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Renovating rental properties is one of the most effective ways to retain or increase your property value, but, like any other aspect of the business, there are best practices to follow.
You can increase your rental income and attract potential renters to your listing through smart renovations, and applying strategic upgrades can make your renovations more effective.
Assess Your Rental Property
First, examine your investment property to determine which areas need upgrading. Remember that repairs and replacements should always take priority over renovations. Always address leaky faucets, faulty appliances, or broken doors first.
If everything in your rental unit works as it should, you can renovate based on current market trends. For instance, smart home technology has become increasingly popular in rental properties.
Create a Budget and a Timeline
Budget
Determine the budget you can spend for your renovations and prioritize the projects that may impact the property's rental value, which can help you justify higher rental rates. You should also consider alternatives that will help you save money on renovation costs. You might not need to get a new door when all it needs is a fresh paint job.
The renovation process will require a lot of expertise, so you need to consider the people you have to hire when calculating costs such as contractors and the materials you might need. Significant changes tend to be more expensive but they increase property value more.
Timeline
Create a timeline for rental renovations so it would not have a significant impact on your business. Schedule renovations outside of peak rental season to minimize vacancies. An up-to-date bathroom is great but housing prospective tenants in the most profitable time of the year is better to finance more upgrades in the future.
Legal Requirements
You should check the local legal requirements before executing your plan such as providing proper notice and making other arrangements for the tenant. If you will access the unit, then you will need to provide a "Notice to Enter."
Be transparent with your tenants about the home renovation work duration, scope, and the inconveniences that might experience. If the renovations require the tenants to vacate the rental unit, you can offer other living arrangements, although the tenant still has the right to refuse.
It ultimately boils down to the rental agreement and whether you included provisions about relocations in the event of renovations. Kicking a tenant out before their lease term ends can result in legal consequences, so it would be best to consult a lawyer you absolutely need to do the renovations.
Identify Key Upgrades
Property owners need to do their due diligence and identify which rental renovations can attract tenants. You can focus on high-traffic areas of the rental property such as the kitchen and install new countertops and light fixtures.
If interested renters are eco-conscious tenants, energy-efficient windows or modern appliances with smart features could be your best bet. Major renovations can contribute to long-term value, but something as simple as adding more storage or applying a fresh coat of paint can still increase the rental property's marketability.
Acknowledge the Purpose
While the general purpose of making renovations to your rental property is to increase rental income, there are specific reasons you should focus on. If the idea is to attract more potential tenants locally and stay competitive, improving the property's curb appeal could be the solution.
If you plan to reduce utility costs, you might want to invest in improving resource or energy efficiency by investing in water-efficient shower heads or automated systems like smart thermostats to reduce energy costs. Either way, you can save more money and improve tenant satisfaction in the process.
Low-Cost Improvements
Sometimes, the solution is easier than you think. You might not even need to make renovations to improve renter satisfaction. Something as easy as using a pressure washer to clean your walkways or trimming the shrubbery around your property can enhance curb appeal and attract high-quality tenants.
Many tenants would appreciate upgrading the current light fixtures or installing new ones to add more light to the unit. Your property stands to increase in value even with the smallest upgrades as long as you keep adding to them over time.
Rental Renovation FAQs
What are the most cost-effective rental property renovations?
Look for the most high-impact and inexpensive upgrades to get the best return on investment (ROI) for your property. There are highly sought-after improvements that are low maintenance such as new light fixtures or modern appliances.
How to determine the ROI of a renovation project?
The most basic way to calculate ROI is to consider the estimated cost of renovation and the potential income increase it brings. The higher the potential income is to the estimated costs, the better your ROI will be.
Do I need permits to conduct rental property renovations?
Depending on how major the renovations are, some projects will require permits. Major structural adjustments, along with changes in the electrical and plumbing system. If you hire a contractor in Indiana, they often get the needed permits themselves.
How to minimize the disruption to my rental business?
The best you can do is to communicate with your tenants and be transparent about the duration, the extent, and the potential noise the renovation might cause. Be sure to adhere to local and state laws, as well as the terms of your lease agreement.
Hiring a Professional to Handle Your Renovations
Some property management companies like CRM Properties offer renovation services that cover minor cosmetic upgrades to complete remodels. This eliminates the hassle of finding contractors and managing renovation costs.
We understand what kind of upgrades your property needs to maximize its value, and our network of vendors can help you get the best services at competitive prices. Let us handle the process and enhance your property's value efficiently.
Curious as to how our service works? No worries! You can schedule a free consultation to determine whether we are the best service for your needs.