The 5 Essential Investments to Include Before Renting
Are you looking to get your property rental-ready? With just a few updates, you can maximize your return on investment (ROI) and avoid costly liability issues, maintenance, or grievances down the road. These simple investments will make your property stand out to potential tenants while providing a great cost-benefit ratio.
Knowing When to Upgrade
Before you embark on any major renovations, consider your expected return on investment. For many tenants, rental property is a temporary living situation. Expensive upgrades and renovations may not substantially increase your rental income. Depending on your area, a few inexpensive upgrades may provide a much higher ROI than a complete overhaul or renovation of your property.
Upgrading for the Highest Return on Investment
Certain upgrades provide a much better return on investment than others, both in rental income and in your property's value, if you decide to sell it later on. As a bonus, many of these upgrades qualify for a deduction on your taxable income, making them even more attractive for landlords. These five investments will make the biggest difference for your bottom line.
1) Kitchen Renovation
One of the best investments you can make in your rental property is a kitchen renovation. Updated kitchens provide a much more comfortable place to eat and cook, and they contribute significantly to the "wow" factor when you're showing your property to potential tenants.
Kitchen renovations can be extremely cost-effective. Believe it or not, a minor renovation like a fresh coat of paint and some new appliances is cheaper and more cost-effective than a full remodel, netting an 87% return on investment. Newer appliances are safer and more reliable and can substantially reduce your property's energy costs.
2) Bathroom Renovation
Just like a kitchen renovation, a bathroom renovation can quickly increase the resale value of your property. Upgraded bathrooms are also a big draw for tenants, allowing a wider range for the rent people are willing to pay. A midrange bathroom renovation generally provides a 70% return on investment on resale and gives your property a clean, safe, and comfortable appeal.
For an inexpensive bathroom renovation, consider replacing the toilet, vanity, and lighting. Even with an older shower or tub, these upgrades will substantially improve the appearance of the bathroom. Adding or entirely replacing an existing bathroom won't provide the same returns as a minor upgrade.
3) Insulation
If you're offering your tenants paid utilities, don't gamble on your heating and cooling expenses. Reinsulating your attic, crawlspace, or walls can make a huge difference in your energy bill. Adding insulation had the highest ROI for homeowners in 2017, according to Remodeling Magazine.
Adding insulation usually costs less than $1,500, and the return on investment can be higher than 105%. Every month that passes, you'll save more and more on your energy costs, meaning the benefits of this particular upgrade will compound the longer you own your property.
4) Home Security System
In many states, landlords are responsible for their tenants' property in the event of a break-in. Avoiding this costly liability with a home security upgrade won't have the same ROI as a renovation or remodel. Still, it can prevent a substantial loss and add to the feeling of safety and security—making your rental more appealing to prospective tenants.
Today's best home security system upgrade might be a smart security system with remote monitoring on your smartphone. These security systems are ideal for landlords since you'll receive alerts immediately if there's an emergency. In high-theft areas, security cameras can provide tenants with additional protection.
5) Fresh Paint
In the renters' market, first impressions are everything. A dark and dingy room can immediately turn tenants away from your property, and a simple coat of paint is an inexpensive way to brighten up space. "If there is any way you can bring light in, it's going to affect your price," says Steven Kopstein, a licensed real estate broker in New York City. In cities like New York, landlords must repaint at specified intervals, which can make this upgrade a necessity.
Light-colored paint, coupled with a few open windows, can make any space appear bright, airy, and open. Choose your paint wisely; a high-gloss or semi-gloss paint is durable and easier to clean, while matte finishes can hide imperfections. A repaint is also a great time to repair any damage from previous tenants. For most areas, indoor paint can last as long as fifteen years, but you should regularly inspect your properties to know when they need a new coat.
Investing Tips for Landlords
For your rental property to attract tenants and grant you a decent income, it's usually unnecessary to aim for perfection. Survey your rental property and address the necessities to provide a safe, clean, and comfortable environment for your tenants. Don't waste money on major aesthetic renovations unless your neighborhood market demands it. As a general rule, don't renovate your house beyond the value of other houses in your neighborhood, as it will substantially reduce your ROI if you ever decide to sell.
As a final tip, put money aside from each month's rent for upgrades in the future. Renovations almost always cost more than expected, and delays can cut into your income if a major renovation keeps tenants out longer than expected. Preparing for your upgrades in advance will maximize the amount of income your property pulls over time.
Author Bio: Allie Shaw graduated from the University of Utah with degrees in communications and public relations. She is an expert in all things home and tech.
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