One the hardest parts of being a landlord is dealing with tenants. Having a great tenant makes being a landlord easy - rent comes in, you pay your mortgage, you move on. Ideally, this is how being a landlord should work. However, as I am sure most of you are aware, this is not always the case. You can have tenants that don’t pay their rent, or worse, ones that actively destroy your property. When that happens, not only are you out rent, you are also out the costs to repair your rental.
To prevent this from happening, a lot of landlords take proactive measures, such as credit and reference checks, Convert to a short term rental with a vacation rental property, Another option is through remodeling your rental property to attract better tenants such as young professionals, who have a little more money to spend and a higher expectation for standards of living. This way, not only do you get better tenants, you can also charge them higher rent.
Home prices in the US have continued to increase every year since 2012. According to Zillow, the average home is sold for $245,000. Keep in mind that this is an average and many metropolitan areas in the US are much more expensive. In Seattle for example, the average price of a home is $752,000. Unfortunately, this puts home ownership out of reach for many millennials, who, on average, have to save 6.4 years of their annual pay for a down payment. This has pushed many millennials into renting instead of buying. Not only that, but some millennials actually prefer to rent instead of buying, which is a big shift in mindset from previous generations. Because they have to rent for longer periods of time, they are more likely to opt for a higher quality rental unit.
But, before you start tearing down walls, it’s important to understand the demographic you want to attract. For millennials, some of the most important features in a house are very different than their parents. This is most obvious in the modern approach to the kitchen. In the past, kitchens were to be kept hidden and used strictly for cooking. Nowadays, kitchens are the focus point of a rental unit. Open concept living and natural light are also key features that will attract better tenants who will stay for a longer term. If you currently have a dated look with a small, secluded kitchen, it is probably time to renovate!
One of the worst things that can happen to a landlord is to have a vacancy for an extended period of time. One way to hedge against this is to ensure that your unit is modern and updated. This will help it stand out in the saturated rental market when compared to others in the area. Not only that, but it will also attract more attention, giving you the ability to screen more candidates and select the best fit. In turn, having a great tenant living in a great rental unit will make them more reluctant to leave – and give you stability and peace of mind.
It is sometimes hard to imagine spending $20,000 dollars to renovate a rental property for only an extra $200 dollars a month in rent. But, it is important to remember that the value of the property also increases. While it may not increase the full cost of the remodel, it will probably be close if done right. So not only have you increased the value of your property, but you have also increased your monthly cash flow.
A renovation could unlock a lot of value in your house. Many homes are poorly designed with a lot of wasted space. By redesigning the floor plan, it may be possible to convert a two-bedroom unit into a two bedroom plus den, or even a three-bedroom house. This increases the property value as well as allows you to charge more rent for an extra room.
While renovating is important, there is a line between spending money wisely to get more bang for your buck and spending money needlessly. Remember, you are not designing your dream house, but a rental unit for other people to live in. This means that the finishes you choose need to be of good quality and sturdy enough to survive tenants that may not care about the property to the same extent you will. To prevent yourself from spending more money than necessary, it can be beneficial to work with a professional contractor. Not only will they be able to complete the work correctly, they can advise you on what is a good idea. A good contractor knows the area and what work should be done vs what is a waste of time and money.
There are changing housing trends that are forcing many millennials and young professionals into renting rather than buying. As a landlord, remodelling your rental properties to modern standards allows you to charge a higher rent and increase your property values. Furthermore, your modern rental units will gain more attention which will help you find the right tenant who will most likely stay with you for a longer period of time.