8 Benefits of Rental Renovations to Increase Rental Income
Rental renovations are becoming something of a hot topic in property management. Many property managers are choosing to renovate their rental property (or properties) to differentiate their property from competitors and increase rental income.
Landlords often avoid renovating their rental properties because rental renovations projects tend to be costly, time-consuming, and a lot of additional work.
What landlords may not know, however, is that rental renovations can seriously enhance their real estate businesses. Here are 8 significant benefits of rental renovations:
- Increase Property Value
- Improve Energy Efficiency
- Raise Rent Prices
- Compete with Local Market
- Minimize Maintenance Costs
- Reduce Tenant Turnover
- Capitalize on Tax Deductions
- Expand Rental Portfolio
Below, we take a closer look at each of these benefits. By the end, you will certainly agree that renovating your rental properties is worth the time, money, and extra work.
#1 Increase Property Value
A rental property’s value is often determined by its classification — class A, class B, class C, and so on. The higher your property’s classification, the higher the rent you can expect to charge. Typically, a property’s classification is based on its age, location, amenities, and the income of the tenants who lease it. By renovating and remodeling a property, you can improve the amenities it offers, and thus attract tenants with higher incomes.
#2 Improve Energy Efficiency
Many companies today are focused on improving the energy efficiency of their businesses. For property managers, improving energy efficiency allows them to lower utility costs, improve their brand image, and attract eco-conscious renters.
There are a few simple ways that landlords can better their property’s energy efficiency with renovations projects. One easy project is to replace single-pane windows with double-paned ones that offer better insulation. Landlords can also swap out old appliances with new Energy Star ones that use less energy to operate.
#3 Raise Rent Prices
Even if your renovation projects don’t raise your property’s value classification, the improvements can still be a catalyst for raising rent prices. Before you begin a renovation, you should calculate how much the project will cost versus how much you can increase rent by when it’s complete. You will likely find that more expensive renovations yield more money in the long run.
#4 Compete with the Local Market
No matter how competitive your local rental market is, it is important to stay on top of the game in order to lockdown renters. One of the best ways to be a strong competitor in your market is to renovate and remodel based on what renters in your area are looking for. If another property management company is attracting more renters than you are, do some investigating and figure out what their properties offer that yours don’t.
#5 Minimize Maintenance Costs
Continuous repairs to appliances, plumbing, and electrical can add up to be a major expense. At a certain point, it becomes more expensive to repair a problem than to simply replace whatever it is that is causing it. Renovating can save you hundreds of dollars annually just by minimizing maintenance costs.
#6 Reduce Tenant Turnover
A good way to successfully retain renters and minimize tenant turnover is to increase renter satisfaction. Many landlords have found that even simple renovation projects encourage tenants to renew their leases. In order to accurately gauge which renovations will mean the most to your renters, you can send out short surveys asking what they would like to see. This not only demonstrates a concern for their renting experience, but it helps you plan your renovation projects.
#7 Capitalize on Tax Deductions
Landlords are able take advantage of Section 179 when undergoing renovation projects. Section 179 allows landlords to deduct the full purchase price of qualifying equipment purchased during the tax year. Such equipment includes kitchen appliances, carpets, drapes, blinds, and more. These tax deductions are designed to encourage companies to invest in their businesses, which is exactly what you should do.
#8 Expand your Rental Portfolio
Because rental renovations can save you money as well as provide you with greater income, you may likely find yourself in a position with more funds than ever. You can use this extra cash to further invest in properties and expand your rental portfolio. By improving the properties you currently own, you will be able to grow your rental business.
Improve your Real Estate Business with Rental Renovations
It should now be evident that rental renovations offer landlords plenty of benefits. With each renovation project, you should assess how much it will cost you now in relation to how much it will offer you in the future. When you strategically renovate your properties, you will often find that the future value is worth much more than the upfront costs.