There are a number of ways to increase rent price for your rental properties. Before you begin, it’s critical, however, to understand your market. Basic cosmetic improvements may be the most you can move the rental needle, but that’s not always the case. Particularly if you’re in an area with a high number of Millennial and Generation Z renters, high-tech features may offer significant benefit. Ultimately, location, size and affordability are still the most important factors for your rental, but increasingly, the newer generations are also interested in smart-home style amenities.
A 2016 study by Schlage and Wakefield Research found that 20% of respondents were willing to pay more for an apartment with high-tech, integrated features like smart locks and climate control from their phones. While 20% may not seem like a huge number, 86% of those respondents were Millennials. Again, it’s critical that you understand your market before making expensive investments in improving your property, but if you own or manage Class A and B rentals with a youthful tenant pool, high-tech features may be well worth the investment.
We’ll provide a description of the feature, the expected cost range, and the rental increase needed for it to be worthwhile. We’ll calculate an expected ROI based on those figures (e.g. if an improvement will cost $5,000 and it increases your rental amount by $50 per month, that amounts to $600 extra rental income per year, $600 / $5,000 is a 12% ROI).
Because of speed at which tech trends change, we’ll stay on the safe side and assume these features only have a lifespan of about 5 years. In all likelihood, they’ll continue to bring value quite a bit longer than that, but a conservative 20% ROI target will ensure it’s a safe investment.
Believe it or not, programmable thermostats have been around in some capacity for over 100 years. Their benefits are well documented and go far beyond simple convenience. By allowing renters to lower or raise their home’s temperature when they’re asleep or away, the EPA estimates that a programmable thermostat can lower an energy bill by 10-30% per month. In some climates, that can be a very real difference of as much as one-hundred dollars.
The problem, of course, is that few tenants actually take advantage of these features. A 2010 survey from the Lawrence Berkeley National Laboratory found that 89% of respondents rarely or never use their programmable thermostats. You can lead a horse to water, but you can’t make them drink. That is, until modern smart thermostats came to market. Internet connected thermostats like Nest from Google can automate the efficiency process. Renters can connect to their thermostat through their phone, changing the temperature of their home quite literally from anywhere in the world. These thermostats also learn from the occupant. Renter’s can turn on automated scheduling that actually tracks when they’re home or away and responds accordingly. Energy usage and savings both become more visible.
Not all tenants are aware of this potential savings, so if you go the route of the programmable thermostat, be sure to add it to your pitch during the walkthrough. Lower utility costs are always a plus for renters and landlords.
Expected Cost: $150 to $300+ per unit for purchase and installation
Necessary Rental Increase (20% ROI): $2.50 to $5
For their security and convenience, smart locks are incredibly appealing to many renters. Like most high-tech improvements, smart locks range in their features, from a simple pin pad for entry to a lock that connects to your phone. The best versions of these locks offer multiple entry methods, all securely managed. If the lock connects to an app, it will likely also allow your tenant to track who enters their unit and when for an added sense of security.
The benefits of these smart locks are not limited to just your renters either. Rather than paying to replace your locks every time a tenant moves out, you can simply reprogram them.
Expected Cost: $100 to $300+ per unit for purchase and installation
Necessary Rental Increase (20% ROI): $2 to $5
Smart lighting has a certain wow factor to it, but it’s not nearly as complex as it may seem. No, you won’t need to do any rewiring or even call the electrician. Smart lighting is as simple as replacing your existing non-connected light bulbs with smart light bulbs. These internet connected bulbs screw right into existing sockets and connect right to your phone. Alternatively, you can purchase smart plug adaptors that allow you to plug any device into an existing outlet and make it “smart.”
Once connected, tenants will be able to schedule lighting preferences and of course turn the lights on and off from their phone. Smart lighting is easy to install and increases both convenience and efficiency.
You can purchase smart light bulbs for as little as $10 a bulb. Smart outlets are around $25. So, depending on the number of bulbs and outlets you’re upgrading, your price range can change quite a bit. Smart bulbs are also expected to last upwards of 8 years. We’ll lower our expectations and set our ROI target at 5 years.
Expected Cost: $100 to $1000 per unit
Necessary Rental Increase (20% ROI): $2 to $17
Video Monitoring Security System
When it comes to rental properties, comfort and security go hand-in-hand, and a modern video monitoring security system can go a long way in providing both. Services like Ring, SimpliSafe, and Google Nest are easy to install and affordable. Tenants can connect their phone and monitor who is coming and going to their unit.
These often also come with motion sensor lighting and the ability to record and produce audio (you’ve probably seen videos of homeowners or renters speaking to a careless Amazon worker or an opportunistic thief). These systems are robust, simple to set up, and offer a great deal of value.
These platforms usually come with a setup fee for hardware and installation (although you can often do it yourself) and a monthly fee for an ongoing subscription.
Expected Cost: $350 to $500+ per unit per year
Necessary Rental Increase (20% ROI): $6 to $10
Online Rent Collection
A modern rental experience goes beyond the physical space your tenants occupy. Now, more than ever, tenants expect a sleek experience paying rent. P2P apps like Venmo and PayPal offer the ability to move the money electronically, but don’t incorporate many of the advantages of full-fledged rental management software. If you want to offer your tenants auto-reminders, automated payments, and a dedicated app experience, you’ll need to go with software designed for rent collection.
Some property management software can run hundreds of dollars a month. Some rental collection services charge similar amounts depending on your unit count. But there are plenty of options that remain affordable (Innago, for example, is free to use). Providing your tenants a professional experience when paying rent helps encourage more timely payments and demonstrates your seriousness as a landlord. It’s unlikely they’ll be willing to pay more in rent for that convenience, but you’ll find it produces better tenants and improves your bottom line.
Expected Cost: $0 to $1000+ per year
Necessary Rental Increase: N/A
Invest in Green Technology
There’s good news for the environmentally conscious renter and property owner – apartments and houses constructed today tend to be far greener than their older counterparts. In many cases, what qualified as LEED certified efficiency and design ten years ago is now the minimum required by code.
That being said, there are still a handful of steps you can take to ensure your property stands out from the pack. And for the most part, it’s economically worth it, particularly if you’re targeting the same Millennial and Generation Z renters mentioned above. It’s hard to nail down exact numbers, but renters are generally and increasingly willing to pay more for a “green” apartment or house.
When it comes to increasing revenue, consider green investments for the additional rental income they’ll produce and the increased marketability they’ll provide.
Maximize Efficiency with What You Have
LED light bulbs, modern insulation systems, targeting highly energy efficient appliances – these are all simple steps you can take to reduce your rental units’ environmental impact and their energy bills. Look for the Energy Star label on refrigerators, dishwashers, and other appliances in need of replacement.
If you need to update plumbing in a new build, consider low-flow faucets and high-efficiency toilets. Spending a little extra on higher quality, energy efficient windows can reduce the overall utility bill for the property by as much as $125 to $465 per window.
And when deciding between generic appliances and fixtures and their energy efficient counterparts, don’t compare total price, compare additional. Sure, paying almost one grand for a window may seem like a lot, but if it’s only a couple hundred more than a normal window, the hundreds of dollars in annual savings easily offsets the cost.
For a relatively minimal and infrequent capital investment, you can take these basic steps to maximize your energy efficiency. Energy Star light bulbs might not compel a tenant to pay you more to live there, but they will make your properties more marketable to environmentally concerned renters and ease your own conscious. Just be sure to let the tenants know your units are energy efficient and have greatly reduced utility bills.
Costs vary widely depending on the amount of work you’re looking to do, so we won’t bother putting a price tag on it, but keeping efficiency top-of-mind whenever improving or turning your units can make a big difference overtime.
Expected Cost: N/A
Necessary Rental Increase: N/A
Install Solar Panels
Solar is quickly becoming a dramatically less expensive source of energy than traditional sources like coal and natural gas. As long as your property has access to regular sunlight for even part of the year, solar may be a tremendously valuable investment.
Many don’t realize that solar systems are supplemental to your regions existing energy infrastructure. In most locations, any solar energy you don’t use is supplied back into the system. You’re provided a credit for this energy contribution and your electrical bill is reduced, so solar panels bring value even if it isn’t sunny all day.
As of 2020, the solar investment tax credit (ITC) allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes. As powerful as this is, costs are additionally offset by creative financing solutions. Many lenders offer solar loans with no money down and a fixed monthly cost. That monthly cost is often less than your monthly energy bill, making the investment well worth it.
What’s more, major future upgrades are expected not in solar cells but in solar energy storage. Batteries are expected to get significant upgrades in the coming years and as storage efficiency increases, and, fortunately for solar investors, they can be easily swapped into and out of an existing system. For those waiting to install for fear that the newest model will outpace their investment, with the exception of an unexpected breakthrough, the danger is minimal. You’ll be able to simply and affordably upgrade your system to match the latest advancements.
If you do provide solar, you don’t necessarily need to increase rent in a traditional sense. Instead, you can stop requiring your tenants to put the electric bill in their name and instead charge them a fixed fee per month. Usually, this fee will be less than what they would expect to pay for fossil fuel based electricity, saving them money, but will also stabilize the revenue increase you can get. Tenants will often also be supportive of your green initiative, a true win-win…win!
Expected Cost: $10,000 to $20,000 per unit
Necessary Rental Increase: $80 to $160
Investing in high tech features has benefits beyond increasing your rent revenue. Some of these features will also automate processes and interactions you and your tenant have, saving you time and making your business more efficient. In the case of green technology, they will also satisfy a certain altruistic spirit, hopefully providing you solace that you’re making smart, environmentally friendly investments, but also, just as importantly, increasing the interest from your tenants.
Of course, these all depend on the market you’re investing in, so think before you leap at any of these improvements, but if you’re the right fit, high-tech features can be a great use of your capital.