As a property owner, you may wonder if renovating a rental property is worth the time and money that it requires.
Property ownership can be a complicated business, and at times, it might be hard to determine whether your investments will pay off in the end.
Renovating your rental property can increase revenue in the long run. Keeping rental properties up-to-date and functional will attract more renters and keep current renters satisfied, as well as allowing the rental cost of a property to increase over time.
However, making money off of renovations isn’t always as simple as painting walls or adding a new stove. Keep reading to learn more about how to determine the most profitable areas of renovation, as well as steps you can take to make sure you’re financially prepared for the renovation process.
Deciding When It’s Time to Renovate Your Rental
Renovating a property comes with its fair share of responsibilities. When deciding if it’s time to renovate, you should carefully consider several factors, including the amount of time you have and what renovations need to be done.
Think About Timing
Renovations can rarely be done overnight. If you’re considering renovations, the amount of time you have to complete renovations should factor into your decision.
If you’re the owner of a single-family rental property, it will likely take less time as there’s just one housing unit to be dealt with. If you own a multi-family rental property, you’ll likely have to renovate multiple units. This can cost more and take more time, but will result in more revenue in the long term.
Additionally, think about how soon you’ll need to make a profit on the renovations. If your finances are limited, it may not be wise to undertake costly remodels that will take years before you begin to see a profit.
Owners usually regard renovations as a long-term investment. If your goal with remodeling is to see immediate results, you may need to adjust your expectations or try to find faster ways to profit than through renovation.
Consider What Needs Renovating
Some renovations are more profitable than others and can make your property more competitive in the rental market. Renters are more likely to pay a higher price for a rental unit that’s functional and has high-quality amenities. The following are some areas for renovations that are most profitable:
- Kitchens: Renters will pay more for kitchens with quality appliances, cabinets, and countertops that are up-to-date.
- Bathrooms: Bathrooms can develop mold and wear and tear. Renovating bathrooms to keep them clean and hygienic will go a long way in increasing the value of your property.
- Addition of rooms: Converting a space into an extra bedroom can significantly raise the rent you can seek to get for a property.
- Flooring: Old carpeting is often a detractor for renters. Replace old carpeting or install hardwood floors to gain more attraction.
- Appliances: Apartments with washers and dryers and other useful features such as dishwashers or air conditioning often appeal to renters because of their practicality and ease of use.
Although these are the most common renovation areas to attract renters, make sure you take into account what needs fixing in your property. If something is broken or poses a safety hazard, prioritize repairing this feature.
Know The Costs and Benefits of Renovation
Before you jump into renovating, take some time to research and plan. Get a sense of your budget and also what competing properties are doing so that you can make the most out of your remodeling process.
Stick to a Budget
Making a budget in advance will help you decide if renovating will be feasible. The following are some strategies that will help you create a strong budget:
- Get quotes from multiple sources to ensure you’re getting a good deal.
- Target areas that are losing you money. Updating windows or appliances that waste a great deal of energy can curb monetary loss.
- Determine how much you can increase the rent after renovation. Investigate how much similarly renovated properties are asking for rent. This will help you plan out how much you can spend and still see the profits within a timeline that works for you.
With some planning, you should soon be able to determine if you can afford to renovate and how much you can invest in the renovation process.
Invest in Quality Renovations and Suppliers
Although it may be tempting to cut costs during renovations, you should make sure that you’re using materials that are of sound quality to avoid having to redo renovations in the future.
In particular, the materials you use when renovating can make a big difference in both the return on investment to your property and the probability that you’ll have to go back and make more repairs.
Before you buy materials, do some research on suppliers. Some, such as Superior Commercial Solutions, have outlined protocols and a high reputation for their kitchen cabinets and countertops that make them a top supplier.
Choosing Between DIY and a Contractor
If you’re looking to cut some costs, doing your own renovations can be a good option; however, if a renovation will be very complicated and technical, it can be worthwhile to hire a contractor.
Choosing to Hire a Contractor
Construction professionals can make the renovation process easier and reduce the likelihood of incorrectly done repairs.
When choosing a general contractor or specialist for your renovation, keep the following factors in mind:
- Price: Compare costs across different companies.
- Reputation: Check for reviews from the community and other business owners.
- Timeline: Some renovators will be able to do your renovations within a faster time frame.
Hiring a renovator that fits your needs will make the process go more smoothly and to your satisfaction.
Opting for a DIY Approach
If your remodeling needs are fairly straightforward or you have experience with renovating, consider doing the renovations yourself. This will save you money that would otherwise go toward labor.
Should you choose to take a DIY approach, make sure that you’re conducting background research before beginning your project. Gaining knowledge beforehand will ensure that your project goes well and benefits you for years to come.
Get the Most Out of Your Renovations
After undertaking the renovation process, you’ll need to be proactive to get the most out of your property.
- Consider increasing the rent: If your renters are satisfied with the changes you’ve made, they’ll be more likely to stay. Increasing rental rates per your expenses will help offset the cost of renovation. Keep in mind that raising rent is more acceptable in response to cosmetic changes than necessary repairs.
- Advertise your renovations: As you list your available rental units, be sure to highlight the renovations you’ve done. Take high-quality photos for the web and show touring prospective renters the renovated models.
- Apply for tax breaks: Sometimes renovations that serve a repairing function can be eligible for tax write-offs. Do some research and speak with the IRS to see if your property can benefit from this perk.
Though renovating is the first step to increasing the value of your property, ensure that you take steps to advertise your updates and also make use of the resources that are available to you.
Superior Commercial Solutions Can Renovate Your Rental Property
As a rental property owner, you’re probably used to making plans about how to get the most out of your rental properties. Renovation is a strong way to help your property stay cost-effective and competitive in the rental market. The professionals at Superior Commercial Solutions can help.
We’re an industry leader in supplying and installing cabinets and quartz countertops for multi-family, student housing, assisted living, and hospitality projects. We’re based in Salt Lake City, Utah, but we take on projects throughout the U.S. Have questions? We have answers!
Sources:
https://scsmultifamily.com/about/
https://www.dumpsters.com/blog/renovating-a-rental-property
https://www.mashvisor.com/blog/renovating-a-rental-property-save-money/
https://www.hollandpicht.com/blog/renovating-a-rental
https://nelsonconstructionrenos.com/is-remodeling-my-rental-property-worth-it/