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Have you ever walked into your rental property and thought, “Wow, this place could really use an update!” Well, you might be surprised to learn that spending money on renovating your rental can actually have several long-term benefits.
Renovations can greatly increase your property value and attract more potential renters, given that you conduct well-planned upgrades for higher returns on your investment. However, there are a few common renovation mistakes property owners need to avoid to ensure a positive cash flow and increase tenant satisfaction.
Renovation Mistakes You Need to Avoid
Overspending
Budgeting your renovation project correctly prevents you from spending money you won't be able to earn back. To make the most value out of your investment property renovations, find the most cost-effective upgrades, establish a target audience, and seek to appeal the most to your current and future tenants. For example, adding a small dog walking area can be great to draw in pet-loving tenants.
Failing to Prioritize Safety Features
While new kitchen cabinets can increase your rental value, you need to prioritize upgrades that would ensure the safety of your tenants first. You should look into matters like electrical wiring, secure entry systems, and smoke alarms. Landlords are required by law to replace smoke and carbon monoxide detectors every 10 years. If you’re missing these features, get them installed ASAP.
Cutting Corners on Materials
Trying to skimp on materials or products can lead to you spending more money in the long run. Cheap fixtures, for instance, may last for about two years before they break, whereas quality and durable fixtures that cost twice as much can last thrice as long. Avoid cheaping out on construction as well as it can be dangerous for your residents.
Ignoring Local Market Trends
Renovation costs aren't cheap, so you have to do your due diligence in finding out what sells in the local real estate market. You should, however, consider your target market as a factor. Student tenants may not care as much about granite countertops but would be drawn to storage space and kitchen appliances.
Not Obtaining Permits
Most construction and repair projects require permits in the state of California. If you intend to break down walls to turn your rental property into an open floor plan, it is considered a structural change and not obtaining a permit can lead to fines and even legal action against you.
Renovations Without Professional Help
Even if you consider yourself a DIY expert, you should still avoid making any major renovations by yourself. Consult or hire a professional to do the job for you. Adding new cabinetry might be an easy enough job, but you might need more than a few tips from the internet to tear down walls or add new wiring to your rental property.
Neglecting Accessibility
You have to remember that not all tenants can easily access areas like stairs or use facilities without assistance. Consider upgrades that add convenience for people with disabilities like ramps, grab bars in bathrooms, wider doorways, or even a central hub for home controls for low-maintenance navigation with things like lights and smart appliances.
Ignoring Energy-Efficiency
You can make upgrades like energy-efficient windows to reduce energy consumption in your rental property, which helps you and your tenants save money. The fewer expenses you have, the more cash flow you can expect from your investment property. These can even come in inexpensive improvements like using lighter paint colors to reduce the need for more lights.
Unjustified Rent Increase Over Upgrades
You can increase your rent if the renovations you've made call for it such as replacing carpet floors with hardwood or building an additional room in a unit. However, making huge rent raises over quality-of-life improvements like adding a ceiling fan or fixing furniture shouldn't call for rent raises.
The Importance of Renovations
New Listing Details
Adding new amenities and upgrades can make a big impact on your rental business since more renters will be encouraged to check your listing out. You can make your listing stand out by mentioning the latest renovations on the house or room features like new carpet or modernized appliances.
Improves Curb Appeal
Online listings aren't your only way to attract tenants. If your rental property is located in a high-traffic area, you might find new tenants from people within the vicinity and they can also help with word-of-mouth marketing. You won't have to renovate the exterior majorly. You can make small changes like replacing your doors and light fixtures.
Add Resale Value
Just as routine inspections and maintenance can help you retain the value of your property, you can also increase its value when you renovate structures or replace fixtures in your rental. This can serve you well if you decide to exit the rental business as you’ll get substantially more than your purchase price due to value appreciation as well.
Increase Rental Income
Some landlords renovate their properties to expand bedrooms and kitchens or add more units to the property. If you have the budget and the rental demand in your area is high, you can start investing in expansions with low risk and increase your income. Just make sure that there’s room for improvement and that you're capable of managing more renters.
Prevents Having an Outdated Property
It's not enough to just maintain your rental property. You have to update your business by modernizing certain aspects of the building such as security and amenities. You can add smart features and appliances and increase your rent rate with these.
Hiring a Property Manager to Handle Improvements
Having the services of a professional property manager can significantly help you manage your renovations better, as well as save costs. Companies like Harland Property Management have access to a vendor network that provides quality service at a lower price.
The work doesn't stop there since you’ll need to maintain these new additions to retain your rental value, and having a property manager whose sole job is to oversee your rental business can be beneficial to your business overall.
Contact us now and we can help you on so many more ways to improve your rental property beyond renovations!
