Renovating Rental Real Estate: Which Improvements Yield the Best Returns?

If you’re a small business owner who owns rental properties on the side, you might realize a nice little income from this side gig. 

That being said, you also have expenses, and naturally, you try to minimize them. But, certain expenditures can enhance your rental properties and enable you to charge more in rent. Let’s look at which repairs and renovations can help you boost your revenues and provide a fast return on your investment.

Benefits of Renovating Rental Properties

Once you’ve purchased a rental property, you might be tempted to rent it as-is if it’s in good working condition. Yet, investing some money could end up benefiting you as a landlord for years to come.

First, making some renovations can increase the property value, which also increases how much you can ask in rent. Yes, it will take time to recuperate your investment, but with a luxury kitchen with all the bells and whistles, for example, you’ll be able to command top dollar for your rental as long as you own the property.

Another reason to renovate or make proactive repairs and maintenance is that you may save yourself a costly headache later. Maintaining a sewer line or having an exterminator make regular visits to prevent mice and insects now will ensure you don’t have issues down the road.

Once you’re ready to sell the property, the improvements you made may help you get a higher asking price.

Finally, the money you spend on repairs and improvements may be tax deductible, so why wouldn’t you make them?

Renovations That Yield The Best ROI

Now, let’s look at what you can do to improve your rental property and see a quick turnaround on your investment.

Eco-Friendly Updates

Older homes may be energy inefficient and may cost renters more to heat and cool. By upgrading your windows, lighting, and water fixtures, not only are you saving them money, but you’re also saving the environment!

Some cities and states offer incentives for incorporating energy-efficient elements into your home. For example, if you install solar panels, you may qualify for the Residential Clean Energy solar tax credit, but only if you live in the home part of the year. There may be other incentives you qualify for.

Landscaping

Another low-cost update to your rental house is landscaping. Adding flowers, trees, bushes, and plants to the front and back yards of a rental property can increase curb appeal. If your property is in a drought-stricken area, you might consider xeriscaping with drought-friendly plants to cut down on water consumption.

Consider also including the cost of a regular landscaping service to trim the grass and maintain the plants. You can include that cost in the monthly rent.

Kitchen Updates

For many people, the kitchen is the epicenter of the home. And an ugly or outdated kitchen can be a turnoff for potential renters.

Renovating a kitchen doesn’t have to be costly. You can reface or paint cabinets to update the look, as well as replace old countertops with durable materials like quartz or granite, which looks expensive but isn’t.

You can also install energy-efficient appliances to cut down on electricity bills and provide a sleek, consistent look to the updated kitchen.

Tech-Friendly Solutions

Certainly, every rental in your community isn’t connected to smart devices, which is why investing in updating things like your thermostat and security system could give you a leg up on the competition.

A video doorbell, security system, and lighting system can all be controlled with a tenant’s phone, which provides convenience and peace of mind.

Bathroom Remodel

Sure, a bathroom remodel can cost an arm and a leg, but it doesn’t have to. 

Simple updates like replacing the vanity and painting the walls can create a modern look without a lot of investment. You can also regrout the tub to make it new and sparkling again.

Outdoor Space

Add some pizzazz to your rental property by putting outdoor furniture on the patio. Consider even adding a barbecue grill and a string of lights to add even more personality!

Here’s a tip: shop for outdoor furniture at the end of summer so you can get great tables and chairs at a fraction of the price. 

Floors

After a few years of renting a property, carpets can get worn out. If previous tenants had pets, that carpet likely also smells less than fresh, thanks to an accident here or there.

You can replace the carpets with new ones, or you can opt for durable, low-maintenance flooring like hardwood, vinyl plank, or laminate flooring. There are affordable options that look like wood but aren’t. Only you will know!

Essential Repairs

Not all repairs are optional. Especially if you’ve just bought the property and don’t know the condition of the home’s plumbing, electrical, structural, and HVAC systems, it’s a good idea to hire experts to ensure they’re up to speed (and up to code).

With plumbing, make sure all leaks are repaired and that any old pipes that are in danger of bursting in the next few years are replaced with newer, more modern materials.

Older homes have older wiring that may not be up to code. Have an electrician ensure all wiring is updated, and while he’s at it, ask him to add more outlets. You can never have enough!

Have a professional to inspect the structure of the home to ensure the foundation is free of cracks. If the home has a basement, have it inspected for water damage. Hire an HVAC specialist to regularly inspect and clean your HVAC system.

Tips for Renovating Rental Real Estate

Find the balance between spending enough money to attract high-quality tenants and cutting costs where you can. If you’re a DIY kind of person, consider which projects you can handle on your own. Changing a faucet or painting a wall may be simple enough that you can save the money of hiring a professional to handle them.

Calculate how long it will take to see a return on your investment. You might prioritize your renovation projects based on the fastest ROI and save the bigger expenses for later when you have more money coming in.

Renovate Smartly

As a business owner, you understand the importance of investing in your business to ensure that you have years of profitability ahead. Owning rental property is no different.

By spending money in the right places, you can increase your property value and command higher rental prices. You may also benefit from tax deductions, and when you’re ready to sell the property, you can ask for top dollar.

Strive to find a balance between maintaining property value and meeting tenant needs so that everyone is happy.