Every penny that you spend renovating an investment property has to be justified by ROI.
For rental properties, how much extra rent can you expect to command for this upgrade? For flips, how much extra value will that renovation add?
If an improvement will cost $1,000 but will only add $700 in value for a flip, then it’s not an improvement worth making.
Rentals are slightly more complicated. If an improvement to your rental property will cost $1,000 and will raise asking rents by $40, is it worth making?
One way to think about rental improvements is time-to-recovery. In the example above, it would take slightly over two years (25 months) to recover the up-front cost. Then you have to factor in the expected lifespan for the improvement.
For instance, that improvement is worth making if it will last you 15 years, but if it will only last through end of this tenancy? Maybe not.
If you’re buying a property that needs work, your first priority is obviously repairing or replacing anything that’s damaged or hideously ugly. But if we’re talking about an average, somewhat dated, ho-hum residential property, and your renovation budget is $5,000, what do you prioritize?
Here are seven ideas to help you spend your $5,000 renovation budget for maximum ROI.
7 Ways to Spend a $5,000 Renovation Budget for Max ROI
1. Appliance Hookups ($500+)
You don’t have to include appliances in your flip or rental property. But most buyers and renters nowadays expect to at least be able to plug in their own appliances.
The cost for adding appliance hookups will vary based on the layout of your property. As always, get at least three quotes from contractors.
If you’re a landlord, having appliance hookups (or better yet, appliances) will definitely help you secure a higher class of applicant. And better applicants mean better tenants, which in turn mean better returns.
2. Invincible Flooring ($2,000+)
This is less crucial to flippers, but landlords should install flooring that could withstand bombardment from the British navy.
I recommend to my students that they avoid carpets and hardwood floors in their rentals. They’re simply too easily damaged.
Instead, consider bamboo flooring, high-end faux hardwood, or luxury vinyl tile (LVT). The latter can even come in waterproof options.
While flooring is the most expensive item on this list, it’s also one of the most critical to landlords’ long-term returns and success. It will be hard to turn a profit as a landlord if you have to replace the carpet every two years as your units turn over.
3. Kitchens: Cover the Ugly ($250+)
Everyone loves to talk about kitchens and bathrooms in real estate—usually right before they try to sell you something for them.
You don’t need to spend an arm and a leg on kitchen renovations for an average property. If your renovation budget is tight, try simply putting a better face on the existing bone structure of your kitchen.
First, consider painting the cabinets. White or black are the classic options, but they’re not your only options, of course.
Second, look to the counters. Assuming they look like pickled death, how might you replace or cover them without going out and spending thousands on white marble?
Related: 3 Renovation Tips to Make Property Management Easier [Video!]
One idea is to replace them with butcher’s block. You can have it cut to your countertop’s dimensions and properly install it, or if the property is a lower-end rental, you could simply place an appropriately-sized piece of butcher’s block over the existing counters.
Another idea is to paint the counters a glossy black, then coat them with shellac or some other shiny surfacing agent. It’s easy, cheap, and contrasts well with white painted cabinets.
If your property is a rental, you can always cover ugly kitchen flooring with a giant throw rug, too.
Here are a few more cheap DIY kitchen hacks, if you’re looking for a new look on a tight budget.
4. Bathrooms: Pull Attention to the New ($100+)
Bathrooms are another area where property owners blow thousands of dollars.
Just like kitchens, how can you cover the ugliest, most outdated parts of a bathroom?
The giant rug trick works here too, if the tile floor is old, cracked, or downright ugly. Just make sure the rug you use is brand new and spotlessly clean.
Speaking of clean, the entire bathroom should sparkle with cleanliness, no matter how old the fixtures are. Use whatever cleaning agents it takes to get the tub, toilet, sink, and walls perfectly clean.
Then, direct prospects’ attention to a few new features in the room. A new upscale faucet, for example, makes the entire sink look newer and sharper. New stylish cabinet hardware, when combined with a fresh paintjob, can make old cabinets look new and chic.
Assuming your shower tiles have also seen better days, scrub them clean, then distract viewers with a bright, en-vogue shower curtain—left in the closed position, of course.
An upscale shower curtain, especially when it’s the brightest object in the bathroom, shifts the entire feel of the room for casual observers.
5. Low-Cost Landscaping ($100+)
Curb appeal matters more than most people give it credit. Human beings, by our very nature, make quick, subconscious decisions based on emotion, then gradually our conscious mind catches up, using logic to justify a decision already made by our lizard brain.
Curb appeal calls out to that lizard brain and helps make up prospects’ minds before they even know it.
The front lawn should be kept immaculately mowed, with front-facing bushes and shrubs trimmed perfectly. Edge the sidewalks—it takes a half hour but makes a huge difference in how crisp and neat the front walkway looks.
The rear landscaping is also important, but less so than the front. When time and budgets are constraints, focus on the front first.
I like potted plants as a cheap way to make the front entrance or walkway look more welcoming. This particular trick works particularly well for urban properties, which may not have a front lawn, or any green for blocks in any direction, for that matter.
6. Paint! ($250+)
When your budget is tight, you can do your own painting and save money.
The trick to painting is preparation, not the actual strokes. Meticulous taping and draping will make your amateur paint job look professional.
The interior of your property should be freshly painted before showing it to prospects. Period.
As for the exterior, that gets more difficult and more expensive. If the exterior is only dirty, try power washing it. But if the paint is flaking, you’ll need to scrape and repaint it.
7. Add a Few Pieces of Flare ($300+)
In my property management course, I teach my students to find a couple “hooks” to make their property more marketable.
What could you do to make your property stand out from all the other listings in your neighborhood?
One idea I like is to market your property as a “smart home.” The entire house doesn’t need to look like the Jetsons; you just need two or three smart home features. A smart thermostat is a no-brainer— it costs $180-250 and you can show off statistics about how much cheaper the utility bills will be.
Here are a few more ideas for smart home upgrades to boost your property’s marketability.
If the target demographic for your neighborhood is eco-conscious, how about marketing your property as a “green home”? You’re already on your way, with that smart thermostat; you just need one or two more eco-friendly features.
Have a dingy unfinished cellar? Add a big wine rack against a wall or two and call it a wine cellar!
Find a couple hooks that will make your listing stand out from the rest. They don’t need to be expensive; they just need to create an upscale vibe.
Related: 3 Easy Multifamily Renovations That Give the Best Bang for Your Buck
The Cure for Average
You can do a lot with $5,000, if you’re willing to do some of the work (e.g. painting) yourself. It’s amazing what a fresh paint job and spick-and-span cleanliness will do to make a property feel newer.
When you have a lavish budget and you can completely renovate the kitchen and bathrooms or completely re-shingle or reside the exterior of a property, it’s easy to make your property stand out and not feel so average. So mediocre. So boring.
But when you’re on a tight budget, you need to use creativity instead of cash to make your property feel fresh and new.
The cure for average is to find a few focal points to pull attention. We touched on this in the bathroom section above; when you can’t rip out the entire bathroom, you can still pull prospects’ attention to a few salient, new features.
The same applies to the entire house. Can’t afford to repaint the entire exterior? Repaint the front door a bright, attention-grabbing color. If prospects’ eyes are drawn to the brilliant red front door, it’s hard for them to conclude that the house is drab, even if the rest of it is coated in an old, dull gray.
Use your creativity, and it will only take those few attention-grabbing features to distract from the fact that kitchen flooring is ugly, or the shower tiles are dated.
What are your tips for doing a renovation on a tight budget?
Share your secrets and hacks below!