Investment Mortgage

6 Simple upgrades to increase your rental property's value

By Milo

August 18, 2023 6 min read

Table of contents
6 Simple upgrades to increase your rental property's value

Investing in a rental property in the United States is a wise move, especially for foreign national investors looking to generate a consistent income stream. However, to maximize rental income or the value of the property, it is essentia l to know how best to improve it. Here, we share tips that are tailored to the U.S. market and designed to appeal to potential renters.

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Why upgrade a rental?

Higher rent The obvious benefit of renovating a rental property is the ability to command higher rent. Newer appliances, nicer floors, modern fixtures – people are willing to pay more for these upgrades.

Make your property stand out When you renovate, you’re showing potential renters that you care about the property's quality. This, in turn, makes your property more attractive to prospective tenants.

Improve energy efficiency New windows, efficient appliances, and smart thermostats can significantly reduce utility costs. If you’re the one covering utilities, these improvements directly benefit your bottom line.

Increase overall property value Strategically chosen renovations boost the property’s resale value, ensuring your investment appreciates over time.

Major tax deductions Many renovation expenses can be deducted from the property’s taxable income, providing a substantial financial incentive to upgrade.

Considerations

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What to repair vs. what to replace in your rental property

As you budget for renovations, remember two key principles:

  • Don’t over-renovate: Quality and durability matter, but simple and practical upgrades are often best.
  • Focus on return on investment (ROI): Before committing to any renovation, estimate the projected increase in rent or the return on the property’s renovated value if you were to sell.

Example: Refinishing worn hardwood floors, rather than replacing them entirely, can revive the beauty of the floors at a fraction of the cost.

Choosing rental property renovations with the greatest ROI

Not all renovations are created equal. Focus on changes that are known to have high returns on investment. For instance:

  • Midrange bathroom remodel: Cost $20,420 with a ROI of 67%.
  • Minor kitchen remodel: Cost $11,507 with a ROI of 81%.
  • Bathroom accessibility updates: Particularly good for markets with older renters, with owners recouping 63% of the cost on resale.

Keep rental property renovations simple

Even modest renovations can make a significant difference:

  • Address functional issues: Use the property as your tenants will, identifying areas for improvement based on real-life use.
  • Stick to surface-level changes: Cosmetic fixes, like a fresh coat of paint in neutral colors, can make a world of difference.
  • Add storage solutions: Well-placed shelves or a kitchen island can add valuable storage space that tenants will appreciate.
  • Choose low-maintenance finishes: Opt for durable, easy-to-clean materials, such as laminate countertops and porcelain tiles, that will maintain their appearance over time.

6 simple upgrades to increase your rental property value

  1. Boost property value with energy efficiency

More homeowners and renters today prioritize energy efficiency in their living spaces. Not only does this cut down on utility bills, but it can also increase the property's overall value. Simple upgrades can make a big difference:

  • Insulate Properly: Ensuring that your property has the right insulation can save on heating and cooling costs.
  • Upgrade to Energy-Efficient Fixtures: Swap out older light bulbs for energy-efficient options. Opt for energy-saving shower fixtures.
  • Consider New Windows: They can greatly improve energy efficiency.

Research, such as the 2018 study, indicates that energy-efficient homes in areas like southern California, Seattle, and Boise command higher sales prices and rental rates.

  1. Refresh bathroom and kitchen fixtures

A decade-old faucet might still work perfectly, but does it appeal to the modern tenant or buyer? Upgrading bathroom and kitchen fixtures can give your property a fresh, contemporary look.

  • Upgrade to modern finishes: Move from standard chrome to oil-rubbed bronze or brushed nickel for a chic look.
  • Consistency is key: Ensure all fixtures match to bring a unified aesthetic to your property's décor.
  1. Modernize the kitchen without breaking the bank

The kitchen is a focal point in any home. Landlords can take certain steps to refresh it without going overboard:

  • Revamp your cabinets: A simple paint job can breathe new life into old cabinets.
  • Invest in modern lighting: Change outdated light fixtures.
  • Swap hardware: New door handles can change the look entirely.
  • Consider countertop upgrades: Granite countertops may cost more than laminate but they’re more durable and appealing.
  1. The allure of fully furnished properties

Renting a fully furnished property is an attractive proposition for many tenants. But is it right for landlords? Here are some things to consider:

Pros:

  • Fill vacancies faster: A furnished property often appeals to a wider audience.
  • Higher rent: Typically, furnished properties can command 10-20% higher rents.
  • Increased security deposit: In many states, you can charge a heftier security deposit for furnished rentals. Tax Deductions: Furnishings for rental purposes can offer depreciation deductions. More details can be found in IRS publication 527.

Cons:

  • Initial Investment: Furnishing a property can be costly upfront.
  • Risk of Damage: Furnishings might get damaged, although a larger security deposit can help cover these costs.
  1. Elevate your countertops

Investing in higher quality countertops like granite, slate, or quartz can drastically elevate the look of kitchens and bathrooms. There are also alternative durable and attractive options like acrylic/polyester composites, ceramic tile, and stained concrete.

  1. Invest in quality flooring
  • Upgrading your flooring can provide a significant boost to your property's value and appeal:
  • Move Beyond Basic: Replace standard carpets and linoleum with more premium materials.
  • Consider Laminate or Tile: They're durable, attractive, and easier to clean.
  • The Luxury of Hardwood: Hardwood floors add elegance and can be a strong selling point for potential tenants.

Ready to give your rental property a face-lift?

Consider a cash-out refinance loan with Milo to fund your next renovation project.

Upgrading your rental property can pay off when done right. Enhancing your property not only attracts potential renters but can also increase its overall value. If you're contemplating financing this revamp, consider a cash-out refinance loan with Milo. The streamlined process releases funds quickly, so you can modernize, upgrade, or give your property a complete facelift. And with higher rental income, the loan pays for itself over time. Start your application, today!

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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