If you're a landlord, here are some good reasons to consider renovating a rental property:
Renovations that increase rental income
You may be thinking about renovating a property so you can increase rent, while adding resale value of your investment property. It's a solid idea; just make sure to keep an eye toward cost-effective choices that will create a lasting space without exorbitant costs. The renovations most likely to increase rent value follow the same logic as increasing property value in general. Start with the number of bedrooms and bathrooms.
• Bedrooms. Adding on to the floor plan to complete a bedroom addition may not make much financial sense. But if you can remodel a basement, convert an attic, or convert some other space into an extra bedroom, you may have a can't-miss project.
• Bathrooms. You may have one of those properties that renters seem to love at first, but then walk away from because of the "bathroom situation." Three-bedroom, one-bath units are notorious for this. Worse, several renters who don't mind sharing a single bathroom may fit into the typical "frat-guys" mold, a scary proposition for any landlord.
The hidden value of renovations for landlords
It's impossible to know for sure, but renovations can suppress future maintenance costs by attracting tenants who will take better care of the property. In this way, renovations will help pay for themselves, even if it turns out that you can't raise the rent while keeping the unit filled. Indeed, many landlords aren't out to maximize income from rental properties so much as minimize the headaches associated with dealing with tenants. If this sounds like you, consider these renovations as top priorities:
• Kitchens. Visually appealing, high-function kitchens are keys to attracting low-maintenance tenants. Find someone who loves to cook and show them the kitchen. It's by no means a guarantee, but the tenant who takes care of the kitchen is more likely to take good care of the rest of the property.
• Flooring. Hardwood flooring, in particular, should generate enthusiasm among prospective tenants, but laminate flooring is probably a safer bet. Not only will hard-surface flooring attract tenants, but you can advertise the property as pet-friendly, with less risk of floor damage.
Location, location, location
No property is renovated in a vacuum. It doesn't matter whether you're putting a property on the real estate market or trying to set a rent price. Not only do you need to take a look around at what other landlords are charging, you should consider the neighborhood at large. If you've made the calculation that the location of your rental unit presents limited opportunities to add property value, it's probably best to stick to exterior improvements.
• Home Exteriors. Homes don't fall apart because of outdated flooring or a limited number of bathrooms. Prolonged neglect to roofing, siding, and foundations is another thing. Simply making sure that the building will continue standing indefinitely may be the best investment. Neighborhoods do tend to go through cycles.
• Windows and Doors. Windows account for 20 to 25 percent of energy loss, while drafty doors can add another 10 to 15 percent. Showing that your unit is relatively airtight with reasonable utility bills will make it more attractive to any tenant.