When it comes to knowing how to renovate a rental property, numerous new and even seasoned investors are doing it wrong. With the goal in mind being to increase the value of the property and have positive cash flow, a troubling number of investors over spend in their renovations and many end up losing money on their property. To help you come out in the green rather than the red, these are my top 3 tips on how to renovate a rental property.
The pool may resemble a green murky pond more than a tranquil aquatic escape to relax in after a hard day, but contrary to popular belief, renovating the pool (or adding one to the property) does little to increase the property value of a home. Based on recovery rate, these are the top spots within the home to renovate for those who want to know how to renovate a rental property without taking a financial loss:
- Newly renovated or improved washrooms and kitchens – Recovery rate 75%-100%
- Budget-friendly improvements (i.e. new rugs, painting/wallpaper) – Recovery rate: 50-100%
- Brand new windows and/or doors – Recovery rate: 50-100%
- Income suites (i.e. basements, lofts, third floors) – Recovery rate: 50-100%
- Energy efficient appliances – Recovery rate: 60%
What should you not sink a ton of cash into renovating?
- Expensive landscaping
- Spa-style or luxury bath and shower systems
- Swimming pools
Which brings us to the next point:
2. Bring On the Curb Appeal
While expensive landscaping won’t give you a great return on your investment, anyone who knows how to renovate a rental property knows that landscaping is a big deal. The value of a first impression is huge and it can be done rather inexpensively if you are smart about it .
Some quick ideas:
- Place containers of bold and brightly colored flowers around the front and backyard to add visual interest
- Weed and restock flower beds with plants and flowers to create ambiance and develop a theme
- Consider adding a water fixture to the backyard to add visual and audio engagement (such as a fountain)
Your local garden nursery experts will know which plants are in season and will do best in your local conditions, and they may even be able to provide insight into which plants will work or look best with one another – free landscaping advice.
3. Don’t Go Overboard
It’s important to understand that knowing how to renovate a rental property very much differs from knowing how to renovate a property that you intend to sell. Renters notoriously (though not all) have less care about the home they are renting simply because they do not own the home. Therefore they are less likely to take care of any beautiful shrubs and landscaping you spent your hard earned money on. They are less likely to ensure that the paint isn’t scratched or the washer and dryer you put within the home are not damaged. When it comes to rental properties keep it simple, clean and low cost. Assume the renter will not care to go beyond mowing the lawn of the property and that they will do minimal cleaning duties in the home. Accept the fact that you’ll need to repaint the home once they eventually move out anyway (so don’t spend a lot on top notch paint!).