Whether you have an existing rental property or are looking to purchase a property to use as a rental, there are ways to add value to the property, and ultimately add cash in your pocket.
Most investment properties are going to need at minimum, a fresh coat of paint and new carpet.
Realistically, the kitchen is probably outdated, the fixtures are original, and there’s miscellaneous other updates that are needed in order for it to be a desirable rental property.
Spend your rehab dollars in areas that are necessities and also in areas that visibly add value to the property.
Consider a property that you can rent “as-is” for $900/month but with $20,000 in updates, you might be able to rent the property out for $1,200/month. This $300/month extra cash flow each month is bringing you an 18% cash-on-cash return.
Before we go into specific areas of the property that you can update, it’s important to remember that you should be upgrading to the neighborhoods standards.
If most houses nearby have stainless steel appliances, faux-wood floors, and granite countertops, you don’t want to opt for sub-standard upgrades such as black appliances or formica countertops.
That being said, you want to make your property stand out without over-upgrading as you may not get the full value out of your upgrades.
Take a step back and consider what renters would want in the property and what it’s currently lacking.
Does it need a fence?
Is the paint too dark?
Are the appliances outdated?
Probably the most critical area to upgrade that will easily raise the cost of rent will be the kitchen. If the kitchen is outdated, change out the cabinets, countertops, sink, and appliances. Stainless steel sinks and appliances give a nice upscale touch to the property and choosing a nice granite can tie the look of the kitchen together.
Bathrooms are your next obstacle.
Focus on the master bath before moving onto the secondary baths. Switch out outdated fixtures with nickel fixtures and if you have the budget, you can choose to replace the countertop, the tile surrounding the tub and shower, and even the toilets themselves.
Fixing up the landscaping outside can give nice curb appeal and provides a good first impression. It doesn’t have to be drastic either. You can lay new sod, fix up the shrubs, and plant a few flowers and it will be an improvement.
Pay attention to market trends locally and nationally!
Even if you’ve had a property for 5 years, in between tenants is a good time to do upgrades as it’s needed so that your property doesn’t slowly become outdated.
People will pay a premium for upscale upgrades if you do it right.
Patrick Donohoe discusses more valuable ways to add value to your existing rental property if you want to check it out!