With around 34 percent of American households renting rather than buying, there’s a lot of opportunity for rental property investors!
Not only will your rental property generate ongoing cash flow and grow in value over time, but it also provides multiple tax benefits, and serves as a hedge against inflation.
Knowing how to increase the value of your rental property provides several advantages for real estate investors. Increasing your rental property value can:
- Give you a competitive advantage over other local housing options.
- Improve the energy efficiency of your property.
- Increase your resale value.
- Keep your residents happy.
- Minimize vacancy loss.
- And, ultimately, maximize your ROI!
So we want to give you several ideas for increasing your property’s value. Here are 10 ways to increase the value of your rental property.
1. Renovate the Kitchen
The kitchen is still the heart of many homes, and it’s the area that makes the biggest difference in the minds of prospective renters. A dated kitchen can immediately turn renters off, while a nice kitchen makes renters think, “yes, I can see myself living here.”
A kitchen reno can be as involved as you want. You can take it down to the studs. But that’s probably not necessary in most cases. Here are a few kitchen renovation ideas that can give you a big bang for your buck.
- Upgrade the cabinets
- Change out the countertops
- Update the fixtures
- Get new appliances
- Add a modern backsplash
One caution: Beware of over-improving in your kitchen renovation. Over improving is when you invest in luxury fixtures and finishes that the renters in your area aren’t willing or able to pay extra for. For example, if your rental property is located in a middle-class neighborhood, quartz countertops probably won’t provide a return on your investment. You’d be better off with a less expensive option like higher-end laminate or lower-end granite.
2. Renovate Bathrooms
As with the kitchen, bathrooms make a major impact on prospective renters. This makes sense because these two rooms are the most difficult for renters to change if they don’t like the current design. While bedrooms can easily be customized with furnishings, linens, and artwork, there’s very little a renter can do to change the look of the kitchen and bathrooms.
So it pays to have modern, neutral bathrooms in your rental properties. Here are a few ways to instantly make your bathrooms more appealing to potential tenants.
- Install shelving for additional storage
- Update the vanity
- Add a dual-sink vanity to the master (if space allows)
- Hang a modern barn door
- Change the tub/shower situation to match your rental demographic (families, for example, often need a tub for bathing children, while seniors generally prefer walk-in showers for easier access)
3. Update Curb Appeal and Landscaping
What do your prospective tenants see as they approach your property? This will be their first impression of the property, so make it a good one!
There are so many ways to enhance the curb appeal of a rental property. Your options may depend on whether you have a single-family or multi-family building, but here are a few exterior projects to consider.
- Plant new grass or switch to drought-tolerant landscaping
- Trim bushes, shrubs, and trees
- Give the front door and shutters a fresh coat of paint
- Install planters with colorful flowers
- Make sure the hardscaping is in good repair (the driveway, sidewalks, stone pathways, etc.)
- Repaint or replace the garage door
- Add exterior lighting
- Lay down fresh mulch
- Create a garden
- Paint the exterior of the house
4. Add Popular Amenities
As homeownership becomes more expensive, a wider range of the population is renting. This means that a certain percentage of renters are looking for all the comforts of a home in their long-term rental. And this means property owners who are willing to add amenities can increase their rental income.
Here are several amenities that today’s discriminating renters are willing to pay more for.
- A dishwasher
- Storage space
- Air conditioning
- Covered, off-street parking
- Outdoor living areas
- Fenced-in yards for pets
- Smart home technology (like video doorbells, high-tech security systems, and automated climate control)
5. Update the Fixtures
If you don’t have the budget for a full kitchen or bathroom renovation, simply updating outdated fixtures in the home can make a big difference. Here are a few fixtures that can be easily and affordably upgraded.
- Light switches
- The kitchen faucets
- Bathroom faucets
- Shower heads
- Window coverings
6. Install New Flooring
New flooring makes a big difference in the look and feel of a property. And there are options for every budget.
- High-end peel-and-stick planks are quick and easy to install and surprisingly durable.
- Magnetic planks also install quickly and easily, and (unlike peel-and-stick) it’s easy to re-lay a plank if you don’t get it just right the first time.
- Ceramic tile looks lovely and typically wears well (just take care to seal the grout and re-seal it between tenants).
- Click-and-lock laminate planks look like hardwoods at a fraction of the price.
But think twice before installing carpeting or hardwoods. Carpeting typically has a useful life of just five years and often needs to be replaced between tenants. Hardwoods are highly desirable, but they require extra care, and they dent and scratch easily.
7. Add a Fresh Coat of Paint
Like flooring, fresh paint gives your entire property an instant lift. Paint is known to be one of the most cost-effective improvements a real estate investor can make. Not only will it make the walls look new, but it can also mask scents from previous tenants who had pets or smoked in the unit.
Here are a few best-practice tips for painting your rental property.
- Choose light, neutral colors to brighten up the space and appeal to a wide range of potential tenants.
- Always order far more than you think you’ll need. Even if you don’t use it all, you’ll need extra for touch-ups between renters.
- Fresh white paint on the trim frames any space well.
8. Increase Energy Efficiency
Renters love energy-efficient upgrades because they save them money on their utility bills. Real estate investors love energy-efficient upgrades because they increase the resale value of the property. And everyone loves energy-efficient upgrades because we all want to do what we can for our planet!
Here are a few ways to increase your rental properties' energy efficiency.
- Make sure the structure is properly insulated.
- Add weather stripping to doors and windows as needed.
- Install energy-efficient appliances.
- Upgrade to energy-efficient windows.
- Add solar panels to help power the home.
9. Add More Living Space
Adding square footage might not be the easiest, fastest, or most affordable way to add value to your investment property, but it can substantially increase your cash flow.
Adding more living space can be done in several different ways. Here are a few options to consider.
- Finishing a basement or attic.
- Converting part of a large garage into an extra bedroom.
- Building an add-on.
- Enclosing the back patio to create an all-seasons room.
- Building an accessory dwelling unit (ADU) on the property to instantly add another unit to your investment portfolio.
10. Practice Good Property Management
Increasing a rental property’s value isn’t just about improving the property; it’s also about resident relationships. Good property management practices help you find qualified renters, reduce your vacancy losses, and increase your cash flow.
Here are several tips for managing your property effectively.
- Market your rental with professional-quality listing photos.
- Make sure your property is always show-ready.
- Screen prospective renters carefully to confirm that they will be reliable tenants.
- Raise the rent to just below the market rate for lease renewals. You want to keep rents up, but you also want to incentivize good residents to stay.
- Charge more for short-term rentals.
- Respond promptly to maintenance requests.
- Go pet-friendly. Most states allow you to charge additional pet deposits and even monthly pet rent to offset any additional risk of property damage that could be caused by the pet.
- Invest in the common areas of your multi-family projects. Pools, media rooms, and clubhouses provide a wow factor that attracts renters and gives you a competitive advantage.
Invest in Rental Property with Gatsby Investment
The benefits of rental property investing are undeniable. The income, appreciation, and tax breaks are the best reasons why you should invest in rental property.
But there are two potential drawbacks to real estate investing.
- Buying a second home as an investment property requires a substantial upfront investment.
- Hands-on management is required. You need to either invest your own time in managing the property and the residents or pay a professional property manager and their army of vendors.
But Gatsby Investment has the solution to both of these potential issues.
Gatsby is a real estate syndication firm that sponsors and manages real estate investments on behalf of groups of real estate investors. We find real estate deals in Southern California with exceptional potential and allow investors to buy into these deals. This means you can own a piece of desirable SoCal real estate for a fraction of what it would cost to purchase a rental on your own!
Then, our team of experts professionally manages every stage of the investment. If it’s a renovation or new development, our project managers coordinate architects, builders, contractors, and designers to produce a high-quality property. And for long-term rental projects, we handle the ongoing property management for you. This makes a world of difference in terms of passive income vs earned income. With Gatsby, you can kick back and monitor the income from your asset without investing any of your valuable time in the active management of it!
And, with Gatsby, you don’t need to spend months looking for the right property to invest in. You can invest in one of our well-vetted projects this week by following these four steps:
- Create a free account with Gatsby Investment.
- Verify your accredited investor status.
- Choose your investment.
- Wire your investment funds.
From that point, you’ll be able to monitor your investment through your convenient online dashboard. No need to worry about how to increase your rental property’s value when you have a team of real estate experts doing it for you!