If you are an investor and have a portfolio of rental properties, you already know the importance of doing the right work on your properties. The right work consists of finding a balance between price, style and functionality that stays within your budget and the neighborhood itself. Many investors get caught up in trying to renovate the property as if they were living there. It is fine to have the property looking its best, but it is more important to keep an eye on the neighborhood and do your work accordingly. Doing work and upgrading your rehab is not as important as doing the right work.
Any prospective renters will compare your property to any other available property that is on the market. Even though you may think that higher quality (i.e. more expensive) fixtures and appliances will attract higher rents at the end of the day, most tenants are focused on price. What you will find is that granite countertops and stainless steel appliances may impact the value of your home when it sells, but it won’t move the needle when it comes to monthly rental amounts. If you are considering any upgrades or replacements, look at your neighborhood as a guide.
Even though you may want to experiment with different colors of paint or newer styles for your investment, renters largely want boring and functionality. They would much rather have items around that house that they feel comfortable with rather than look good. If you are furnishing the property and want to go out of the box with your couches, coffee tables or appliances, you may like them more than your tenants. Most tenants view a rental property as a nine month stop until they can move somewhere else. It is very rare, and extremely positive, if you find a tenant that falls in love with your rental and wants to stay there for multiple leases. By keeping the items functional, useable and in line with what a majority of people desire, you will increase demand and in turn increase your rent ability.
If you view your rental property as a long term hold, you should treat it accordingly. There are many items in and around the property that could be replaced or upgraded if you had an unlimited budget. Most investors don’t have that luxury and need to be savvy with their expenses. There are segments of investors who will opt for the top of the line everything when something breaks down or needs replacing. Others will look to keep existing items updated and working for as long as possible. If you consider keeping your property for the foreseeable future, you can justify spending money on a new roof, furnace and other big ticket items over the years. If you are not sure what you want to do with the house from year to year, spending money on replacement items every time they break down is not conducive to a profitable business. Try to fix and update every item that needs it for as long as you can. If not, you may be throwing money out the window.
Curb appeal can have a huge impact on prospective renters. Instead of solely focusing on the interior, you need to spend some time and money on the outside. If you have overgrown or dying bushes, you need to get rid of them. If the yard has burnt out grass or poor landscaping, you need to spend money to have it looking fresh. The same can be said with the garage or if there are weeds in the driveway. Most renters and buyers form an opinion about the property before they step foot in it. If the outside is a mess, they can assume the inside will be the same. If you are doing any work to the property or have a seasonal maintenance checklist, the exterior cannot be ignored.
Finally, the two most important areas to focus on with any interior renovations are the bathrooms and the kitchen. It is rather ironic that one of the rooms that typically have the least time spent in it is so important, but bathroom upgrades are a must. The kitchen and bathroom should be in line with the neighborhood, but they should be updated. Loud wallpaper in the bathroom and twenty year old appliances and fixtures in the kitchen will give the rest of the house a dated feel. Start your budget in these two rooms before you look anywhere else.
There is a natural instinct to try to have the best looking property on the block even if it is a rental property. The reality is that you don’t need to have the best looking home, just what is best for your tenants. Between the kitchen, the bathroom and the exterior, any work can add up pretty quickly. Keep an eye on your neighborhood and keep in mind what your long term goals are with the property. Doing work and updating the property is always important, but doing the right work is more important.