Improve Your Existing Property to Increase Rent Price
January 29, 2021
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One of the best ways to increase the profit your properties generate is to increase the rental price you can justify charging for them. A sure-fire way of doing so is to improve the property as it currently exists. There are a wide variety of different ways you can improve your units and properties to increase the value of what you already have.
Below, we’ll run through a handful of suggestions. we’ll provide a description of the improvement, the expected cost range, and the rental increase needed for it to be worthwhile. We’re using 10% ROI as our target for improvements with a long lifespan (like remodeling a kitchen), but a higher ROI for those that require more regular updates. ROI is calculated by dividing the one-year increase in rental revenue the improvement will generate by the cost of making the change (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).
Renovate the Kitchen
Living rooms, bedrooms, etc. – these are spaces tenants generally get to fill and visualize themselves. They are more imaginative in how they envision the space. Kitchens, on the other hand, tend to exist as-is. For this reason, adding polish to your kitchen can majorly improve the perceived value of your rental property.
Upgrading your kitchen can run anywhere from a few grand on the low end to north of ten thousand dollars depending on the changes you intend to make. Just keep in mind, this is a rental property. Ikea can be an excellent way to replace old cabinetry with high quality, affordable alternatives. Butcher block, modern laminates, and even some manufactured options like quartz can provide you fresh countertops. If you have appliances with white or black plastic finishes, upgrading to stainless steel will add a great deal of pop and give your unit more of a high-end feeling.
Expected Cost: $3,000 to $10,000+
Necessary Rental Increase (10% ROI): $25 to $85
Renovate the Bathroom
Like kitchens, renovated bathrooms are particularly appealing to prospective tenants. It doesn’t take much: modern tiling, a well-kept vanity, and a clean shower / toilet can go a long way to impressing your renters. Anywhere from a few hundred dollars to a few grand can make a big difference.
Expected Cost: $1,000 to $5,000 per bathroom
Necessary Rental Increase (10% ROI): $8 to $45
Update Lighting Fixtures
If your property has old lighting fixtures, particularly in the kitchen, a trip to Lowe’s and a few hours of install can add a great deal of finish to your property. If fixing your lighting will require the work of an electrician, it may still be worth it, but consider if your money would be better spent elsewhere.
Like your kitchen and bathroom, these should last a long time, particularly the re-wiring an electrician may have done. We’ll assume a lifespan over ten years and keep the annual ROI required low.
Expected Cost: $100 to $1,000
Necessary Rental Increase (10% ROI): $1 to $8
Hire a Landscaper
Curb appeal isn’t just important when selling a property. The view from the outside will be your potential renter’s first experience with your rental – make sure it stands out! A well-kept lawn, fresh mulch, flower boxes, and clean walkways will improve the curb appeal of your property. Also keep in mind, the increase in rent will be multiplied per unit, so if you own and manage a multi-unit, this can be particularly worthwhile.
Because landscaping is a regular expense, we’ll look to make more money from this investment than was put in. We’ll set a high ROI target of 110% in a given year.
Expected Cost: $500 to $3,000 per year
Necessary Rental Increase (110% ROI): $46 to $275
Apply a Fresh Coat of Paint
Faded, chipping paint on the exterior of the property gives it an unkempt look. You’ll be shocked how much a difference a fresh coat can make, adding life and vibrancy to your building. Hiring local painters is relatively inexpensive, or, if you’re a real go-getter, you can pretty easily handle this yourself, just make sure you’re prepared to put the time in to get it right. The price you ultimately pay will be dependent on both the size of your building and the amount of work you take on. This value will also be multiplied by the number of units you have.
Most experts agree that a fresh coat should last 5-10 years. We’ll assume the lower-end of that and look for an ROI of 25% annually.
Expected Cost: $1,000 to $10,000
Necessary Rental Increase (25% ROI): $21 to $210
Replace the Front Door
If the front door to your building is well past it’s prime, one of the simplest yet effective ways to improve the rental value of your property is to update it. Studies have shown that updated exterior doors can increase a property’s value by up to $16,000, and while that doesn’t translate directly to rent, like other curb appeal improvements, it will make a difference. This value will also be multiplied by the number of units you have.
As long as it’s of decent quality, a front-door should last multiple decades. We’ll stick with a 10% ROI which should easily return everything you spent on it.
Expected Cost: $500 to $2,000
Necessary Rental Increase (10% ROI): $4 to $17
Furnish Your Rental
There are likely two scenarios in which offering furnished rentals will be worthwhile: 1) you’re looking to attract long-term renters traveling across country (like corporate housing) or 2) you’re positioning your property as a short-term rental. If your market is mostly local and long-term, furnishing your rental is not likely to be worth the money – renters simply won’t be willing to pay the premium.
Also, keep in mind that furnishing your rental and maintaining that furniture can be a hassle. If your rentals would be considered Class C or below, it’s probably not worth the hassle. Don’t fill your unit with cheaply made stuff. If it looks like junk, it will be treated like junk. You don’t want to spend more on replacements than you would on quality furniture to begin with. Ikea is a great place to start and has plenty of high-quality pieces – just make sure that’s what you’re getting.
If you do find yourself in a market that supports either of the two options mentioned above, furnishing a rental can provide tremendous value. Folks looking for short or long-term housing solutions from out of town are usually willing to spend more to reduce hassle. If you go the route of corporate housing, a company might be footing the bill. Expect to easily increase your rental bill by 15-20% for furnished long-term rentals and as much as 40-50% for short-term.
Expect to pay a baseline cost of around $2500 and add on $1000 per bedroom (e.g. a one-bedroom would be $3500). You will likely need to replace the furniture every few years, so look for a higher ROI than some of our improvements.
Expected Cost: $3,500 to $6,000
Necessary Rental Increase (35% ROI): $100 to $175 (you will likely get much more!)
Of course, to improve your property in any of these ways, you first need to have some expendable capital. What’s more, you’ll be quite sorry if you make the investment only to find that it doesn’t move the needle on the rent your market is willing to pay. As always, know your business and know your market above all. Be sure you’re targeting improvements that make sense for you and your investment.