Which Renovations Offer the Best Return for Landlords?

Investing in a rental property is one of the best ways to create a secondary stream of income that can increase your financial stability. However, competition for rental properties is fierce, making it difficult to attract renters.

To help your property stand out and attract the best rental return it is important to make thoughtful renovations that strategically increase your property’s value, making it more desirable to potential tenants.

In this article, we will be sharing how you can do that.

Budgeting For Property Improvements to Increase Value

Always Stick to the 30% Rule Home Renovation Tip

Before you start your property renovations, it’s important to remember the 30% rule. This is a guideline that helps you stay within your budget. The 30% rule means that you keep your renovation budget within 30% of the value of your property’s market value. 

The 30% rule avoids overspending and means you don’t make costly changes to your property that don’t actually provide a healthy return on investment. It’s a great starting point and the best way to kick off a valuable property renovation. 

You might also like: What Is The 1% Rule In Real Estate And Does It Work?

Keep Track Of All Your Expenses

Meticulously tracking every cent you spend on your rental property renovation is essential for two reasons. Firstly, unless you know exactly how much you’re spending as the project progresses, it is very easy to go over budget - often without even realizing it.

Secondly, even though the renovations suggested in this list are all home improvements that will increase the property value, the expenses for landlords can be reclaimed against your taxes.

For small renovations and home improvements, these might be deductible in the immediate tax year, but for larger renovations, you will need to add the costs to your property costs basis and depreciate.

The easiest way to track and manage your rental property expenses is to use a purpose-built landlord accounting software like Landlord Studio. 

Plan For The Unexpected

It’s almost inevitable that something will crop up to increase the original work estimate. For example, workers might uncover structural or plumping issues, or there might be a shortage of materials which drives prices up. If these unexpected rental property renovation costs are not planned for you could quickly find the project coming to a halt, or being completed to a subpar standard. 

Setting aside 15%-30% of your budget (depending on the size of the renovation) for these unexpected costs should give you a comfortable buffer to deal with the unexpected, without having to compromise.

8 Best ROI Home Improvements

Here’s a priority list of the 8 best home improvements to increase value. Let’s get started.

1. Update Your Property’s Windows

The state of your property’s windows can deter potential tenants, especially if they are in particularly poor condition. This is because poor-quality windows leak heat (wasting tenant money on high energy bills) and they are also more prone to condensation and mold growth. 

What’s more, bad-quality windows don’t form a protective barrier against external noises such as passing cars, lawnmowers, and passersby. And lastly, windows that aren’t in good condition pose a serious security risk, making it easier for break-ins to occur. This poses a serious risk to tenants’ belongings and safety, making your property decline considerably in desirability. 

Updating your property’s windows is essential to increase your property’s curb appeal, improve energy efficiency, and restore security. To take things a step further, consider installing window shutters as shutters drastically increase the aesthetic appeal of your windows. This makes your home look more up-market and increases its rentable value.

2. Re-design the Kitchen

In a rental property, the kitchen is where your tenants spend a lot of their time. It’s often referred to as the heart of the home and will serve as a space where your tenants can gather and enjoy meals together.

Creating an attractive kitchen space with modern, high-quality appliances is a great way to increase the rental value of your property. You might also consider replacing old countertops and flooring, updating the oven, and repainting the cabinets so they are more in style with current interior design trends.

Top Tip: make use of durable materials in your kitchen upgrade as these will last a long time and ensure you get the best return on your investment.

3. Upgrade the Bathroom

To increase the value of your rental, it’s important to upgrade the bathroom(s). This means replacing old or worn-out shower doors, repairing or replacing leaky taps, and making sure the white bathroom suite is in good condition. 

In the same way as a kitchen upgrade, a bathroom upgrade can greatly improve your tenant’s satisfaction with the property, adding significant value. A well-kept home makes your tenants happier and leads them to trust that you take your role as landlord seriously.

What’s more, a clean and well-kept bathroom will entice your tenants to stay for longer, providing you with a more reliable source of secondary income. 

Refurbing your bathroom to really make it shine is a great way to help your property stand out from the competition.

4. Create Additional Storage Space

Renters want properties that offer more storage space - especially built-in storage. This is because freestanding furniture is expensive and wardrobes and bookshelves take up a lot of much needed floorspace.

As such, if you can create additional storage space within your rental property, you will attract more better quality tenants and be able to raise the rental value of your property as a result.

Whether you want to spend the big bucks and build a garage or you want to make smaller changes such as:

• Creating a storage space under the stairs.
• Hanging shelves on the walls.
• Building an in-built wardrobe in the bedroom.

Creating more storage is one of the best ways to increase your competitiveness in an oversaturated market.

5. Replace the Carpets

Replacing the carpets within your rental property can go a long way towards attracting potential tenants and increasing your rental value. With so many renters (and even their pets) coming in and out of your property over the years, it’s no surprise that the carpets have become worn down.

If the condition of your carpets isn’t as good as they once were, it’s probably time to replace them. Laying new carpets in your property will make all the difference to the overall aesthetic, showing potential tenants that you take care of the property and will therefore take care of them also.

Related: What’s The Best Flooring For A Rental Property?

6. Introduce Smart Technology

Smart technologies are one of the most sought-after elements of a property, attracting tenants from far and wide. This is because smart technologies increase home security and put renters in control of their energy usage and expenditure. 

The benefits of smart home technology are many, including:

• Remote real-time monitoring to increase security and energy efficiency
• Linking devices to deliver coordinated results
• Enhanced property appeal
• Increased home security through triggered alerts and recordings
• Motion detection that saves battery life and energy
• Fault detection within the home

Smart technologies are a great investment if you’re hoping to increase the rental value of your property. They make life more convenient for tenants, put them in control of their energy usage, and increase their sense of security in your property.

Investing in smart technology is one of the most effective ways to attract the best tenants who will provide you with a regular and reliable secondary income.

Related: 9 Best Smart Locks and Rental Lock Boxes for Short-Term Rentals

7. Focus on Your Property’s Curb Appeal

What does your property look like from the perspective of passersby? Is the garden messy and unkept, does it need a paint job, are there tiles missing from the roof? The outward appearance of your property creates that all-important first impression. In fact, it can have the biggest impact on whether or not tenants enquire about your property.

There are a few main ways you can improve your property’s curb appeal, including:

• Tidying up the gardens
• Repainting the exterior
• Generally tidying up
• Mowing the grass
• Planting attractive foliage
• Repainting the woodwork around doors and windows
• Maintaining or replacing fences and gates
• Installing outdoor lighting

When your property is well-kept, it increases potential tenants’ trust in you and gives them peace of mind that you will maintain the property during their time in it. This is extremely attractive to potential tenants and is one of the best ways to increase your return on investment.

Related: Landlord Dos and Don'ts: Landscaping For Rental Properties 

8. Create a Comfortable Outdoor Space

People are spending more time outdoors. According to research, over 168 million people regularly enjoy time outside. This is because we’ve realized how beneficial the outdoors really is for our mental and physical well-being. 

As a result, rental properties with usable outdoor spaces are highly sought after - particularly in busy cities. If you want to increase your property’s rental value, investing in transforming the outdoor space is a great solution.

Whether you choose to create a fenced-in area that is safe for animals and children, a patio area that’s ideal for hosting, or a botanical area with space for a vegetable garden, optimizing your property’s outdoor area will attract a higher number of interested tenants.

Final Words: Best ROI Home Improvements

As a landlord, you want to make sure you get the best return on your investment. And leveraging these best ROI home improvement tips will allow you to increase your investment value, charge higher rents, and reduce vacancies by making your property more desirable, and improving tenant retention. 

But, as mentioned already, successfully navigating a property renovation is only part of the challenge. You also need to keep meticulous records of everything that is spent in the process.

This way you can reclaim the cost of the renovations against your taxes, either through depreciation or as deductible expenses.

And the easiest way to keep these records is to use purpose-built rental accounting software.

Landlord Studio features that can help you manage your rental property improvements:

• Mobile app - Track expenses as they happen so you never forget. Simply open the app to log an expense.
• Bank feeds - Automatically import bank transactions and reconcile them with a click. Reduce manual data entry to save time and avoid accounting errors. 
• Receipt scanner - Scan receipts at the point of sale to automatically log the expense and keep them securely organized for when you need them
• Customizable reporting - Quickly generate customizable reports with a few quick clicks and make sure nothing slips through the cracks.
• And more - Use our property maintenance tracker to stay on top of renovation progress, set reminders to keep projects on track, and store important documents for future reference.

Create your free account with Landlord Studio today to discover how it can help you stay on top of your rental property expenses and maximize your rental property ROI.

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