To have the greatest return on your rental property investment, you must develop a consistent and long-term property renovation budget. While properties being rented out do not usually need a complete “flip” renovation, it is important to know where you should allocate your property renovation budget to have the greatest effect on the Lehi market in increasing the rent value.
Experienced property investors recommend allocating funds for property renovation on the main features of the property based on the following percentages:
- Kitchen: 30%
- Bathroom: 20%
- Exterior: 20%
- General Improvements/Other: 30%
After you determine the areas of your property that fall under these percentages, factor in the total worth of the property and take a percentage of it. For example, if you have a $40,000 property renovation budget based on 10% of a $400,000 property value it would look like this:
- Kitchen: $12,000
- Bathroom: $8,000
- Exterior: $8,000
- General Improvements/Other: $12,000
Keep in mind, each adjustment needs to factor in your target market and what will maximize value for your future Lehi tenants. Create a list of each room and feature of your property and utilize your allocated property renovation budget to find what needs the most improvement (you do not need to use the whole budget).
Some property investors will want to maximize their property renovation budget by redoing the entire kitchen or bathroom; however, it is important to keep costs low as possible and find what needs the most work. For example, you could keep the main kitchen body and just replace the floors, sink and faucet, add new appliances, and paint the cabinet doors or add new handles. Bathrooms can generally stay the same with their walls and layout, but you could place a new shower head or heads, toilet, or vanity based on your vision for a more clean and modern look. If there are items from your property that you do not want to keep, consider utilizing a second-hand market by selling them to have more funds for adding new items. Alternatively, to cover costs, some Lehi investors might buy from the second-hand market or a community online classifieds section to find lower cost items for kitchens, bathtubs, windows, and doors.
Generally, a full renovation with your Lehi property renovation budget will most likely always add additional value. However, overcapitalizing can become a factor, especially when rental values can alter depending on the market. As such, ensure that your budget fits your goals and that you do not perform expensive renovations that are not needed to attract higher rent.
In determining the most important items to focus on with your property renovation budget we have found that these items tend to attract a higher rent value:
- Updating the kitchen and bathroom to be more modern
- Adding blinds/window dressings and floor coverings
- Including privacy features
- Outdoor living areas and fencing
- Ease of access to rooms
- Natural lighting in the home
The most important factor in renting to Lehi tenants is to have the best presentation that you can to make a positive impression with your prospective tenants that will last even after they decide to live in your property. Additionally, prior to contacting you, potential tenants will often drive by the property itself to view the condition. If they are impressed, then they will contact you for more information. If not, they may move on to the next rental property. As such, curb appeal can help attract and retain quality tenants. An effectively planned property renovation budget will result in careful consideration of all the costs necessary to allocate the right resources and time to what matters most to your future tenants.