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When Updating Rental Properties, Timing Is Everything
Sometimes, updating your rental property will require you to either sacrifice a few rent checks or get work done right after closing the deal. From planning to budgeting to timing the signing of your lease with high season, making changes requires special attention to keep your budget on track. Because timing plays such an important role, we’ve put together a go-to list of how to get your upgrades done in time and on budget.
Start With a Simple Cost-Benefit Analysis
From quick improvements to major overhauls, there are a few simple rules that should steer your decision to make updates. The bottom line — make improvements that will help you make more money.
The change should increase the rental rate. Unless the adjustments you’re planning on making are nominal, and can be done affordably, be sure to run the numbers first. Calculate how long, in months, it will take for you to recover the costs, then consider adjusting the rent to make up that loss.
The update should decrease property maintenance expenses. Certain changes to a property can actually decrease operational costs. When a property is upgraded and requires less maintenance, the investment stands to pay for itself by improving your unit’s real estate value and decreasing the overall costs required to manage the property.
The investment should increase your property's resale value. When all is said and done, will these updates be reflected with an increase property value? If your answer’s yes, then do your best to find the funding and get the work done.
Upgrade Your Rental by Upping the “Wow Factor”
High-quality finishes like granite countertops and new appliances can help capture the attention of quality tenants and increase resale value. Appeal to top-quality tenants with upgrades that get noticed.
Check out Craigslist for properties like yours, and look for ideas by studying the high-end results carefully. Sometimes, a little change can make a big difference. Here is a sampling of what tenants are looking for in a rental:
- Open floor plans
- On-site storage
- Off-street parking
- Easy access to the outdoors
- Pet-friendly spaces
- Well-maintained rentals
- Curb appeal
- Central air conditioning
- In-unit washer and dryer
- Smart home-enabled spaces
- Online rent payment options
- Green upgrades
- Updateded lighting fixtures
Improve the Space When It’s Vacant
Are you thinking about purchasing a property and updating it before your tenant moves in? It’s important that you consider the impact that this project will have on your tenants for a few reasons. If on-site debris and noise are in play, your tenant’s quality of life and health may be diminished or at risk. Larger projects are best taken on when the rental's empty. Here are a few tips to think about when planning updates and improvements in a vacant space:
Upgrade upon purchasing. If you’re planning on buying and updating immediately this approach is one of the best ways to take on larger projects. Ventures like gutting spaces and installing new kitchen appliances, cabinets or HVAC systems are best completed before tenants move in.
Post-inspection negotiating may allow for project-related escrow cash. Once a seller’s accepted your initial offer, you may be able to settle on an agreement to adjust the purchase price when habitational or other major concerns are at issue. Habitational problems impact the unit’s ability to keep the elements out and they also pertain to the proper functioning of the hot water heater, furnace, etc. If major issues are revealed during the inspection process, and the space is not being sold “as-is,” consider your counter-offer carefully. If your initial bid on a unit was $350,000, and the inspection report finds the roof is in need of immediate replacement, counter with a bid of $325,000 and request that $25,000 be held in escrow to be used only for the costs related to tearing out and installing a new roof.
Update strategically so work’s complete right before peak season. This tip’s an important one. If you plan on completing significant upgrades after the unit has been rented, you’ll need to empty the space while the construction is underway. This is specifically the case when updating bathrooms and kitchens. Getting the timing right is key here. Schedule the upgrade projects so that the job is complete at the beginning of the summer because your odds of finding a competent tenant are best during high season. And you’ll have better luck in the future when you’re seeking new renters as well because demand will be highest then.
Tenant-occupied Updates You Can Make
Are you planning updates to a rental home or property that’s already occupied? Will these updates cost you more than a month’s rent? You can easily make improvements to the space when the tenant’s renting — just be sure to request permission and clearly communicate the dates you’ll be on-site. Here are a few affordable ways to upgrade your rental property without sacrificing a rent check:
Make inexpensive changes. Adjustments to kitchens and bathrooms that may require workers to be in the unit for a few days can have a big impact. Projects like upgrading lighting fixtures, swapping out the washer and dryer and changing outdated toilets are easy and less-expensive options that can add value to the space. Spruce up the front of your place with new bushes and flowers to really improve curb appeal.
Get smart. Spaces with smart home security additions are actively being sought by tenants who will be moving with valuables — they want to know their stuff will be safe. And with the popularity of the Internet of Things, improvements like these are trending today.
Paint the front door. Something as simple as a fresh coat of color on the main entrance can do a lot to add flare to a rental.
Update the electrics. With the help of a certified electrician, swap out old dining room fixtures with new, high-efficiency LED-enabled fixtures. New outlets in key locations can add value as well. Source kitchen and bedroom outlets that also contain USB ports to up the convenience factor.
Whether you’re planning on making small changes, or gutting a space for a more open floor plan, timing is everything when it comes to upgrades. While you’re studying your options, connect with your American Family Insurance agent and discuss your plans. You’ll find easy-to-understand coverage that neatly suits your needs, and protects your investments too.