Top-Value Renovations for Your Rental Property

Top-Value Renovations for Your Rental Property

Owning a rental property, naturally, requires plenty of time and dedication in order to really see success.

Whether you are tackling the business on your own or working with a property manager, it’s incredibly important to prioritize both tenants’ needs and the needs of the business.

In some projects and decisions, you may struggle to find a balance between the two. However, renovating your rental property proves to be one of the most effective projects that can serve both needs when executed properly.

But before you start tearing down walls, it’s important to do thorough research and evaluation as to what renovations will drive the most value and success for your rental property.

To help you get started, here are some ideas for your own property renovations.

1. Kitchen

Kitchens are always a great selling point of any space and have showcased their value for decades. Whether it be small repairs or a complete gut and restructuring of the space, making over a kitchen can produce over an 80% return-on-investment (ROI) when executed effectively.

Some attributes that contribute greatly to the high ROI in kitchen renovations include:

• ‍Counters - Durable countertops providing ample space in the kitchen will be key given the high resale value they can produce.Typically, they can cost less than $100 per square foot for the material and labor of installation; however they serve as a large part of the return.‍
• Cabinetry - A full replacement of cabinets can cost anywhere between $2,000 and $9,000 depending on your needs. However, many newer model homes and buildings can get by with a quick resurfacing instead.‍
• Lighting - Lighting is commonly an underrated adjustment in renovations. It can drastically change the feeling of the space for tenants; and for a relatively low cost for property owners. ‍
• Cosmetics - Small adjustments to the style of the kitchen will help in making the space feel more modern and unique. Adding a backsplash for example can cost as low as $25 per square foot.

Kitchen renovations can certainly come at a high cost for large spaces or multiple units; however, common financing options like a home equity loan or a business loan can certainly help to fund such a large expense.

As the name suggests, home equity loans allow you to use funds directly from your property’s equity to finance the renovation and oftentimes, with a fixed interest rate — unlike many personal loans. Similarly, business loans will typically come with a lower interest rate and your interest payments will be tax-deductible, making it much more feasible to pay off in the long-run.

Luckily, even after investing so much into a kitchen renovation, you likely will not have to make any additional upgrades for another 5-10 years.

2. Bathroom

Like kitchens, bathrooms are another renovation creating an incredibly high ROI for property owners. Whether you own a new or old property, tenants and future buyers are likely to pay more for a space with new, upgraded fixtures and details. Even the smallest changes can be effective for giving the bathroom a modern feel.

• ‍Fixtures - When it comes to bathroom remodels, you should certainly prioritize the look and style of fixtures as they can be one of the small details that attracts high-paying tenants. In many cases, you won’t have to splurge on fixtures but it is important to create cohesion throughout the space as this will help create a luxury feel. Most modern fixtures are timeless and will be valuable when you are looking to sell as well.‍
• Bathtub vs. Shower - Always pay attention to the current trends, needs, and location of your ideal renter. If you are going after a younger community of renters, they may be happy with a shower in the bathroom. However, you will notice that renters older in age or those with large families will require a bathtub instead. Understanding your specific market for high-priced pieces like a bathtub or shower, naturally, will drive greater ROI, because of the tenants' sheer need for one over the other.‍
• Paint - Painting is a quick and easy fix that will provide value in the short-term for tenants and can sustain itself in the long run if you are looking to sell.

3. Garage

Garages are continually growing in popularity and value and can certainly be a beneficial addition to any property. Garage renovations typically don’t require an extensive redo of the space because most of the value comes from the small details that are added during a renovation.

For example, a finished garage is relatively simple to complete and it typically costs around $10,000 with an 80% ROI. Adding insulation, walls, and consistent flooring throughout the space gives off the message that the garage can be used for more than just parking your car. This is not only valuable to prospective renters, but can certainly increase the value of your property in the long run.

Similarly, maximizing the storage space and replacing or resurfacing the garage door can, again, portray the space as an actual room versus a cold and concrete garage.

4. Curb Appeal

The outside of your property is essentially your first impression on potential renters and buyers, making it an important feature to update during renovations. While it does produce a lesser ROI in comparison to some of the other spaces inside of the home or building, it is what draws people in.

This is another space where it is important to thoroughly study your target market and other competitive properties in the area. This will help you gauge whether or not your renovation is actually necessary and if it will appeal to renters and buyers. Some things to consider when doing an analysis of your ideal renter or buyer include:

• Age
• Occupation
• Income
• Marital/Family Status
• Lifestyle
• Interests/ Hobbies

Simple pieces of information like this may help you decide how much to invest in the outside of the property. For example, if you are targeting young, busy professionals you may not need to invest in landscaping as they may not be interested in the upkeep of the land so a simple, stone walkway may suffice. Contrarily, when targeting a married couple or family, you may want to invest into a full yard redesign or even a porch to appeal to their lifestyle and needs.

Of course, this is a rather simple example.However, you can always use your own real estate market analyst to help you determine what will make the most sense for your property

5. Basement

Renovating a basement produces another highROI around 70%. This can be even greater depending on the location of your property and how competitive an upgraded basement actually is. In New YorkCity, for example, it is rare that you find a property with a basement, so to have one that is modern and cohesive with the rest of the home or building is ideal.

Finishing a basement is definitely up there in cost and can range anywhere between $10,000 and $80,000. However, similar to a finished garage, tenants and buyers will be able to perceive the space as livable when it is fully built out. Common features to add into your property’s basement include:

• ‍Windows and Lighting - One of the many drawbacks to unfinished basements is the lack of lighting in the space. This, alone, can hinder a renters’ ability to see the basement as an added living space.Adding low cost lighting or windows will help to open up the space and even make it feel bigger.‍
• Storage - While a finished basement may provide additional living space, it is also important to prioritize the functionality of the basement. Creating built-in storage features will help tenants imagine how they can actually use the space for their own belongings.At the owners benefit, storage can be put in place at a low cost in comparison to other expenses.

Keep in mind, however, that as a property owner, your National Flood Insurance policy may be limited in terms of coverage for a finished basement. Drywall, carpet, and window treatments typically are not covered so you may have to add a private flood insurance provider to your list of costs for the renovation.

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6. Outdoor Space

Renovating an outdoor space has proven to create the greatest rate of return for property owners, specifically in southern regions. Restructuring an outdoor space can be as minimal or extensive as you would like depending on who you’re selling to.

• ‍Landscaping and Design - This will require some market analysis. However, generally speaking, this can be one of the simpler “to dos” when it comes to renovating. Starting with a few thousand dollars, you can utilize gardening, a patio, a deck, or a veranda to separate out the space. Establish clear areas for sitting, cooking, recreation, etc.This will help the tenant imagine themselves in the space.‍
• Seating - Built-in seating can be beneficial to property owners wishing to establish long-term style and design to the outdoor space. Again, depending on your market, this can be appealing for tenants and buyers who do not wish to invest time into creating their own outdoor space.
• ‍Kitchen - According to Absolute Outdoor Kitchens, the addition of just a kitchen space in an outdoor area can produce a 100-200% return on investment. For a property owner, this is something to take advantage of, specifically during the pandemic as the desire for outdoor space is increasing.‍
• Small Amenities - Fire pits, fountains, and small ponds are ideal to add for owners prioritizing design in the outdoor space. With costs less than $1,000 they can be the little details that take your property to the next level.

Also, if you own a condo building, townhouse, or multi-family home you can leverage the multiple units you own to drive your rate of return. Creating exclusivity with your outdoor space can allow for a greater rental or selling price in that particular unit. This is a common tactic used in apartment buildings and can similarly be translated well into your rental property.

7. Floors

Outdated floors are a property owner's worst enemy. However high-end wood flooring just simply isn’t necessary for most rental properties. Given the lower ROI that they produce, it's important to find a happy medium between modern and affordable.

As an owner renting to tenants, you want to be a little more practical when it comes to renovating flooring since this will be one of the main areas of wear and tear. Consider the following flooring types that will both increase property value and provide durable support over the years.

• ‍Vinyl - With the ability to last for up to 20years, vinyl flooring is made to look like hardwood but at a fraction of the cost. Most materials can be purchased for about $1 per square foot and are known to produce the greatest ROI for property investors.‍
• Linoleum - Linoleum is very easy to install and is relatively durable in the long-run. It is also made of much softer materials than other flooring types, making it great for noise reduction.‍
• Laminate - With the lowest cost of these four flooring types, laminate can be bought for as low as $.50 per square foot. Laminate flooring is topped with a photographic layer that is made to look like wood grain. Similar to vinyl flooring, it can last for decades making it ideal for property owners.‍
• Engineered Hardwood - This is the perfect option for owners who want the look of hardwood floors without the cost.Essentially, engineered hardwood flooring is several layers of laminate with a thin layer of wood on top. To most people they would not notice the difference; however, it is important to note that damages are much more visible on this kind of flooring.

While updated flooring certainly can drive greater value for your rental property, this is one renovation where it's usually more effective to prioritize practicality over design and visual appeal.

8. Smart Amenities

Lastly, smart homes are becoming more and more popular as society continues to modernize. Everything from washer machines and refrigerators to dog bowls and window blinds are being taken over by smart technology.

For property owners in particular, some smart home upgrades are producing a 50% rate of return in the long-term, making it more and more necessary to implement them during this age.

Some common and valuable smart home upgrades include:

• ‍Security - Generally speaking, with smart security systems, you can lock and view your home from any Wifi-enabled device which is certainly convenient for potential renters. However, peace-of-mind is arguably the biggest selling point for tenants given they always know the state of their home even when they are away.‍
• Thermostat - As one of the top three most wanted items in homes today, smart thermostats adjust on their own to a renter's preferences and save energy when the unit is empty. ‍
• Appliances - Smart appliances are huge energy savers as well. Renters can turn them on and off when needed and, again, they create more convenience than many traditional appliances currently do.

Investing in smart technology will truly upgrade your property to the current times and showcase the convenience and comfort that your property provides.

Like any other part of owning a successful business, renovations will take time and unfortunately, quite a bit of money.However, exploring the options above and developing a full strategy for your renovations can put you on the right track to receiving the largest return on your investment as possible and setting you up for greater success in the future.