Rental property upgrades serve various purposes for your business. They can increase your rental value, improve tenant satisfaction, and more. Determining the right time for upgrades can be challenging, but these key signs will help you identify when renovations are needed.
Wear and Tear
Normal wear and tear is inevitable and becomes more noticeable as a property ages. It's not just fading paint on walls or scruffs on the floor from moving furniture— it can also be the toll that time takes on any building or object.
This includes structural damage, roof rust, worn-out furniture, and squeaky door hinges. While prospective tenants may not spot this at first, ignoring these signs can lead to frequent tenant turnover.
Malfunctioning Systems
Rental properties have several working systems to make everything run smoothly such as the electrical, HVAC, and plumbing systems. Each of these needs to be in good order for legal compliance and for creating a habitable environment.
Faulty electrical systems can lead to incidents like electrical fires, electric shocks, rental property damage, and other potential injuries that your tenants can sustain.
A defective HVAC system can lead to poor energy efficiency, as well as poor indoor quality due to mold growth. Fluctuations in temperature won't be the worst side effect as airborne contaminants can spread to the entire apartment and harm your residents.
Poor plumbing systems can cause water damage from leaks, flooding, increased water bills, mold growth, and structural damage from burst pipes. Clogged drains can become an inconvenience and failing to address these can lead to higher maintenance costs.
Increasing Competition
In a competitive rental market, multiple properties might start offering new features that your rental home won't have, and that can make all the difference for potential renters. Upgrading your property helps you attract tenants to improve occupancy rates and charge higher rent.
Finding out which amenities and features potential tenants prefer can be determined by researching your competition, as well as doing your research on current market trends. Some of the basic upgrades that continue to be popular include hardwood flooring, in-unit laundry, and stainless steel appliances.
Negative Cash Flow
Spending more through upgrades might sound counterproductive at first, but an increased property value will significantly help you generate more rental income as well. Even simply upgrading appliances can have a huge impact on attracting higher-quality tenants.
Consider your budget and potential ROI before making upgrades. Other than the initial investment, you'll also have to think of maintenance costs and ways you can save money through deals to maintain a positive cash flow.
Outdated Design
How your rental property looks in person and in photos can affect whether potential tenants would consider your listing or not. Curb appeal is among the key factors in rental property value, and modernizing your property can contribute to higher tenant retention. Some of the rental property upgrades you can do include:
- Applying a fresh coat of paint on the walls
- Replacing lighting fixtures
- Adding luxury appliances
- Upgrading flooring
Rental Property Upgrades FAQs
How often should I upgrade my rental property?
That can depend on your competition and whether your property's design and features are becoming outdated. One of the best ways to slow down the need for replacements, repairs, and renovations is active property management such as regular maintenance and educating residents to be responsible tenants.
Can I make these upgrades by myself?
You can upgrade your rental without professional services, but it's recommended that you consult experts before doing so since even small mistakes can lead to higher costs. When something requires professional installation, it would be more cost-effective to pay professionals than do it on your own.
How do I know which are the best upgrades?
Simple research can determine that for you, but you can also consult property management companies that can analyze the local market for valuable insights before you upgrade your rental. You can also rely on the most common efforts such as adding new appliances, installing new floors like luxury vinyl tiles, or providing an in-unit washer.
What is the biggest benefit of upgrading my rental property?
You will effectively increase your overall market value, which comes with long-term benefits. As for short-term advantages, better visual appeal and having better amenities can help with staying competitive, which in turn can attract new tenants and fill vacancies.
How do I calculate the return on investment (ROI) of the upgrades?
To calculate your returns, use the formula below:
(Property Value or Rental Income Increase - Cost of Upgrades) / Cost of Upgrades
You will also have to account for the duration of the rental vacancies during major upgrades, as well as the depreciation over time. You can use the outcome as a factor on how much you should increase your rental rates or which property upgrades are worth the investment.
Will this increase my maintenance costs?
It will, but the amount will depend on the upgrade itself. Adding more appliances, for instance, will increase the number of things you have to maintain. However, there are also upgrades such as energy-efficient windows that can contribute to reducing utility bills.
Conduct regular inspections and meticulous tenant screening to ensure that your residents will maintain your rental property and the furnishings that come with it.
Leave Complicated and Tedious Matters to Us
Managing rental properties can take a lot of time and effort, and it can take property owners away from more important and profitable opportunities. Companies like Provident Property Management offer services that can take care of various aspects of your rental business and keep it well-maintained.
Let us handle daily operations and inspections so you can focus on expanding your portfolio. You can rent to more tenants in no time, and all that is achievable without having to lift a finger.
Interested? You can contact us to learn what professional property management can do for your investment property. Better yet, schedule a free consultation!
