Renovating a rental property is a great way to increase your property’s rental potential. A rental property that has been consistently renovated and updated to stay in line with current trends is going to be more popular with tenants and will be able to fetch a higher rental price overall. Not to mention, an up to date property will appreciate more with time and sell for a higher price when it has reached its rental shelf life.
However, renovating a property that will be used solely as a rental home is quite different than renovating a private residence. It is important to know the differences before jumping into any project.
Renovating can be fun. It is exciting to see a property come to life—changing and evolving with the newest trends. It’s easy to get carried away. When rehabbing or renovating a home specifically for rental purposes it is vital to keep a strict budget in mind, though.
Don’t let yourself get swept up in designing the most gorgeous house. A rental property is not going to be cared for nearly as much as if it was a private residence. It will experience more than average wear and tear, so planning for that in advance will save your wallet and your peace of mind in the long run.
When approaching a renovation project, you need to ensure you are looking at it as a business venture. The common saying in rental property management is to treat it like a house, not a home. You won’t be living there, so don’t spend the extra money on frivolities and over-indulgences. A rental property is merely a temporary home to your tenants, and they will treat it as such. Focus on the important areas and try to keep things simple.
When renovating or rehabbing a rental property, you need to be aware of city certifications and permits. Don’t dive into a project headfirst without verifying if it requires any additional paperwork. Just because you own the property it doesn’t mean you can do whatever you want without asking permission first. Some things, such as electrical or plumbing work, require county or city permits. Adding living space can often require additional permits and even require an increase in septic tank size—which will require even more permits.
After work is completed, it may require a certification from the city/county. Even if it isn’t required, which is rare, it is best to have the city inspect the work, anyway. Having legal documentation that the renovations are legally and safely completed is a great asset to have as a landlord. It can help you in the future should any problems arise with your tenants. It is better to be safe than sorry.
Another thing to keep in mind is that many areas require a special certification for homes that are intended for rental purposes. In Detroit, for example, a rental property must be registered with the city directly. It requires a Certificate of Compliance, which is granted after an inspection has been performed and the property has been deemed safe and habitable.
Always Go for Quality
When it comes to renovating, it is always important to keep an eye on the quality of the work rather than the quantity. Don’t bother renovating the entire home if some areas are habitable already. Focus on spending your money on a quality renovation of the areas which require the most help. In rental properties, the best places to spend money are on flooring, stain-resistant paint, kitchens, and bathrooms.
Quality renovations in specified areas won’t just save you money on your renovation budget, but they’ll go a long way in attracting clients and keeping your return on investment rates in the green—two factors you really want in a rental property! Putting your time and effort into focusing on quality renovations will also help increase the life of the renovations, preventing you from having to redo them a few months down the road.
Figuring out the focal points of any rental property will aid you in deciding where to budget your renovation money. Kitchens and bathrooms are always a major focal point for a rental—as these are what your tenants will inspect the most before signing a lease. High quality paint, tile, and shower heads and faucets are all great features to focus on when renovating a rental property.
Renovations can be fun and exciting, but when renovating for a rental property it is vital to keep budget in mind and stick to the plan. Rental properties are a business and need to be treated as such. While it may be easy to get carried away with the concept of renovating a rental property, looking at the bottom line will be the best way to keep yourself and your expenses in check.