There are many good reasons to consider renovations to your rental properties. You might be interested in fixing or upgrading some ugly or broken component of the house. You might be interested in making the property look prettier and therefore more valuable to renters. Or you might simply be making an effort to remain competitive in a hotly contested neighborhood.

Whatever the case, you’ll need to handle home renovations strategically in your rental properties.

Here are the best ways to do it.

The Most Important Aspects of Renovation Management

When it comes to renovation management for rental properties, these are the most important things to consider:

  •   Renovation selection and planning. First, you need to choose the right renovations. Not all renovations pay off equally – and some renovations may not pay off at all. You’ll need to choose renovations that attract more tenants and allow you to charge higher rent, justifying your investment in them.
  •   Timing and execution. It’s possible to renovate a property while a tenant is living there, though it’s much easier to renovate an unoccupied property, says LosAngelesPropertMangementGroup.com. It’s also important to keep in mind the timeline for your desired renovations since any months-long endeavor is going to eat into your profitability.
  •   Cost and pricing strategy. Finally, you’ll need to think about the cost of your renovations and how you’ll handle pricing your units after the renovations are completed. You’ll want to minimize expenses without compromising on quality, and you’ll also want to maximize rental income without necessarily pushing tenants away.

We’ll explore each of these ideas in turn.

Renovation Selection and Planning

These are the most important things to consider for renovation selection and planning:

  •       Consider long-term ROI. Some property renovations offer a much higher return on investment (ROI) than others. ROI is arguably the most important variable to consider, since it can immediately tell you whether or not a certain renovation is worth it. Few renovation projects have an ROI of 100 percent or more (as applied to home value), but you can close the gap here with increases to rental income.
  •       Focus on areas of weakness and deterioration. If an area of the home already looks and functions decently, it’s probably not worth renovating. Instead, turn your attention to areas of weakness and deterioration. What areas of the house are off-putting to prospective tenants? Where are other properties outshining yours?
  •       Choose attractive renovations. Generally, renovations that make the property more attractive and more inviting are better than ones that make it more functional or practical. That’s because these superficially appealing renovations attract more tenants and get them to pay more.
  •       Distinguish your property. Finally, use renovations as a way to distinguish your property in the neighborhood. Offer tenants something they won’t get anywhere else.

Timing and Execution

The timing and execution component is relatively straightforward. The best time to tackle renovations on a property is when it’s already vacant, since you’ll have plenty of time and flexibility to get the job done.

If you do decide to handle renovations while a tenant is currently occupying the property, your best tool is proactive communication. Let your tenant know exactly what you want to do and why you’re doing it and give them plenty of time to work around your schedule.

Cost and Pricing Strategy

As for cost and pricing strategy:

  •   Get multiple quotes. The general rule is to get at least three contractor quotes before moving forward with a project. This allows you to get a better feel for “normal” prices for this type of job and gives you an opportunity to find the best price for the project.
  •   Hire contractors you can count on. Similarly, it’s important to work with contractors you can genuinely trust. It’s not worth saving a few dollars if the contractor you hire doesn’t show up for work or doesn’t do the job properly. Study reviews and get referrals to minimize risk here.
  •   Optimize for long-term value. Every decision you make should be optimized for long-term value. For example, a superficial makeover might make the property more attractive in the short term, but it’s going to set you up for more work in the long run.
  •   Keep prices in line with the market. Depending on the nature and extent of the renovation, it’s likely justified to increase rent in proportion. However, if you do this, make sure your prices are still in line with the local market. Otherwise, you’ll turn prospective (and possibly current) tenants away.

Renovations, when managed properly, can add value to your property, attract more tenants, and ultimately increase your cash flow. It’s not always easy or straightforward, but with the right mentality and general principles, you can always find a way to make it work.