Homeowners who rent out their properties need to weigh the benefits of renovation against the property value and possible rents. As a property manager, your goal should be to maintain the property while getting the highest return possible with the least amount of investment. Unnecessary expenses only reduce the return on investment, although renovation and maintenance of a rental property is inevitable for owners who plan to keep their investment profitable.
The property owner should keep in mind that when renovating a rental property, they should focus on making it modern and updated, but be careful not to waste money on upgrades that do not return value or improve the renter's experience.
London estate agents Portico surveyed their tenants about what they want from a rental property in terms of furnishings. They highlight some interesting results:
- 41% of potential tenants preferred simple, modern furniture in neutral colors. Contemporary laminate flooring was the preferred choice.
- 38% of renters appreciated homey touches like painted walls, unique pieces and comfortable leather sofas.
- 12% of survey participants loved the look of a quirky space with wooden floors, neutral furniture, some fascinating objects and a fun wall.
- Only 9% of potential tenants craved minimalism, where bright white walls, simple blinds and chic but minimalist furniture were offered.
A property that is being updated for sale may be renovated differently than a property that will continue to be rented for many years. Every project must be evaluated based on potential return. Owning or managing a property is like running a business: every decision affects the bottom line.
Inspection
This is a top-to-bottom walkthrough to determine what needs to be done. Look for areas that need major and minor repairs. Keep an eye out for damage from the outside of the property to the inside. A thorough inspection should include water supply, gas lines, electrical system inspection, and other sources that provide essential services to the property. Note the condition of the roof, exterior siding, and windows. Does your yard, fence or roof need repairs?
Maintenance
This needs to be at the top of your list before starting any type of remodel. Depending on the market and price, some items may be more important than others. Painting is an inexpensive solution that can really bring new life to rooms. Are the floors in good condition, are the taps working, are the appliances in good working order?
Check for leaks under each sink and around toilets. Check that hoses that go to dishwashers, refrigerators and washing machines are in good condition and are not older than their life expectancy. Once you have your maintenance list in place, it will be easier to plan your budget for any major renovations you have planned.
Kitchen renovation
The kitchen should be a focus of renovation for the homeowner, as it provides a good return on investment. Kitchen cabinets should receive attention, countertops should be invested in, and the entire appearance of the kitchen should be appealing to the renter.
Homeowners rarely like to replace appliances that are in good working order. Only if your market requires updating the appliance to generate more revenue would I recommend replacing appliances that are in good condition unless a major renovation is planned.
With this in mind, if a kitchen renovation is part of your plans then it may make sense to update your appliances at this time.
Kitchens are a quick way to blow an entire budget. I have seen estimates ranging from $10,000 to over $100,000. This is a great place to get a good return on investment, but it's also an easy place to spend too much and lose money.
Top Projects to Save Money on Kitchen Renovations
Paint and stain
- If your cabinets are functional and intact, they can easily be brought back to life with kitchen cabinet coatings, paints, or stains.
- Repainting doors, trim, and walls can literally change the entire look of any room and is inexpensive.
Lighting
Antique accessories make a home look dated. Recessed or recessed lighting can often replace existing lighting for minimal cost and make a big difference in appearance. It's also very easy to add extra lights at the same time.
Cabinet Replacement
One secret that local cabinet companies don't want you to know is that you can order RTA cabinets online. An RTA cabinet is ready to assemble. By doing a little handy work, you can save thousands of dollars and have beautiful new cabinets for a fraction of the cost.
Rigid countertops
Everyone loves hard surface counters, but as property managers, most of us don't want to spend $4,000 to $7,000 to install granite or quartz counters. A simple and inexpensive option is to use large tiles. Typically tiling your countertop this way can save you up to 75% of the cost of installing a granite slab by a professional.
Provides popular amenities
During renovation, amenities should be made available that would be useful to renters. Providing amenities such as storage spaces, washer and dryer units, dishwasher, garden, off-site parking, a fenced-in yard for pets, and an area or porch will provide more value for higher rents. The presence of the aforementioned amenities adds more value to the rental property, maximizing the chances of earning more money with the property to be rented and should help maintain occupancy.
Lighting and Hardware
Lighting really is one of the easiest and most cost-effective ways to change the look of an interior. Updating your lighting can have a huge impact on modernizing the look of your property. Big box stores offer beautiful options that can be installed by any handyman and, most importantly, you won't have to spend a fortune.
Focus on providing plenty of light in the kitchen and bathroom. Both areas are known to have a huge impact on property value.
When looking for hardware to replace, consider replacing door hinges, door handles, and bathroom finishes like faucets and shower heads. When we're updating the look, the goal is to make everything match and look new. This includes matching the lighting as well.
Remodel and update the bathroom
The bathroom is an essential part of any property and should be made as comfortable as possible for tenants. This is a great place to get a return on investment if done right.
Keep an eye out for leaks in the bathroom plumbing areas and fix them. This needs to be done before any updates are started.
Floors
Bathrooms are relatively small, which makes them inexpensive to tile. A simple addition to your floor covering is to also use tile as a floor finish as well as to accent the shower and counters.
To avoid accidents, the floor must be of a type that minimizes slipping when wet. I recommend avoiding any type of laminate in the bathroom. I also discourage the use of vinyl due to possible damage to the renter. For my rentals, tile is the only option when looking to upgrade.
Don't be too trendy when choosing flooring. Simple and functional is ideal, and remember that the tile will last forever if it is well looked after. Typically, maintenance just means cleaning cracked grout and occasionally sealing.
Games
Bathroom fixtures are relatively cheap to change. Faucets and sinks can be replaced for just a few hundred dollars and if you tile the counter at the same time, you can have a completely updated look for a cost in the hundreds rather than the thousands.
Consider Your Cost Versus Rental Income
A landlord wants their property to look suitable for renting as well as serving tenants. However, the profit you hope to make from your property should be a focal point in the manner and extent you will renovate. It is a bad decision to invest in improvements that do not improve the value of the property or rents.
The property is expected to recoup the money invested in upgrades over time. However, renovation of rental properties must be done with cost versus rental income in mind to prevent the owner from losing money.
It must be well understood that no one will look after your property more than you, therefore there must be limitations when you are building for rental purposes compared to a property that you would live in yourself.
There is no doubt that renovating a property requires a lot of planning. Whether you want to sell your property or rent it out, implementing a strategy can help you achieve long-term financial gains. Throughout the process, keep the return on investment in mind with each decision.
