. Angel Rosado

    These are great ways to attract renters. I always think of when I was searching for my first apartment, what did I want. And fixing rather than replacing is the way to go unless it NEEDS to be fix. I think based on the target market that you are attempting to reach you can also do additional items such as adding a small playground in the backyard if targeting families with young children, just a thought.

    I also really like your tip of the black appliances.

  2. Robb Almy

    Great post, Joshua. While all your suggestions are great, I really appreciate what you write about flooring. One of my early mistakes was going with tile flooring for a rental. I have found wood or a quality laminate the way to go now for the very reasons you suggest. Thanks for sharing your wisdom.

  3. Nathan Richmond

    It’s amazing how timely this article is. I’m looking at purchasing a home built in 1923. Above the garage, which is not connected to the house, is a 2 bedroom apartment and a studio apartment. If I purchase the house, I will be doing some house hacking (living in the house, renting out the other units). Anyways, the house was last updated in the ’60s. I’m researching exactly what renovations I should make and this article confirmed exactly what I was thinking. Renovate the kitchen and bathrooms, and install new flooring.

    @Robb Almy I, too, prefer a quality laminate. I’ve gotten so many compliments on the laminate I had installed on my most recent house.

    Thank you for giving me the confidence to proceed. ?

  4. Sean Williams

    Another thing to consider it making your properties “tenant proof”. Such as using vinyl tiles vs. vinyl sheets or ceramic tile. Hardwood (lighter) costs more but lasts much longer in the long run than carpet, however if you feel carpet is necessary, carpet tiles may be a good option as well.

    One last thing that I’ve noticed that adds much value to tenants and the rental price is a yard, especially if they have kids or a pet. Most people will pay a little extra for this added bonus especially if they’re coming from an apartment…just make sure they know they’re responsible for cutting it!! (if not the owner)

  5. Philip Mankins

    I agree with your recommendations and am so glad that you mentioned “spruce up”. I find it so crazy when a place for rent isn’t clean and touched up. We always get comments about how clean our units are. When people say that, 1) I’m glad that they noticed but 2) How could it not be?? It takes so little time and money to give a place a great impression: clean the unit, sweep and clean the outside, touch up paint and dings. So easy! Thanks, Phil

  6. Brandon Stevens

    An important article, we are sometimes accused of making our rentals “too nice” but the fact is our tenants stay longer, usually takr better care of the property and i can charge a little more.

    *If you have hardwoods, learn to “refresh” them between tenants. Clean is nice but shiny sells.

    *If your going to have someone do laminate counters, just pay for solid surface. It will pay for itself over time if you buying pre cut slabs from lowes well then its hard to justify the difference.

    *Learn to replace cabinet doors, sure you can get away with paint and refinishing to a certain extent but changing out just the doors is an easy upgrade that makes them really look new and most come unfinished so your only left refinishing the boxes to match.

    There are a lot of 3/1s in our market, we specifically target those with enough room to add another bath. Not only does it up the rent significantly it does wonders for your valuation and subsequent resale. We then strive to make one an on suite if possible the addition pays for itself in the added value and guess where that tenants going……to the other rentals with an on suite
    ….good luck finding that.

  7. Kevin Polite

    Great article. I got a property at great price that was a 3/1, but made it a 2/2 and got higher rents than all my comps of 3/1 and very close to the the 3/2’s, wouldn’t do that in every area, but I”ve seen 2/2 sell really fast in this area, which is in an up and coming neighborhood.
    We remodeled to the tenant that were wanting to come to the area, not the ones that were there.
    I’ve used Ikea cabinets and they are very long lasting and they have some great cabinets, BUT contractors hate them until they see how easy they are to install.

  8. Mike Kinder

    I love it when I rip out carpet and find hardwood… A previous owner, of a home I renovated, came back to see if there were any improvements. I cracked up when they asked me, “where did you get the hard wood? It was under the carpet I said; over 30 years evidently.
    To the point of ROI, I had the floors sanded, stained and finished for my cost of $1.65 a square foot.
    For bathrooms and kitchens, I try to find remnant granite from a local supplier. The slab has already been purchased, cut and installed, I grab the leftovers for quite a bit less. Also, look for Habitat For Humanity, Restore locations. I’m in VA, but saved $200 on new rails for a staircase I paid $20 for at Restore. Wishing I had known about garages prior to some of my jobs, but won’t forget that one on my next op.
    Nice Read, Thanks!

  9. Katie Rogers

    I would not be too quick to turn a 1 bedroom into a 2 bedroom, especially if the resulting bedrooms end up too small. As an extreme example, I once saw a rental advertised and priced as a 3/1. It was really a 1/1. The landlord had divided the one spacious bedroom into three rooms each barely capable of holding a twin bed. Tenants resent such shenanigans. Also we want to be careful we do not price out quality tenants looking for a one-bedroom.

  10. Michael Brall

    Some of the counter tops in my kitchen is chipped or scratched and need to be replaced.
    I am painting the cabinets to save money and redoing the floor with hardwood for .79Cents a foot i bought.
    Granite is 35$ a foot out here and would cost around 2 thousand. What do you think I should do? Should I just go back with formica countertops ?
    This is going to be a long term rental I own and will eventually sell.

    • Michael, The article says that granite scratches. I didn’t know that. Brandon, in an above comment, says solid surface, but I’m not sure what that includes. I’m wondering about polished colored concrete. But it seems that would be so heavy on the cabinetry, and a problem if you replaced cabinets later. If you need something temporary, until you can afford and decide what you want, Lowe’s carries a countertop paint, that looks good, and disguises scratches. Holds up fairly well, although you may have to touch up after butcher knife wielding tenants. Use a smooth foam mini roller and tray, and paint with much ventilation, when house will be vacant for a couple days. I’ve used the wheat color on 3 kitchens. They have sprinkles you can add, but I thought they looked tacky on the store sample.

  11. Good points. That basic spruce up is so important, and doable even when you can’t afford anything else. I generally do my own cleaning, and have had tenants choose my rental over others, because they said it was “ready to move in.” Get a ladder and climb into that back kitchen cabinet to wipe it out. Repaint or touch up everything inside, even the closets. Don’t forget to clean window ledges, baseboards and trim, even if painting isn’t necessary. Check for burned out bulbs & plumbing drips, etc. Tops of ceiling fans get dusty. Change greasy filters over range. Although I’ve given deposits back for apartments that appear nice, I’ve never had a tenant to do all of these things after moving out. And I tell them that I will paint and clean carpets (so they will be to my liking), if they will leave utilities on for a few days. Also, I don’t like to show the apartment until it is ready, or at least not messy.

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