Should you renovate your home before renting it out? Your first gut reaction may be to say no way. If John is willing to move in to my home in it’s current condition, why should I renovate? This is a little mistake that can turn into a big mistake later on. By not renovating you will attract a tenant who has lower standards. Worse, a tenant that accepts a rental unit that is not maintained is less likely to leave your home in good condition when he moves out. This little mistake of deciding not to spend a few hundred dollars could cost you thousands of dollars later on.
I made this very mistake. I did not replace two ceiling fans when they went out. The light kit in the ceiling fan still worked and so I told the guy about it, and he seemed fine with it when he moved in. Also, the toilet would run every so often, then stop. I told him about it but he didn’t seem to mind as long as it flushed. The kitchen sink also drained very slow. I knew I should have called out a plumber to fix. I figured that the new tenant wouldn’t even notice because the sink still drained and because he never saw how fast it drained before, he wouldn’t know the difference. When he moved, he didn’t even tell me. Not only did I have to post a notice of abandonment, but he left my home a mess. He left no address for me to reach him. I even had to incur the expense of calling out a trash hauler to haul away all the junk he left in my home. I attracted that sort of tenant with my rental unit in the condition it was in. The tenant did stay 12 months which is what his lease was for. To turn the unit, it cost me about $5,000.
Renovations done right will result in a higher monthly rent you can charge someone to live in your home as well as attract a higher standards tenant. If you install two new ceiling fans for $500 and then increase the monthly rent by $25, the payback is 20 months. Keep in mind that you are not just increasing your monthly rental income, but you are increasing the entire value of your property: a big plus when you decide to sell your home. As a general rule, if the payback is less than 24 months then it is a good investment.
What you want to do is to install improvements that most prospects want which in turn will let you charge a higher monthly rent.
Benefits That Most Prospects Want
1 – Dishwasher
2 – Central air conditioning
3 – Garbage disposal
4 – Washer and dryer hookups
5 – New kitchen cabinets
6 – In warmer climates, ceiling fans are a must
7 – Microwave
8 – Three bedroom homes are generally easier to rent than two bedroom homes
9 – Pets. If you do allow pets, you need to charge a $500 per pet deposit. You also need to let the tenant know upfront that even a small, “outside” dog leaks 15 pounds of urine in the carpet per year and so when he moves, you will have to completely rip out the carpet and the padding underneath and replace. This means that even if the tenant only stays a year (signs a year lease) he will not get back his pet deposit. For this reason, many owners simply do not allow pets which means if you do allow pets in your rental home, it will be easier to rent.
When replacing appliances, make sure you buy mainstream brands and models that are easy to get replacement parts for. If you can find an appliance that is modular, get it. This will let you easily replace parts as they go out. Always make sure that replacement parts are easy to get for the appliance.
Look around your home for items that are easy and inexpensive to replace but that improve the look of your rental unit. For example, new light fixtures or ceiling fans are inexpensive and really improve the look of your rental home. Replacing old electrical switches and outlets with new ones is another. Another one is new hardware on the kitchen cabinets.
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