Avoid These 6 Rental Renovation Mistakes
Capitalize on Your SFR Investment
By Daniel Neff
Home renovations will always be part of being a single-family rental (SFR) owner/operator. However, the renovations you decide to tackle will vary based on your long-term plan for your SFR properties and how long you plan to hold them before selling.
As you plan your renovations for 2024 and beyond, watch out for these rental renovation mistakes we frequently see in the field. For example, if you are planning to hold a property for a short time, you may choose to spend more because of the potential to get a quicker return, or if you are planning to flip it you can bake renovation costs into the sale price. If you plan to hold the home for a 10-year cycle, you may want to invest in renovations upfront, so you do not have excess maintenance issues (and costs) during that decade. For a five-year holding pattern, you’ll likely choose to be more conservative with renovations to maximize your investment for the medium term.
No matter which holding cycle you’re in, the longer your home goes unrented, the less money you make. Your renovation process needs to be as quick of a turnaround as possible ($1,000 a day in renovation costs is a standard expectation). As you plan your renovations for 2024 and beyond, watch out for these rental renovation mistakes we frequently see out in the field.
Renovation Mistake 1
Focusing on trends
Your renovations should aim to give you the longest staying power to ensure the property is attractive to renters and to help you avoid the need to renovate while the home is occupied. It is always cheaper to keep renters in the property versus having to take it off the market when it is time to find the next tenant. To make sure you renovate it right the first time, go for timeless fixtures and clean lines over “of-the-moment” trends to help with longevity.
Renovation Mistake 2
Choosing cosmetics over function
Aim to make the home as functional and as open as possible to give renters the ability to make it their own. Making prescriptive cosmetic changes or dividing up spaces so that every room has a distinct purpose could prevent renters from being able to decide what they want to do with the living space and impact your investment in the process.
Renovation Mistake 3
Neglecting major appliances and needed replacements
Investing on the front end to ensure that your mechanicals are in good functioning order lowers your odds of needing to spend that money as an operating expense while you have renters in the home. It also decreases the likelihood of having a potential billback from them as a result.
Upgrading big-ticket items like HVAC, hot-water tanks, and appliances up front can save you time and effort once you have renters in place. A good rule of thumb is that if the item is older than 10 years consider replacing it as part of your rental renovation.
Renovation Mistake 4
Not being on par with the rest of the neighborhood
While you are not aiming for your property to be the nicest house on the block, you do want to meet the traditional standards of the neighborhood. You can do this by ensuring the exteriors blend in. For example, if every house in the neighborhood has a fenced-in yard and yours does not, it is probably a good idea to add one (or to remove a fence if other homes do not have one). Making sure driveways and sidewalks are in good order not only helps with curb appeal, but also helps keep the property safe for tenants and guests.
Renovation Mistake 5
Neglecting the garage or basement
While it may be cheaper to remove a garage that is not in great shape versus renovating it, this could actually cost you in the long run. Garages add value to homes and are typically a big selling point for renters, especially if you are in an area where they are detached.
Not finishing or renovating a basement can be another missed opportunity to maximize your investment. Depending on your market, renovating it could enable you to increase your rental rate per month by $500 or more.
Renovation Mistake 6
Not upgrading your lighting
Not upgrading your lighting is a mistake frequently skipped during renovations that is an easy (and cost-effective) fix. Converting it all to LED means work orders for lighting will certainly decrease—and may even become nonexistent. And renters like the cost-savings generated by low-energy-consuming lighting.
SFR home renovation decisions can be challenging and vary based on a variety of considerations. But keeping your long-term plan in mind and sidestepping renovation mistakes like these can help you capitalize on your SFR investment.
Bonus Tip
Focus on the Kitchen
If renovations are part of your plan, consider investing in the kitchen to make the house feel more like a home, as well as adding convenience features. Kitchens are often the focal point of the home, not only serving as a functional space for cooking and eating, but also as an informal gathering place for friends and family.
Updating appliances, upgrading lighting fixtures, replacing hardwood with more durable wood-like tile or giving the cabinets an affordable paint job may help a renter choose your unit over another.
If you are looking to make a bigger splash, consider adding a kitchen island or adding a work nook in the kitchen (especially for those who need to use all of the bedrooms for family members). These options provide more usable space and can come in handy for those working at home or needing an after-school homework spot for the kids.
Regardless of what you decide to do when upgrading your SFR homes, consider working with a company that performs regular work on these types of properties, like MCS. They can make recommendations on areas that can add value, reduce renovation costs, and help keep your homes rented.
