Renovating: Tips for a DIY Landlord
Renovating is always a matter of ROI.
Eventually, every property needs renovation. If you’re not careful, the process can take your home off the market for too long, making it less profitable than you need it to be. So how does a DIY Landlord do it right?
The worst thing you can do is wait until a tenant has moved out to begin planning your renovation. The moment you recognize that a property is going to need work before you re-rent it, start writing down what it needs, determining what you can and can’t do yourself, and collecting bids for the part you can’t.
Preferably, Renovate When Empty
Try to avoid renovating around a tenant. You have a legal duty to provide them with “peaceful enjoyment” of the unit they’re renting — and construction sites don’t lend themselves to a peaceful environment. If you have to renovate while the tenant is in the property (maybe a tree branch crashed through the roof), either consider relocating the tenant first or have them sign some type of waiver where they agree to deal with the mess and don’t sue you later for the hassles. Be sure you check your state’s laws about your options and requirements about tenant compensation.
The Most Important Things to Spend Extra On
Renovation is a balancing act: what can you accomplish with your budget? But there are a couple of items that it always pays to spend extra on.
- The first is high-quality flooring. Industrial-quality tile, solid (not laminate!) hardwood, and commercial-grade linoleum cost meaningfully more up front, but they will last you so much longer than the alternatives that the Total Cost of Ownership will save you in the end.
- The second is high-quality fixtures, especially in the bathroom. High-quality fixtures corrode less quickly, break less, and end up saving you money by requiring significantly fewer visits from the plumber (and/or your own hours).
In order to effectively renovate proactively, you have to create a schedule of what you can reasonably expect to fail within the next few years in each house. This schedule allows you to arrange your improvements well in advance, making that whole ‘plan ahead’ thing much easier. More importantly, this allows you to pick the most important room to renovate during each vacant period, so you don’t ever get to the point where you have to take out a new credit card to get a huge renovation done in time.
Renovate with Rent in Mind
Even if your property doesn’t need repairs, you still might want to renovate so that you can charge your next tenant higher rent. Here’s a quick rundown of the renovations that have the best ROI in terms of rent-increase-per-dollar:
- Hardwood floors
- Kitchen improvements
- Bathroom improvements
- Curb Appeal improvements
- Lighting, especially in dim areas
Get these things done, however many your budget can afford, and you can bump your rent — just be careful not to make the house too good. If you outshine the neighborhood, you’ll end up with a sterling jewel that you can’t get enough rent to get a return on your investment. Strike a balance, and you can turn each vacancy into an opportunity.