Success in the rental industry depends on many factors, one of which is attracting great tenants. Adding to a rental property’s value through upgrades benefits both owners and tenants. So, how do you know which upgrades will produce the best return on investment? Join us below as we discuss the top upgrades that both attract quality tenants and maximize ROI along with what property owners should avoid.
Top 10 Upgrades to Attract Quality Tenants
The right renovations are essential to maximizing rental value in addition to getting your property noticed. Higher rent can mean higher quality tenants, plus added profits. Let’s take a look at the top 10 renovations any landlord can benefit from.
- Upgraded Lighting
- Water-Saving Fixtures
- Modern Flooring
- Boosting Curb Appeal
- Energy-Efficient Appliances
- New Countertops
- Added Square Footage
- All-Over Painting
- Update the Bathroom
Technology has made our lives convenient and streamlined; renters look for the same in a rental property. Today’s modern tenant needs plenty of outlets, USB ports, and a reliable internet connection. If your rental home is old, the electrical system may need an upgrade to withstand the modern demand of everyone’s devices.
That said, technology upgrades do not end with outlets themselves. Items such as security systems, video doorbells, or smart locks are things any tenant would gladly pay extra for in their next rental home. Safety and security weigh on everyone’s mind; as a landlord, any step you take to secure the property is beneficial.
Another area where technology benefits the rental industry is through online property management services. These services allow landlords to provide tenants with online rent payments and digital maintenance request capability for a reasonable monthly fee. These features attract quality tenants but are equally beneficial and convenient for landlords.
Below are a few examples of technology upgrades that, for a modest investment, improve rental property appeal and value of your rental property.
Technology Upgrades for Rentals
- Smart Home Security System
- Video Doorbells such as Ring
- Smart Locks for Entry
- Outdoor Motion Lights
- USB Capable Outlets
- Online Rent Collection
- Digital Maintenance Requests
Natural light is the best light, but additional light sources are inevitable. If the lighting in your rental is dingy or dated, an upgrade is necessary to appeal to tenants. Newer fixtures are more stylish and energy-efficient when paired with long-lasting LED bulbs. These save tenants both time and money by decreasing energy costs and the frequency of replacement bulbs. Investing in a cohesive lighting scheme throughout the property presents a more polished and modern overall look.
When tenants must pay for utilities, saving on water bills ranks high on the list. The simple act of swapping out the faucets in the kitchen and bath can save a bundle. Low flow fixtures work by limiting the amount of water flowing through them, which means less water and money down the drain. Do not forget the showerhead! Low-flow fixtures are pricier than their in-efficient counterparts, but they add value to your investment property while saving money in the long run.
A debate as old as time; carpet or hardwood in rental properties? There is something to be said for either option but what is not appealing is outdated or poorly maintained flooring of any kind. Modern renters prefer wood, laminate, or tile in rental homes above traditional carpeting. However, hardwood is a significant financial investment for landlords. That said, there are plenty of new and innovative products that provide both style and durability on any budget.
In a rental property, durability means lower maintenance, saving landlords in yearly upkeep, and turnover costs. Let’s take a more in-depth look at the options below.
Carpet vs. Other Flooring – What is the best flooring for rental properties?
- Carpet – Carpet stains easily and shows wear and tear far more quickly than any other flooring option. While many renters prefer carpet in the bedrooms, it is frowned upon in other areas. Additionally, carpet can hold a multitude of allergens, complicating common conditions such as asthma. While it may seem cheaper initially, replacement is recommended after every few tenants, costing more in the long run.
- Hardwood Flooring – Materials such as wood, laminate, ceramic tile, or vinyl can all be great options for a rental property upgrade. The key here is to balance cost with durability, while one may cost more than another initially, consider the maintenance costs involved. Unlike carpet, other types of flooring are easily cleaned or swept free of dirt or debris. Laminate offers the best of both worlds, the look and durability of wood at a fraction of the cost.
- Mixing Materials – If upgrading to hardwood or laminate throughout is not in the cards, mixing materials is a great option. Utilize carpeting in low traffic areas such as bedrooms, subsequently freeing up savings to be used on more expensive materials in other areas of the property. This helps to keep the cost down while still achieving an appealing result and adding value.
Boosting Curb Appeal
It is easy to focus primarily on your rental interior, but outside gives the best first impression to potential renters. Therefore, exterior spaces and curb appeal cannot be overlooked. However, an unkempt outside is a sign to tenants of your maintenance expectations. So, seal or fix driveway cracks, trim hedges or shrubs and mow the lawn if seasonally appropriate. In addition, if overgrown patios or foundation is covered in mildew, consider investing in a power wash at least once per year. These tips will keep your investment property showing worthy!
To add value and sell the lifestyle your property provides, think about adding a patio set or outdoor table. The added relaxation or entertaining space is a huge bonus for renters and looks great in marketing photos.
Many investors have heard the phrase “kitchens sell homes” well, they also rent them. Old-fashioned or mismatched appliances grab a tenant’s attention, but not in a good way. While regular maintenance and temporary fixes serve a purpose, eventually, replacement is inevitable. To add value and appeal to your property, invest in energy-efficient and matching appliances that offer a warranty.
Adding a new washer/dryer offers convenience for your tenants and added profits for you. Properties with a washer/dryer in the unit can charge more per month than those that do not have this amenity. Along with an attractive look and energy savings, new appliances also make a great highlight in marketing to attract new tenants!
A dated kitchen is an eyesore to prospective tenants. Appliances can be swapped out, and cabinetry can benefit from new hardware or even a coat of paint, but countertops are another story. Options for countertop upgrades vary widely and include modern materials such as cement, granite, Corian, and quartz, to name a few. Remember that durability and functionality is key, as well as a timeless style.
Additional Square Footage
Do you have some underutilized space in your rental home? Well, converting to an additional bedroom, sunroom, family room, home office, or finishing off a basement creates more rental value. Bonus square footage is a valued asset to renters and buyers alike, meaning this type of renovation has great ROI potential. Especially now, with so many individuals still working from home, occupants are looking for any extra space they can.
All Over Painting
One of the simplest upgrades a landlord can make is investing in a fresh coat of paint. Touch-ups are ok, but over time, walls begin to look shabby and worn. Something as easy as repainting rooms with a modern neutral hue offers one of the largest investment returns. When choosing a color for rental properties, simple is best. While it may be tempting to follow all of the latest trends, remember landlords must appeal to a wide range of tastes.
Once you find a paint color that works best, stick with it! Additionally, register your paint’s brand and color at your local hardware store. Doing so ensures there are no mix-ups, and your contractors can easily pick it up as needed.
Update the Bathroom
Bathrooms, like kitchens, are always a great choice for landlords looking to upgrade. Cost-effective upgrades that maximize impact include upgrading the vanity, adding new light fixtures, or swapping out for a modern vanity mirror. When selecting a vanity, try to find one with additional storage. With so many options and finishes to choose from, these simple changes result in a huge impact on your rental bathroom’s overall feel.
What is ROI (Return on Investment), and How is it Calculated?
In its simplest form, ROI is a metric used to evaluate a rental property’s profitability performance. After a few calculations, the result is a ratio of how much profit you are making on the original investment. Evaluations do become more complex when you factor in equity or if you have financed the investment property, but a good rule of thumb is between 6% and 10% ROI. So, take advantage of some of the many online ROI calculators available for free to investors, or follow the steps below.
How to Calculate ROI?
- Calculate the Rental Property Annual Rental Income
- Subtract Expenses to Determine Your Annual Cash Flow
- Add Any Equity to Get Your Total Net Income
- Divide the Net Income by the Total Investment to Determine ROI
Things to Avoid When Upgrading a Rental
Now that you have some ideas on what upgrades add value and how to calculate ROI, you may wonder what renovations should be avoided. Not everything property owners can do will be profitable in the end, especially in a rental. With that in mind, check out these things to avoid below:
Do Not Replace Things You Can Repair
If an appliance or other fixture is still working properly, it does not always need replacing. For a cost-effective option, consider doing things like resealing the deck and refacing or painting cabinetry. Simple repairs or a little sprucing up are
Still, great options when full replacements are not in the budget.
Steer Clear of Non-Durable Materials
Rental homes see far more turnover than a traditional owner-occupied home. Therefore, to get the most for your money, durability is key. For items like countertops that get a lot of use, choose a light-colored resilient material that hides scratches well.
Forget Luxury Upgrades
Luxurious and expensive materials have their use, but not in a rental property. The truth is luxury upgrades do not mean higher rents if the neighborhood market will not support it. In high-end suburbs where rent is high, tenants may come to expect a certain number of bells and whistles. However, for most rental markets, tenants are less likely to appreciate, and pay for, luxury finishes. So, before making any costly decisions, thoroughly research the local market.
Having the right mix of amenities and value will attract quality tenants. Carefully choosing and adding the right upgrades can help achieve greater ROI. Are you looking for ways to increase profitability in your investment property? Turn to the trusted rental property management experts at Bay Property Management Group. Our expertise has helped owners reach their properties’ full earning potential by offering a full-service approach to rental management. Give us a call today to see how we can help you!