Want a few quick ways to boost your rental property’s value? Or, for that matter, your home’s value?
Pricing in real estate has little to do with what you paid for the property, or how much you spent improving it. Real estate values and rents are based on one thing: what buyers and renters perceive the value to be.
Which is not to say you should do anything immoral, such as hiding structural problems with popcorn ceilings or painting over mold instead of treating it. If there are true dangers or problems with a property, you need to disclose them to buyers. That’s not just ethical, it’s legally required.
But appearances matter in real estate. The difference between a $200,000 property and a $230,000 property may be only $3,000 worth of upgrades, not $30,000. Sometimes small changes will drastically impact the property’s functionality (e.g. #1 below), or create an image of luxury (e.g. #4), or simply make the property an easier place to live (e.g. #6). In other cases, it’s about managing first impressions.
So how can you maximize your property’s value, without spending a fortune?
1. Magically create another bedroom.
Many homes have perfectly good rooms that aren’t classified as bedrooms because they don’t have a closet.
So add a closet!
This cheap upgrade just involves a small drywall buildout, but listing a three-bedroom house instead of a two-bedroom house can mean a price difference in the tens of thousands of dollars.
If you don’t feel like hassling with contractors, go to IKEA and buy a handsome wardrobe. Voila! A new bedroom, which can easily add hundreds of dollars to the rent you can ask.
When hunting for rental properties, you can even keep an eye out for properties with these “bonus rooms.” You might buy a two-bedroom, only to have a three-bedroom on your hands a few days later.
Pro Tip: To be classified as a bedroom, the room needs at least one window!
2. Swap out the kitchen & bathroom hardware.
You’d be amazed what clever, cute or charming hardware can do to a kitchen or bathroom. Replace those tacky 1980s cabinet knobs or drawer handles with a new look. You could go for charming rustic, or fun and kitschy beach house, or ultra-sleek and modern, or anything else that fits well with your existing cabinetry and vanities.
We all have at least one friend with spectacular taste. Call her up, stroke her ego a little, and offer to buy her lunch if she swings by Home Depot with you to pick out some upscale hardware for your kitchen and bathrooms.
Need some more ideas for sprucing up your kitchen or bathroom on a budget? Here are seven hacks to redo your kitchen and bathrooms for almost nothing.
3. Raise the rent before selling.
Thinking about selling a rental property to another investor? Raise the rent, so you can show off those higher cap rates, income and cash flow.
This strategy even works if you’re planning on selling to a homeowner. “Rents for $1,500, but your estimated mortgage payment is only $1,064!”
Just be sure you don’t lose your tenants when you raise the rent though, if you’re selling the property as a turnkey to another landlord.
As a final thought, what do your current renters say about the property? Are they cooperative and impressive ambassadors for your home, when prospective buyers visit? Or are they dirty, disrespectful, or disreputable? If the latter, give them notice to vacate if possible, and either bring in some more impressive renters or leave the property vacant while marketing it.
Don’t forget to screen all applicants thoroughly!
4. Make your property a smart home.
Pick up two or three smart home gadgets and boom! Your boring old house is now a “smart home” with “state-of-the-art technology.” For a few hundred dollars, your property has ratcheted up in sex appeal, modernity and value.
Landlords can also see excellent returns on smart home updates with higher rents.
Start with a smart thermostat, so you can boast to prospective buyers or renters that it will save them hundreds of dollars a year on electricity and gas bills. They cost around $200.
Then consider smart door locks, smart smoke detectors or a smart security system. Smart door locks also have a functional use for landlords and property managers, who can grant temporary access to anyone: contractors, real estate agents, leasing agents, prospective tenants, etc.
Smart homes are increasingly becoming greener as well, so you can brag a little about your investment property’s green home chops when you advertise it.
5. Kick up your curb appeal.
First impressions matter. A lot. You need your property’s first impression to be stellar.
That means a well-groomed lawn and paint that’s not flaking or faded, at the minimum.
But don’t stop there. How does the garden look (if there is one)? Are the trees trimmed back from the house? How are the shrubs and other landscaping?
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Could the house benefit from more privacy? Consider planting a hedge, or latticework with ivy. If that’s too much work, just buy a few potted bushes and line them up where you want more separation from the outside world.
If the backyard is noisy, buy a fountain to burble away and block traffic noises or loud neighbors.
The easiest trick is simply to buy some potted plants and line the walkway or home entrance. No muss, no fuss, no breaking the bank.
6. Add a second sink in the master bathroom.
Who doesn’t love his-and-hers sinks in the bathroom? If you have the space, add a second sink.
The cost of replacing a single-sink vanity with a double-sink vanity can range from $500 up to $5,000, so be careful your costs don’t spiral out of control. Get a few prices and see what’s possible with your property’s bathroom.
This is one of those little things that makes a huge difference to renters and homebuyers, so if you can add a second sink for a three-digit price tag, it’s money well spent.
7. Add a bathroom.
People can’t get enough bathrooms. A property with as many bathrooms as bedrooms reassures renters and buyers that they’ll never have to wait for the bathroom. Which, of course, no one likes to do.
But it’s also a mark of modernity – once upon a time, almost all properties were built with only one bathroom. Today’s homes are built with several (in some cases bordering on “many”).
Where adding a bathroom can get expensive is rerouting plumbing to a pipe-less part of the house. So get a sense of where the plumbing runs through the house, and whether it’s possible to add a new bathroom using the existing plumbing lines. Even a half bathroom adds lots of value!
8. Drop walls for an open floor plan.
No one wants to live in a honeycomb, at least on the first floor. Open floor plans create lighter, brighter, more communal living spaces – another mark of a more modern home.
Not all walls are load-bearing, and even those that are can often be opened partially. What was a door could become an open archway, or you could remove the wall but leave a support column.
Plan on at least a few hundred dollars for a structural engineer’s opinion, before getting crazy with the sledgehammer.
9. Clean up the neighborhood.
The problem isn’t always your property. Do the rednecks next door have a 1970s Camaro on blocks on the front yard? Or maybe they haven’t painted or landscaped since White Snake was cool?
Brush off your etiquette lessons, because you’ll need tact here. When you approach the neighbors, consider inviting them over for pizza and beer with you and the work crew at the end of a work day. Once they have a slice of pepperoni in one hand and a beer in the other, ask them “Want to see what we’re doing to the place?” They will of course say yes, so you can show them around the property with pride and point out all the exciting upgrades you’re making.
Now for the tricky part – the offer. Try something like this: “Hey these guys are wrapping up on Friday, and gave me a killer deal on this job. They actually still owe me a favor; want them to swing by your place to give you a quote? They won’t charge for the quote and I’ll make sure they give you the same pricing they gave me.”
Depending on how bad the neighbor’s property looks, you might even offer to just “roll it in” with your job. If you do offer to pay the bill though, be careful to take care of the neighbor’s pride. No one likes to feel like a charity case, so you either need to make it sound like it’s no trouble at all for the contractors to knock out the task, or propose some small favor in exchange. Even if it means making up a favor that actually won’t help you at all. A person’s pride is a prickly thing.
It might cost you $500 or $1,000 to clean up the junkyard next door, but if that’s all it takes to make the block look classy and upscale, it’s money well spent. Terrible eyesores next door can drag down property values by tens of thousands of dollars. Do what you need to do.
Keep an Eye on ROI
Property upgrades are all about return on investment. How does the cost compare to the impact on value? Most home renovations have negative ROI, so be careful not to fall into the trap of assuming that property upgrades will pay for themselves.
Do research, talk to real estate agents and property managers, find out for yourself. A good listing agent will be able to give you an accurate estimate of how much value a given upgrade will add, in your neighborhood.
Perhaps most importantly, buy properties for less than they’re worth in the first place, so that you’re starting from a place of equity and not playing catch up!♦
What are your tales from boosting investment property profits? How have you added value to your home, rental property or flip? Regale us with tales of conquest.