“Remodel it and they will pay.”
This myth sprung from watching too many television shows showing dramatic makeovers and jaw dropping profits. While a fix-and-flip can earn some quick cash, remodeling rental properties is not always that profitable. Now, that doesn’t mean to say that you NEVER need to upgrade or remodel, but understanding where your costs and return value are is one of the most important elements to property improvements.
Top 3 Remodeling Projects
When it comes down to it, there are only about three common major remodeling or upgrading projects that are rental-related; flooring, kitchen remodel, and bathroom remodel. Did you know that most renters count the number of bathrooms a home has before they count the bedrooms? Over the past several years, more and more renters are holding the quantity and quality of their ‘throne rooms’ to higher standards and accounting for frequent guests. Luxury equipment and modern clean lines are all the rage but come at an expense. But it doesn’t have to cost as much as it sounds! A simple coat of fresh paint and upgrading the light fixture can help ensure that you’ll see a higher return at a much lower cost. Still, want to do a full upgrade though? Consult your property manager to get an idea of which improvements would generate the most return and always check your seasonal sales at your local hardware store.
Much of the same can be said for an easy kitchen spruce up. Most cabinets can be wrapped or painted for a fresh new look and adding a few new modern pulls can bring a tired kitchen back to life. Switching your appliances from outdated white to either black or stainless steel would also be a great investment that will surely have you seeing higher quality tenants and rental income. For most full renovations, you may find brand new ‘appliance package’ deals or you may find yourself browsing the used appliance store for unbeatable deals with great or not-so-great warranties. Always weigh your cost/benefits to decide what works best for your home!
Unfortunately, the same cant be said with flooring-related improvements as many different factors come into play when deciding ‘if’ and ‘when’ flooring should be changed. You can find more information on our flooring suggestions here.
Cost vs. Income
Before you opt to remodel your rental, you need to do some thoughtful and purposeful analysis first. Consult with your property manager to find out how much your proposed upgrade will increase your rent. As an example, if your kitchen remodel will cost you $13,000 but your rental rate increases by $200 a month, it’ll take roughly 5.5 years to recoup that investment assuming your rental rate doesn’t continue to increase over the years. With an average of 3-5% yearly increase in rent, your initial $13,000 investment has now paid itself off and become pure profit!
Sounds great, yeah? But where will you get the initial $13,000 to begin with? From remortgaging the home to dipping into that savings account, paying for any upgrade or remodel could cause a lot of stress, confusion, and expense. Consult your banker and heavily research your opportunities to decide what works best for you.
Need More Info?
Here at Victory, we pride ourselves in our current knowledge and experience and are confident in our ability to guide you on how to prepare your house for rent. Understanding from the very beginning if your home is a good investment or candidate for upgrade/remodel is key to its success as a rental home. Claim your FREE Rental Evaluation here and prepare for worry-free investing.