Determining rental house improvements can be a difficult task for an investor/landlord. One must always be careful not to over-improve, while still adding and retaining value for the future. It’s all about creating a beautiful rental house for your prospective tenant. Because we are value investors, it is crucial that we keep cost tabs on the amount of money we spend, while still increasing overall value, in order to preserve the return on investment. That said, we view any improvement with a long term perspective.
We believe that the subtle details in rental houses make all the difference in attracting and retaining the best tenant base, as well as securing equity in the investment. Don’t you enjoy coming home to a clean, well maintained home? A professional, reliable tenant will as well. The idea here is to create a beautiful space while making sure that any expense for beautification is fully returned in the value you receive back.
Comfort and security are two themes to be considered in a rental house:
Think to yourself, “What would make me truly enjoy living here?” That’s right. We want our tenants to enjoy living in our homes. When a person enjoys their space a few things happen:
- They take care of it. (fewer repairs!)
- They want to stay there. (low turnover!)
- They want all their friends to see it. (free advertising
Check. Check. Check. These are all emotions that we want our tenants to experience. A motto we heard in the past and like to apply it to our investment approach is “Coming Home Never Felt This Good.” If you can make your tenants utter these words, you will have a stable, reliable rental portfolio.
A few key improvements to make in a rental house:
Again, the main idea is to spend money in areas that make the most sense and that will give you a solid return on your investment.
Security features– Depending on the budget, updating motion lights, access doors and cameras are great. Simply trimming hedges for good visibility and removing other large obstructions can be a high value, low cost improvement in security.
Heating, Ventilation, Air Condition (HVAC)– Having efficient heating and coolings systems is a must. Items that go hand and hand with this may include, new windows, weather striping doors, ceiling fans or even maybe window units. It is extremely important that your tenants are warm in the winter and cool in the summer.
Curb appeal is crucial in attracting a high caliber tenant. Consider giving assigned parking spaces and guest spots can create a sense of ownership as well as comfort. No one wants to come home after a long day to find there is no parking! Again, this is all about eliminating annoyances for your tenants and creating an environment where they want to live. Depending on the exterior of the building siding, shutters, paint or pressure washing may assist in keeping your property’s curb appeal top notch.
Kitchens/bathrooms – It is well known in real estate that kitchens and bathrooms sell houses. We believe they may help rent houses too. That old, dusty fixer upper may have cabinets circa 1972 but chances are, a coat of white, oil based paint will breathe new life into them. This is not the time to break out the sledge hammer you see on home improvement shows. Take a moment to consider if the layout still works and how you can make what the home already has look its best. Painting cabinets, adding a cheery color on the wall and adding a $100 laminate countertop often goes a long way.
There are many more ways to add value, but it is up to the investor/landlord to properly evaluate the property as well as their situation. Do what is best for your investment and financial situation. Investors should gauge what needs to be accomplished immediately also, what can wait until the property is cash flowing.
The bottom line
At the end of the day, you are thinking of ways to increase value. An increase in value often justifies an increase in rent. We don’t suggest you price yourself out of the market, but an attractive rental will command fair market rate, maybe with a small premium. A beautiful rental house matters! Be mindful of keeping costs low while maximizing beauty. Many low cost treasures may be found in the paint aisle at your local hardware store or the housewares section of a thrift store. Open your mind and have fun! Afterall, it’s all in the name of cash flow.