While some big upgrades are needed, most rental owners focus on inexpensive updates that provide actual or perceived benefits to the tenants, such as smart devices or improved landscaping.
What Types of Rental Renovations Make the Most Sense?
Knowing what renovations to make on your rental property can be tricky, especially since the whole name of the game is ROI.
When you first buy the property, you may need to make some expensive fixes to make it livable, such as replacing the roof or getting mold out of the unit.
However, many upgrades to the property don’t actually provide the ROI that you’re looking for. In reality, spending $15k on a new deck in the backyard isn’t likely to produce enough ROI in the long run.
Don’t Be the Best House on the Block
Most renters aren’t looking to pay top dollar for an incredible property. Many renters see their situation as temporary or as a way to save money—so either way they likely aren’t looking for an A+ property.
Most renters will look at other units within ½ miles to a mile, and their main focus will be on size, bedrooms, and bathrooms. They might be impressed if your property has quartz countertops, upgraded flooring, and impressive crown molding, but will they pay an extra $200 a month for it?
In general, the answer is no. Paying extra to make your property the nicest on the block rarely pays dividends. Of course, the condition of the property is important, but if other properties are clean and well-kept, then most renters will go with the cheaper, comparable property.
Upgrade to Match the Neighborhood
While making nice upgrades to upstage your neighbors often doesn’t result in a useful ROI, there are times when you do need to spend money on bigger upgrades.
If your property appears to be significantly lower quality than the available units, then you’ll likely need to update. This may seem to contradict the previous advice that big updates don’t provide good ROI, but at some point, the property falls so far behind in quality that no one wants to live there—unless you slash rent an unreasonable amount.
If the standard for your area is a quartz countertop, your property may look immediately outdated to potential tenants. Keep an eye on the flooring, paint colors, fixtures, and overall layout so you can understand what’s standard in the area.
One strategy some owners subscribe to is to match the neighborhood but make one upgrade that sets you apart. For example, if everyone else has outdated cabinets, upgrade yours. Or put in better flooring. These pieces likely won’t help you raise the price but can attract high-quality tenants.
Main Reasons to Renovate the Property
The number one reason is to (of course!) increase your ROI. The property is an investment, after all, so you’re only spending money hoping to make more in the long run.
However, there are five different ways that renovations can help you make money.
Higher Rental Price
With a more updated property with the upgrades, you may be able to charge more. Just remember, your goal isn’t to be the most expensive property in the neighborhood, as you’ll likely get passed over by budget-conscious tenants. The purpose of most upgrades on a rental property is to keep your property in the game, not to charge an extra $300 per month.
Of course, a nice property with good amenities might allow you to charge a bit more, but in many markets, that might be only $50 – $150 per month. More than that, potential renters will look elsewhere.
Longer Tenant Stays
Generally, the biggest benefit to your ROI with renovations won’t be the monthly rent; it’s the savings you make elsewhere. A huge cost to rental owners is vacancies, so having a great tenant who stays for several years is massive.
Tenants who love the property they’re in are likely to stay longer. If they’re proud of the landscaping, feel safe with the security system, and love the functionality of the smart devices, they are likely to remain happy.
Higher Quality Tenants
Nice properties tend to attract better tenants. At the very least, you should have a larger pool of tenants to choose from if you’ve made your unit desirable. From there, you can pick the best tenants, who are generally less likely to cause problems.
You’ll save time by avoiding frequent complaints, and good tenants are more likely to take good care of your things, resulting in lower maintenance costs down the road.
Shorter Vacancies
If you charge $2k in monthly rent, having a vacancy adds up quickly. While a property with nice renovations may not result in a huge increase in charged rent, you are likely able to fill your unit faster than other nearby properties.
If you can cut down a 6-week vacancy into a 2-week vacancy, you’ve just made yourself $2,000.
Cost Savings
Some of the renovations we’ll discuss can actually save you money. For example, a smart sprinkler system may use much less water, and a smart thermostat can help you save on utilities. Those sorts of upgrades usually pay for themselves within a year or two.
7 Inexpensive Rental Renovations
The ROI you’ll earn from big renovations is totally dependent on the neighborhood. Let’s talk about the most common smaller renovations you can make to a rental property that can help you rent the unit faster, keep tenants longer, and perhaps charge a bit more:
- Fresh Paint
- Security System
- Smart Devices
- Landscaping
- Upgraded Fixtures
- Stainless Steel Appliances
- Outdoor Seating
1. Fresh Paint
Most paint has a life of about 5-10 years, depending on the type you use. If the paint is chipped in many places, peeling, or faded from the sun, then it’s time for a fresh coat. It’s relatively cheap but of incredibly high value to your tenants.
The cost of painting varies widely, depending on the quality, size of the unit, height of the walls, and labor. However, the average 2,000-square-foot house will likely cost around $5,000 – $6,000.
It’s a good idea to fill in holes and do some paint touch-ups in between every tenant. You can get it done in a day or two by yourself but gives the look of a well-kept unit.
2. Security System
These days, just about everyone has a doorbell camera, and many people have door sensors with alarms. These features are fairly inexpensive but provide an incredible benefit to the tenants.
For example, for a few hundred dollars and then maybe $30 – $40 per month, you can install a fairly basic yet effective security system in the house. That’s certainly worth the benefit it provides the tenant.
Give your tenants full control of the security camera footage, but be sure to get an alarm code from them. As the landlord, you may need access in an emergency, but they’ll feel like the house is more theirs if you can’t see camera footage.
3. Smart Devices
With 82% of renters wanting at least one smart device in their home, it makes sense to upgrade the house this way. It probably doesn’t make sense to integrate every electronic feature in the house fully, but upgrading a few can be inexpensive.
A few good examples of smart devices to install are:
- Thermostat
- Sprinkler system
- Exterior lights
- Garage door
- Speakers
4. Landscaping
Some people drive up to rental properties, see how the outside looks, and immediately drive off without seeing the inside! That’s obviously not what you want.
Curb appeal is a popular upgrade for a reason. Your tenants want to live in a place that looks nice and that they feel good about when they invite people over. Tenants who like the unit they live in are more likely to maintain it.
Most front yards will already have grass, but perhaps you need to spend some time pulling weeds out of it, adding fertilizer or reseeding sections. If it’s bad enough, it might make sense to rip it up and replant, as sod isn’t very expensive ($.31 – $.0.82 per square foot).
In addition, it’s also inexpensive and simple to rip out a small portion of grass near the house and install a garden bed. Or, you could add a tree or two to the park strip. A nicely-trimmed lawn with some extra plants really makes a front yard stand out in a neighborhood.
If your property has extensive landscaping needs, such as huge lawns or large garden beds full of plants, be sure to explain that you’ll be handling the landscaping. Otherwise, many renters will be scared off by the prospect of intense gardening responsibilities.
5. Upgraded Fixtures
A fixture is just about anything attached to the house, and the look and feel of these determine a house’s perceived quality.
For example, some people may see your cabinets as outdated, but just replacing the golden knobs with a brushed nickel version may be all you need.
Here are a few examples of fixtures to consider adding or upgrading:
- Soft-Close Cabinets – While upgrading every cabinet in the house can be pricey, perhaps doing just the kitchen and the master bathroom makes the most sense.
- Faucets – Many builders install cheap versions that leak often. Spending $200 on a nice kitchen faucet definitely increases the appeal.
- Can Lights – Removing and replacing dome lights with can lights can make a property feel 10 years newer.
- Light Bulbs – Many houses still have lightbulbs that cast everything in a slightly yellowish tint. For pretty cheap, you can go grab 2700k LED bulbs in a soft white.
- Door Knobs, Light Switches, Outlet Covers – These may be small things, but for a few hundred bucks, you can really update the look of your house.
6. Stainless Steel Appliances
It’s often said that the kitchen is the best room to invest in because it’s often used and is usually highly visible in the house.
Few things can update a kitchen faster than having appliances that don’t look like they’re from 2000. Stainless steel provides a sleeker, modern look.
Even if replacing the fridge and stove is out of your price range, the coffeemaker, blender, and toaster are a good place to start. Then, when you need a new fridge or stove, spend a little extra to get one that your tenants will love.
7. Outdoor Seating
Many people value a comfortable outdoor setup. If your property has a nice deck with an overhang, that’s terrific! However, even just purchasing a few nice chairs and a table for people to enjoy a cool summer evening adds value to the property.
