Just like the real estate market, the needs of renters are changing from time to time. As a rental property owner, you must meet those requirements to stay in business. Your renters are your lifeline. To keep up with the demand, many rental owners decide to make renovations.
Renovations are ideal for making your property stand out from competitors and keep the structure intact for more years. Certain projects allow you to increase the value of your rental property in case you’re planning to sell it in the future. If you’re planning to renovate your old rental, we suggest you ask yourself these questions first.
- How can you fund the project?
Luckily, there are numerous ways to finance a rental renovation. Besides saving, another popular funding approach is taking out residential loans. Many private money lending companies can help you with investment property funding and offer options depending on your goals and financial situation. Some rental owners decide to open a home equity line of credit, which often comes with lower or tax-deductible interest.
Other options you can consider are applying for a home equity loan, refinancing your mortgage, or crowdsourcing the money. Another solution is to earn the money you need for the renovation, or at least most of it to cut the loan amount you’ll need. Earn extra cash by doing side gigs like thrifting, tutoring, writing, or renting a spare room.
- Are you going to repair or replace it?
If you’re working on a limited budget or you don’t want to waste money, you need to be careful of the changes you’ll be making. Assess the rental property and decide which parts only need repairs and which ones require replacement. In most cases, landlords can receive tax incentives for repairs but not for replacements. However, you shouldn’t always rely on fixes as the costs can only add up, which causes you to spend more than in the long run.
If your rental property has structurally sound cabinets and hardwood flooring, you might only need cosmetic fixes. Do not rush when replacing old appliances, too, as they’re generally costly. Search for DIY repair resources or call on a professional to check them first.
Considering the maximum usable life of the household furniture or equipment can also help in making repair-versus-replace decisions. If you want to add more appeal to the property, you can opt for inexpensive upgrades like replacing outdated lights, bathroom fixtures, or door handles.
- How much time can you spare?
Many rental owners decide on renovation projects with budgets on top of their minds. Time should be taken into account as well. Major renovation projects may require you to commit several days or even weeks. It’s recommended that you’re on-site during the renovation process. This can ensure that the project will run smoothly and avoid unnecessary delays.
If you can’t be there personally, hire an experienced project manager who can monitor the work. This might be an extra expense, but it’s a worthwhile investment. They can ensure that no details are missed and that your property will generate cash flow on schedule. Delays are costly. If you’re willing to shell out extra cash, hiring professional builders can minimize delays. DIY projects might seem cost-effective, but if you’re not skilled, they can lead to more costly improvements and more hours of work.
- What do local renters prefer?
Take notes of what local renters are looking for. You can find out more about this by scheduling inspections on competing properties. Local property inspections are an effective form of market research. It can also help if you speak with local property managers and real estate agents. This gives you a better idea of what your target renters are looking for, from the most desirable features to the fun extras.
For example, families generally prefer properties with fenced yards or bathrooms with bathtubs. Other standard features most renters look for are low maintenance lawns, ease of access, spacious bedrooms, and ample storage space. If your rental falls short of these basic preferences, attracting a tenant would be more challenging. Researching about the trends and latest preferences of renters can be a big help in deciding what you should renovate.
A renovation can be an expensive project, so you want to ensure you do it right. The last thing an investor wants is to waste money. Choose the best renovation projects and seek help from professional builders. With a successful renovation, you can boost property value, improve renter satisfaction, and even reduce operating costs.