As a property owner, you always want to get the most out of your investment. Whether you own a single-family home, a duplex, or an apartment complex, there are many benefits to renovating your rental property. Improvements and updates attract better tenants, increase rents, and improve the overall value of your property. Of course, you should carefully plan and budget for any renovation project.
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That said, let's delve into the significant benefits of such a huge investment.
Increase Property Values
Renovating your rental property can increase its value significantly, especially when it was bought at a price that's cheaper than the market value. While a property's market value can grow organically after many years, you can also take a shortcut and increase your property's value with the appropriate renovations.
Enable You to Charge Higher Rents
The rental market and your property's overall condition usually determine the monthly rental cost. So, investing in renovations is the smart way to go if you want to increase monthly rent. If you're worried about renovation costs, think about how much more money you'll make with the higher rent you'll receive.
However, you should also factor in how much the potential rent increase will be after renovations when deciding on a budget.
Attract Better Tenants
Long-term renters looking for a permanent place to call home usually look for good-quality properties with sturdy windows and a nice bathroom and kitchen, among other things. You also want to make an excellent first impression, so a professionally done paint job would be beneficial. High-quality tenants pay on time and take care of your unit as if it were their own.
Reduce Tenant Turnover
Aside from attracting a better caliber of tenants, renovating your rental property will also help reduce tenant turnover. According to TransUnion, landlords spend a monthly average of $1,750 on a vacant apartment. The following amenities help attract better long-term tenants:
- High-speed internet
- Walk-in Closet
- Soundproofed walls
- Balcony or patio
- In-unit washer and dryer
- Pet-friendly features
Take Advantage of Tax Benefits
As any savvy property owner knows, landlords can take advantage of depreciation tax codes with undergoing property renovations. In particular, Section 179 allows landlords to deduct the total price of long-term properties bought during the tax year, including appliances, carpets, blinds, and other renovations and property improvement purchases.
Additionally, you may be eligible for a capital gains exemption when you sell the property. However, it's essential to remember that the rules surrounding tax benefits can be complex, so speaking with a professional before undertaking any significant renovations is ideal.
Should You Renovate Your Rental Property?
It's important to know that renovating your rental property can also have drawbacks. For one, you may lose rental income while remodeling and renovating. Moreover, it would help if you considered the monthly rent of surrounding and similar rental properties when coming up with a renovation budget. You don't want to set a vast budget only to discover that you can't charge more than expected. Ultimately, you choose whether or not a property renovation will benefit you, but make sure you do your research beforehand.
John is a financial analyst but also a man of different interests. He enjoys writing about money and giving financial tips, but he can also dive into relationships, sports, gaming, and other topics. Lives in New York with his wife and a cat.