While renovating your rentals can be expensive and time consuming, there are ample benefits to the process. When weighing your decision to renovate your rental, consider these six pros:
Renovating your rentals could enable you to raise your rent.It is important to run the math of the potential increase in rent versus the budget of your renovations. YetiInvesting shares an experience of spending over $100k in renovations, yet increasing rent by over $1,100k per month, enabling them to recoup their renovation costs in under 7 years. Keep in mind, this is an extreme example of particularly beat up properties, and with some minor renovations, you could easily get a significant rent increase. That’s why it is crucial to run the numbers for each individual scenario. Another bonus is the potential higher rents, could draw in a higher caliber of renters.
Renovating your rentals can reduce the costs of ongoing maintenance.Regular repairs of appliances, plumbing, or electrical could ultimate be more expensive than upgrading them. In fact, Mashvisor found that these kinds of renovations could save you hundreds annually. See our blog post on “Life Expectancies of House Parts & Appliances” for guidance on when it is time to repair versus replace.
Renovating your rentals could have significant tax benefits.Landlords can take advantage of Section 179 and bonus depreciation tax codes when undergoing renovations. Section 179 enables landlords to deduct the full purchase price of long-term personal property purchased during the tax year, such as kitchen appliances, carpets, drapes, blinds, etc. bonus depreciation allows buy and hold investors to receive immediate tax deductions on long-term assets.
Renovating your rentals could reduce tenant turnover.Transunion found that the average landlord spends $1750 per month on a vacant apartment during tenant turnover. The good news is certain amenities can help you keep those properties occupied. Here is some data Transunion found on the top amenities to reduce tenant turnover;
- High speed internet- 94%
- Walk-in closet- 89%
- Soundproofed walls- 88%
- Patio or balcony- 87%
- Washer/dryer in house- 87%
Renovating your rentals could increase the value of your properties.Depending on the project, you can see a significant ROI and value increase. Some projects, though, such as adding an upscale master suite or doing a major kitchen remodel, Remodeling Site found does not show ROI.
Renovating your rentals could help you get more cash-out of them to grow your rental portfolios.If you use cash-out refinancing as a tool to grow your rental portfolio, consider improving the property, increasing the value, and getting more cash-out. Learn more about this strategy in our blog post, "How to Maximize Cash-Out Refis to Grow Your Rental Portfolio."
If you are ready to upgrade your rentals and are now looking for financing, check out our trusted partner LightStream. LightStream offers whole-project home improvement financing from $5,000 to $100,000, and flexible terms, so you can make your loan work for you.
Learn more about LightStream’s hassle-free process and get your project started. For more resources on managing and upgrading your rental property, check out our Investor Resources.