Who wants an upgraded property with a high-end kitchen and luxurious flooring? Everyone! But is it worth the money? To an investor, probably not.
The biggest mistake landlords make when rehabbing their properties is over-improvement. When a new landlord looks at the property as if they’ll be living there themselves, they pay too much for upgrades. In reality, rates are set based on the neighborhood market, not on how many upgrades you made. And people won’t pay 20% more for your home just because it has granite countertops. Those types of improvements simply don’t bring a big return. If a tenant wants a perfectly finished property, they’ll move to a neighborhood where those upgrades are standard.
Questions to Ask Before Upgrading Your Rental Property
So, before you make an improvement, ask yourself a few questions.
1. Does This Bring Real Value to the Property?
Any improvement is an investment in the property. So, with each upgrade, consider the return it’ll bring.
2. How Long Will It Take Me to Recover the Cost of That Upgrade?
Figure the return on investment in real dollars. Experienced investors ask questions like, “If I put in a $2K countertop, how long will it take me to make that money back?” Figure out the numbers by looking at the rental income and calculating how much more you can charge in rent for the upgrade you’re considering.
3. Do I Need to Make the Improvement?
Why are you upgrading? Wise investors only make improvements when they’re needed. So ask yourself, “Am I replacing the countertops because the kitchen needs them or because it’s not my style?” Usually, upgraded countertops or wooden floors only bring a minimal increase in rent (5% or less). So, if you lease a property for $2K/month, you’ll only bring in an extra $100/month for the upgrade. That means it’ll take about five years to recover your investment. Is it worth it?
6 Rental Property Improvements Worth Making
Are there any upgrades that pay off? Of course. These fail-proof improvements benefit your property and your tenants, even if you don’t calculate their exact return.
1. Low-Maintenance Landscaping
Clean out the flower beds, lay fresh mulch, and patch the holes in the yard. Also, consider planting low-maintenance shrubs that need less attention from the tenants. You want your property to look well kept, even if someone forgets to water the plants every day!
2. Secure the Fence
Keep your fence functional and fresh. It needs to be sturdy with no missing pickets — secure enough to keep a dog inside. Plus, painting a fence is cheap, so it’s an easy update to an older fence. No matter who leases the property, they’ll want an intact fence.
3. Matching Outlet and Socket Covers
Finishing touches, however inexpensive, show you care for a home. When someone walks into a property to see mismatched yellow, white, and paint-stained outlet covers, they also see oversight. For as little as $0.13 each, you can update the plastic covers to match. It’s an easy fix well worth the few dollars you’ll spend.
4. Matching Doorknobs
Doorknobs should also match. It’s easy and rather inexpensive to update all the doorknobs to a standard look. Old doorknobs show traces of paint and use from the years. New, matching doorknobs are another finishing touch that make your home look complete.
5. Soaker Hoses
If your property doesn’t have a sprinkler system, invest in a soaker hose. Not only do you want your landscaping to stay hydrated, but water keeps your foundation intact. Summer in the DFW area brings consecutive days of 100-degree weather, which can shift the foundation. If your foundation shifts, you’ll see cracks throughout the property. And fixing the foundation is expensive. So act preventively, and wrap soaker hoses around the house for times of drought and heat.
6. Clean Carpet
People want a clean property as much as they want any other feature. Rarely do people ask a potential landlord for granite countertops or hardwood floor upgrades. However, if a property isn’t clean enough for them to feel comfortable with their kids playing on the floor, they probably won’t rent the house. So get the carpets cleaned professionally. Then look for any other measures you can take to make it a pristinely clean property.
3 Improvements NOT Worth the Investment
People think a new countertop will bring a property to the top of the rental market. But, unless the current countertops are damaged, it won’t bring enough return to make it worthwhile.
2. Real Hardwood
Real hardwood floors look amazing, but they aren’t usually worth the money. Think about your goal for the property more than your preference for flooring. If you plan for the house to be a long-term rental, you don’t need high-end wooden floors. Many people can’t tell the difference, and hardwoods are often overkill.
3. Labor-Intensive Landscaping
We want to give tenants the least amount of responsibility possible for grounds maintenance. Fruit trees, water features, and elaborate gardens look great… when they’re maintained. However, tenants aren’t interested in doing major landscaping upkeep. To keep these features looking their best, you’ll need to hire a professional landscaper. So, after you pay for the landscaping upgrade, you’ll have to pay even more to keep it looking nice.
Make the most of your investment by thinking through the return on your upgrades. You want your investment to pay off, so don’t waste money on improvements that don’t.