Updating Older Rentals: Balancing Cost and Value

Imagine a potential tenant scrolling through rental listings, and they come across two properties. One has outdated carpets, appliances straight out of the 80s, and faded wallpaper. The other? Sleek, modern finishes, energy-efficient appliances, and fresh, neutral paint colors. Which one do you think they’ll be more likely to choose? 

If you’re the owner of a rental property that has housed its fair share of tenants over the years, it might be time to consider a property refresh. While we’re sure your investment has served you well, every property deserves a little update to stay competitive in today’s rental market.

In this article, you’ll learn how a few strategic updates can improve an older rental’s profitability and appeal. We’ve also got you covered with tips on kick-starting your modernization plan, and money-saving hacks on how to renovate on a budget without compromising on quality. 

How Can You Tell If Your Rental Property Needs an Update?

Is your rental looking a bit worse for wear? Here are some telltale signs that it could use an upgrade:

• You or your tenants are facing high energy bills because of poor insulation and outdated windows, a common problem in older properties.

• The property has an outdated electrical system or old wiring.

• The appliances are unreliable and often break down.

• The property has a worn-out exterior with peeling paint or neglected landscaping.

• The unit has discolored wallpaper and worn out carpeting.

• The property has cramped spaces and awkward layouts that hinder functionality.

• You often get feedback from tenants about maintenance issues.

Benefits of Modernizing an Older Rental Home

Is modernizing your unit worth the cost? Let’s look at some benefits of renovating an older rental:

1. Maintenance Costs Savings

Old properties often come with old problems. Plumbing issues, electrical hazards, and constant repairs can drain your time and wallet. Modernizing your property can drastically cut down on these maintenance headaches. New systems and appliances are more reliable and energy-efficient, reducing both the frequency and cost of repairs. It’s a win-win: happier tenants and less stress for you.

2. Justify Higher Rent Prices

A modernized property with updated amenities can often command higher rents as long as it offers what tenants want. This means quality, comfort, convenience, or even style. This could result in more money in your pocket each month, boosting your rental’s profit potential.

3. Future-Proof Your Investment

Investing in updates doesn’t just benefit you in the short term, it can also improve the long-term value of your property. Should you decide to sell in the future, a modernized home will be far more attractive to buyers, potentially fetching a higher sale price.

Learn more about How to Future-Proof Your Rental Investments

4. Tax Benefits

Did you know that some renovations can save you money on your taxes? Certain energy-efficient upgrades are eligible for tax credits if you qualify, while general improvements can be claimed on your taxes or depreciated over time. This can make your investment in modernization even more cost-effective. Always check with a tax professional to see what benefits you might be eligible for.

5. Happier Tenants

Modern amenities mean a better living experience for your tenants. For example, features like an in-unit laundry or updated kitchen appliances are becoming expectations, not extras. Providing things that improve the renting experience can encourage tenants to stay longer and reduce the costs of finding new tenants.

5 Steps to Updating an Older Rental Property

If you have a rental that’s in need of some upgrades, here are a few steps that you can take to bring it up-to-date:

1. Inspect the Property Thoroughly

Before you grab that sledgehammer or start picking out paint colors, a detailed property inspection is a must to understand what you’re working with.

Take a comprehensive look at the entire property and walk through each room with a keen eye and a notebook (or a digital tool, if that’s more your style). Pay close attention to areas that are visibly outdated or in disrepair and create a list of projects that need to be done.

Here are some areas you should pay close attention to:

• Electrical System: Old wiring or outdated electrical panels can be a safety hazard and might not support modern appliances and technology.

• Plumbing: Keep an eye out for things such as leaks, corrosion, and water pressure problems. Old plumbing can lead to significant damage if not addressed.

• Structure Elements: Inspect the structural integrity of the foundation, walls, and roof. Cracks, sagging, or water damage could indicate underlying more severe issues.

• HVAC System: Heating and cooling systems are vital for tenant comfort. Ensure that HVAC systems are in good working order or consider upgrading to more energy-efficient models.

• Insulation Issues: Poor insulation on walls and windows allows heating and cooling to escape through gaps and cracks, causing heating bills to go up.

• Potential Hazards: Older properties might contain hazardous materials that need professional removal. Check for the lead paint or asbestos.

• Potential Cosmetic Improvements: Evaluate areas that need cosmetic updates, such as outdated decor, carpets, light fixtures, wallpaper and paint, appliances, and storage solutions.

2. Consider Market Demand and Tenant Preferences

Knowing what tenants need and want will help you better prioritize upgrades and help you ensure that your efforts won’t go to waste.

Remember that not all upgrades offer the same return on investment, so weigh the costs of potential renovations against the expected rental income or property value increase. Focus on high-impact improvements that align with tenant preferences.

It’s also important to realize that trends may evolve, but some upgrades have long-term value. Energy efficiency and smart technology, for instance, are likely to remain attractive for years to come. Prioritize renovations that will keep your property competitive in the long run.

Want to find and keep reliable tenants? Download your FREE Guide on What Tenants Really Want in a rental.

3. Set a Realistic Budget and Renovation Goals

Before you renovate, outline a clear, realistic budget and set specific renovation goals. This includes not just the cost of renovations but also a buffer for unexpected expenses.

Having clear objectives will help guide your decisions, so think about what you want to achieve with this renovation. Is it a higher rental income? Lowered operating expenses? Or increased property value?

Next, break down your renovation project into smaller tasks and assign a cost estimate to each. Include costs for materials, labor, permits, and any additional expenses. Tools like spreadsheets or apps for budgeting can keep everything organized. Set a realistic timeline for your project as well, considering contractor availability and the scope of work. Be sure to factor in some extra time for unforeseen delays as renovation projects often hit unexpected delays.

4. Decide What to Spend On

A successful renovation plan balances immediate fixes with long-term improvements. Immediate fixes may not be glamorous, but they’re necessary updates to make the property livable and safe. Examples include fixing leaks, repairing broken fixtures, and addressing safety hazards. These fixes can prevent further damage and more costly repairs down the line.

On the other hand, long-term improvements may not be urgent but can enhance the property’s appeal and value. Think about energy-efficient upgrades, smart home features, or updating the property’s exterior. These improvements make the property more attractive to tenants and help future-proof your investment.

With your budget set and market data ready, the next step is to decide where to allocate your funds. Focus on upgrades that will offer the highest return on investment. 

5. Safety and Compliance Upgrades

Always prioritize essential updates that ensure the safety and legality of your property. This includes electrical, plumbing, and structural repairs.

• Kitchens and Bathrooms: These are often the most scrutinized rooms and can significantly impact tenant satisfaction and rental rates. Invest in quality fixtures, modern appliances, and stylish finishes. 

• Energy Efficiency: Upgrades like new windows, insulation, and energy-efficient appliances can reduce utility costs and attract eco-conscious tenants. They also offer long-term savings on energy bills, something tenants will appreciate over time.

• Curb Appeal: First impressions matter. Simple improvements like landscaping, a fresh coat of exterior paint, and updated lighting can make your property more inviting. Likewise, pressure washing the vinyl siding, walkways, and any patios or decking could make a big difference as well.

• In-Unit Laundry: Today, an in-unit laundry is largely considered important by renters. Add a washer and dryer to boost the property’s appeal if possible.

• Outdoor Space: People highly value outdoor space, especially in urban settings. Maximize your home’s appeal if it has a small balcony, patio, or garden. If you allow pets in your rental, adding a fenced-in area for them could help to make your rental more appealing as well.

More value-adding tips here: 8 Ways to Add Value to Your Rental Property.

How to Save Money on Modernizing Your Rental Without Compromising on Quality

There are a number of ways that you can save money when doing upgrades or renovations on your rental. Here are some tips that can help you to save:

1. Source Affordable Materials

Renovating on a budget starts with innovative sourcing of materials and fixtures. Aside from big-box stores, check out specialty suppliers, wholesale warehouses, and local businesses. They may offer competitive pricing, especially when buying in bulk or negotiating for discounts. Online marketplaces like Craigslist, Facebook Marketplace, and Habitat for Humanity’s ReStore are great resources for finding discounted materials and fixtures, contributing to cost savings and sustainability efforts. Another way to save money is by repurposing and upcycling materials whenever possible. 

2. Wait for Seasonal Discounts and Sales

Timing your purchases can lead to significant savings on materials and fixtures. Many home improvement stores and suppliers offer seasonal discounts and sales, particularly during quieter periods like late fall or early spring. Another tip is to take advantage of end-of-season sales for outdoor materials like patio furniture or landscaping supplies.

3. DIY vs. Hiring Professionals

Deciding whether to tackle projects yourself or hire professionals requires careful consideration. If you have time, and interest, going the DIY route can help you to save on labor costs for tasks like painting, installing shelves, or minor landscaping. Use online tutorials and guides on platforms like YouTube to boost your skills and confidence. However, hiring licensed professionals is essential for tasks involving safety, compliance, or technical expertise, such as electrical work, plumbing upgrades, or structural modifications. Professionals know exactly what they’re doing and keep things up to code, preventing costly mistakes and future repairs.

4. Hire a Professional Property Manager

Consider hiring a professional property manager who can oversee your property’s repairs and upgrades with a keen eye for efficiency and quality. Their expertise ensures that work is done right the first time, and they can also provide invaluable renovation advice based on their knowledge of the local rental market. Their work doesn’t stop here. Once repairs are over, they can handle your day-to-day landlord tasks and maintain good relations with your tenants. This modernizes your rental operations, too.

Modernizing an older property is an investment. It can transform your space into a more attractive and profitable rental while also saving you money and reducing headaches down the line. Giving your property a fresh, modern touch not only benefits you as a landlord; it can also make it a place that tenants love to call home. 

Ready to modernize your property and maximize your rental income? Your investment will be in good hands with a Renters Warehouse professional property manager. If you want to start your investment journey as a landlord, explore our single-family rental marketplace.