Does It Make Sense To Do A Full Home Remodel On A Rental Property?

Does It Make Sense To Do A Full Home Remodel On A Rental Property?

There could be a variety of reasons why you want to renovate your rental property – it’s in poor condition, its basic mechanics are old and will reduce your ROI, or it’s simply not up to par with the neighborhood. On the other hand, there may be a few reasons not to renovate, such as the property being in good enough condition, your budget not allowing for it, and so on.

So, the answer to the question, “Should you renovate your rental property?” is entirely dependent on your specific situation. With that in mind, we’ll go over a few important aspects of property renovations. This should put you on the right track to deciding whether to proceed with renovations.

Renovating Your Investment Property – The Pros

The right renovations can help investors maximize their ROI while also adding value to their property. With the primary goal of owning a profitable, cash-flowing investment in mind, we’ve compiled a list of advantages that investors can take advantage of when renovating their rental property:

1. Property Renovations Boost ROI with Higher Monthly Rent

When deciding on a monthly rent to charge tenants, it’s usually based on the rental market and the condition of the property, so you can’t go any higher without justification. That’s when the question “Should you renovate your rental property?” enters the picture. Property renovations make perfect sense if you want to kick it up a notch and charge more rent. In terms of cost, you will eventually make up for it through higher rent. After renovation costs are deducted, the higher rent will result in a higher ROI.

2. Rental Improvements Increase Property Values

Renovations to your rental property, especially if it was purchased for less than market value, can significantly increase its value. This is also known as “forced appreciation.” A property’s value may rise naturally over time, which could take years, and is based primarily on market value. With the right renovations, you can cut to the chase and instantly increase the value of your rental property.

Here are a few renovations that can boost the value of your home:

        • Changing Out Old Windows
        • Kitchen Remodeling – Countertops, Cabinets, and Flooring
        • Shabby Garage Doors Need to Be Replaced
        • Renovations to Bathrooms
        • Exterior and Interior Painting by a Professional

3. Quality Upgrades Attract Good Long-Term Tenants

Some of the same things that increase the value of your rental property can also increase your chances of attracting a great long-term tenant. Serious renters looking for a long-term home are more likely to sign the dotted line on properties with curb appeal, quality windows, a nice kitchen and bathroom, and so on.

Because first impressions are everything, a professional paint job can entice them and make them feel good about your rental. Quality tenants who make your rental their home will help keep your ROI on track because they will care for the rental as if it were their own nine times out of ten.

4. Reduces Future Repairs and Operating Costs

One item to consider when answering the question, “Should you improve your rental property?” “, is whether or not the house’s primary mechanics are in good working order. Failure to renovate key sections of the house when they are needed, as well as needing to constantly repair or patch up decaying elements, might end up being costly in the long term. It’s best to make a list of what needs to be included in the overall restoration of the property so that your operating expenditures are maintained to a minimum in the future.

When Real Estate Renovations Don’t Make Sense – The Cons

There are some situations and improvements that can have a detrimental influence on the investor. This is why researching whether or not to improve your rental property is a good idea. The following are three downsides of renovating your investment:

1. Rental Income May be Lost During Renovations

When an investor purchases rental property, he or she will almost certainly wait until the improvements are completed before finding a renter. This means that if there is a significant quantity of work to be done, or if the sort of renovations will take a long time, there may be a loss of revenue for a lengthy period of time. This is not a con in and of itself. It becomes a problem, though, if the investor’s budget is a constraint. If you are not in a financial position to spend money on renovations while also losing rental revenue for a lengthy period of time, all while paying the mortgage cost Then temporarily deferring non-essential upgrades would be your best alternative.

Once rental income starts rolling in, and you are in a better place financially, you can tackle whatever renovations are possible while the tenant is in place. Any other renovations that are best done when the property is vacant, can be completed when you are between tenants.

2. Certain Renovations can Appraise a Property Right Out of a Neighborhood

When an investor over renovates to the extent where the property is priced out of the neighborhood, this can turn renovations into a “negative.” Consider a community where properties rent for $1,000 to $1,200 per month. Consider one house in the same neighborhood that has undergone costly renovations and would need to rent for $1,700 to recoup the costs. Because of the substantially higher rent, it is possible that it will never be occupied. Potential tenants will seek out the more economical rentals in the area.

This can be the case when a kitchen is renovated with very expensive, real granite countertops, and the rent is raised to compensate. Meanwhile, the house across the street is using Formica laminate countertops, which looks just as good, and the rent is much lower.

3. Combining Bedrooms to Create a Master Suite Can Lower the Property Value

When a bedroom is removed or combined to make a spacious master suite, it is typically misunderstood as a prudent investment but turns out to be a huge con. It appears to be a fantastic concept, because, let’s face it, who doesn’t appreciate a spacious bedroom? In actuality, additional bedrooms can increase the value of a home, so removing them may be a mistake.

Are You Planning a Full Home Remodel?


If you’re considering a whole house remodel, New Key Construction, based in Walnut Creek California, is here to serve you. Our passion is to be the home for talented craftsmen who deliver beautiful projects to clients throughout the SF East Bay Area! Choosing the right general contractor for your project can be difficult, but we make things easy by focusing on Your Experience, Client Communication, Cutting Edge Technology, and Pushing Our Design and Build Limits!  If we could have one goal, it would be that when someone you know is looking for a contractor you highly recommend our company because of the experience we deliver for you! Check out our website, our portfolio, and our reviews to learn more – or give us a call today!