Investing in rental property is a business, and landlords should be focused on how to maximize their returns.
In many situations, successful landlords are business owners who are able to recognize and create opportunities within existing properties. Some of these opportunities can come to fruition without much capital expense and will increase the amount of rent that a landlord can reasonably ask for and achieve after improvement. If the landlord’s analysis is correct, calculated improvements will increase NOI (Net Operation Income) over the long-term period of ownership. Certain improvements will not only increase rent, but also the value of the asset when the time comes to sell the property.
Here are some basic opportunities landlords should be aware of when calculating the rent potential of a home:
FLOORING:
While carpet throughout may be the flooring of choice for some landlords, it likely is not the most attractive and “rent grabbing” option for tenants. In Richmond, VA we see hardwood flooring in high demand, whether new and modern, or old and in need of some sanding/poly. Of course, this wouldn’t be a reasonable option for a rental upgrade, but there is a middle ground.
Hardwood laminate. Landlords find that this type of flooring looks attractive and mimics hardwood, while also holding up to the turnover and can be installed at a reasonable cost. While carpet may still be appropriate for bedrooms, try hardwood laminate to cover the kitchen, dining, and living room areas.
KITCHENS AND BATHS:
Both kitchens and baths are what buy and sell homes. It’s the same with renting! As a prospective tenant walks through a rental home, they will retain images of the kitchens and baths.
Newer appliances and granite counter tops will win over a prospective tenant when competing with an outdated kitchen, and it will hold true for years before needing another upgrade.
In the bathroom, a modern toilet, new shower head, and updated vanity and light fixture will do the trick. All of this is low cost, relatively easy to install, and will boost potential rent compared to an outdated bathroom.
Most importantly and over all upgrade, kitchens and baths tend to be the dirtiest areas of a rental. Have these professionally cleaned between each tenant and before you begin showing the property!
ADD A BEDROOM:
Have an attic? Or, do you have a garage that isn’t being used? Consider investing some time and money to add an additional bedroom. You’ll need permitting to do this correctly. While this investment would be a larger scale project, the returns might be larger scale as well.
Landlords should do their research. Find comparable homes to see what those homes are renting for with another bedroom. See if the resell value is worth adding another bedroom. How much will adding another bedroom increase returns? It’s worth diving into if the space is available without adding an addition.
PAINT:
White, light grey, or neutral. This is completely my opinion, but stick to these colors throughout the home to attract any tenant. In addition to adding brightness, tenants will not have objections to this color choice. In my experience as a property manager, I’ve seen purple interiors, blue interiors, yellow interiors, and they all have turned away prospective tenants during showings.
Stick to one or two colors at most at use these at every rental property you own. No more struggling to keep up with paint codes.
Having a fresh coat of paint, all light/white color, will certainly improve the rent potential for homes battling various color or having colors on the darker side of the scale.
LIGHTING:
New lighting fixtures vs. old lighting fixtures. This is an inexpensive upgrade that has a bright future. When thrown in the mix, this will allow a landlord’s rental to show much better than the darker, older homes with outdated lighting. Better showings create more interest, and more interest has the opportunity to bring higher rent.
LANDSCAPING:
Often landlords will overlook an investment in landscaping. Even if the grass isn’t perfect, take the opportunity to drop some bags of mulch and plant a few colorful plants before listing the home. Take half an hour to trim the hedges! Just like new paint, lightly manicured landscaping will cover a lot of ground.
Create opportunity to improve. Once you’ve identified some key areas of improvement, do research to be sure the investment will bring the returns you want. While increasing rent is a great benefit, be aware that improvements may also lower vacancy and/or increase the chances of a multi-year lease.
