If you own and operate one or a few short term rental properties, it might be obvious that you are trying to get the biggest bang for your buck. With the help of your property management team, the goal is to provide your guests with the best experience and in return make a great profit.
While you might be happy with the current rental rates your investment property is producing, there is a always a way to increase these values. Within this article we will walk through which home renovations can increase your rental rates and the overall value of your property. So read on to learn more about the best ROI home improvements for your short term rentals.
The best ROI for your short term rental will come from cutting down on risk by maximizing the safety of your home and then investing in interior or exterior renovations such as improving the bathroom, kitchen or adding a fresh coat of paint.
If you are thinking about upgrading your short term rental property, a focus on safety is a great place to start. When guests are staying at your property, they will want to feel comfortable and safe in their surroundings, in fact, this is their right and you are legally obliged to disclose any safety conditions that are not up to code.
Consider getting a home inspection as a first step in evaluating the safety of your house. A home inspection process is not just for when you are buying or selling a home. You can get a home inspection at any time to become informed on the issues plaguing your property (if any).
Some common issues to keep an eye on are:
- Fire Alarms - Fire-related incidents are far too common in homes, including short term rentals. A home inspection will ensure that you have functioning fire alarms and the necessary amount installed throughout your property.
- Carbon Monoxide Detectors - While most homes have at least one carbon monoxide detector, this is not enough to adequately protect the entire property. A proper home inspection will detail how many carbon monoxide detectors your property should have and where they should be located to ensure protection from this deadly gas.
- Electrical Issues - Outdated and unsafe electrical systems can pose a threat to your occupants including fire hazards and shocks. Replacing outdated breaker panels and wiring will remove this risk from your house. You would be surprised at the issues found behind walls - this items is a must!
- Mold - The presence of mold can cause breathing difficulties, especially to those with asthma or other breathing impairments. Testing for mold in your investment property gives you peace of mind knowing that your guests will be safe.
- Routine Maintenance - While this might not always be pointed out on a home inspection, it is important to keep up with the regular maintenance tasks required in your property. Replacing filters, cleaning gutters, and replacing batteries are a few of the many tasks that need to be kept up with to ensure a safe and well-maintained environment for your guests.
By completing these repairs or regularly checking these items, you reduce your risk of liability issues while hosting guests at your short term rentals. Guests will be safe while they enjoy your property and you can rest easy knowing you have provided a safe environment for your guests to enjoy.
Additionally, if your property poses any safety hazards, it might be more difficult to find a good property management company to work with. A safe home means happy property managers and happy property managers means you will be a satisfied investment property owner.
Renovations That Add Value
When considering renovations for your short-term rental property, there are two categories in which you can think about adding value: short-term and long-term.
- Short-term value is added when the improvements you make benefit the guests or tenants staying at your property. By improving the livelihood of your occupants, you can subsequently increase the rental rate and good reviews will ensure a steady stream of income.
- Long-term value is added when the improvements you make increase the overall value of the property. No matter if you plan to sell in the near future or many years down the line, if you choose the right home renovation projects, you will benefit from the fruits of your labor with an increased sale price.
Interior ROI Renovations
You can find plenty of lists available that include the best ROI home improvements for a personal, residential property, but these are not always applicable to short term investment properties.
Below are many of the best home improvements for resale that will also benefit the guests of your short term rentals:
- New Light Fixtures - A properly lit home ensures your guests can function efficiently and happily in each separate room which brings practicality during their rental experience. New light fixtures will bring your investment property into modern times if you choose fixtures that are both modern and timeless. As light fixtures typically stay with the sale of a home, they will also add value to a potential new buyer.
- New Flooring - New flooring can dramatically change how a space looks and functions. Depending on the condition and the style of the existing flooring in your home, you can replace the flooring in select rooms or the entirety of the home. Be sure to choose a durable flooring, like engineered hardwood or luxury vinyl tile, that will stand up to the constant coming and going of your short term rentals guests.
- Updated Appliances - Replacing broken or outdated appliances is a no brainer for your investment property. Guests will require functional appliances in any rental and you will receive negative reviews if you skimp in this area. Additionally, updated appliances can be a deciding factor for potential buyers if and when you put your property on the market. Do not think you need to install state-of-the-art appliances, they just need to be able to achieve the basics like heating up food and washing dishes.
- Bathroom Remodel - Guests traveling to your property for a vacation or getaway will want to feel like they are properly taken care of and the look or function of your bathroom has a big impact on that. You certainly do not have to go all out and recreate a spa in your bathroom space, but beautiful tile, sparking fixtures, and a bright coat of paint can achieve that desired relaxation effect. A renovated bathroom without a doubt will increase the value of your home as home buyers often skip over homes without updated baths and short term renters will do the same.
- Kitchen Remodel - For potential buyers and house guests, the kitchen is the heart of the home. A newly remodeled kitchen will stand out in listing photos and allow your investment property guests to cook their meals at home. If your kitchen looks like it belongs in a different century, upgrading the flooring, cabinets, countertops, and backsplash can dramatically upgrade the quality of your rental. Keep in mind that a kitchen remodel does not have to be a complete gut job. You can significantly change how your kitchen looks by simply repainting the cabinets to a more modern color and adding a backsplash or new flooring.
Exterior ROI Renovations
There are also many exterior projects that can upgrade the value to short term tenants or add value for the long term when and if you decide to sell your home - these are as follows:
- House Paint - Location and curb appeal are huge factors that renters take into consideration when choosing their next stay. Updating the paint on the exterior of your home may be the easiest way to completely transform the look of your home. This should be done every 10 years anyways to maintain your property structure as paint is a protective layer that helps the wood shield against water damage. With short term rentals, this is a great opportunity to make a statement and separate your house from the rest, consider choosing a bold color that will make your house a truly unique experience. If you are planning to sell your income property in the next few years, however, opt for a more neutral color that will appeal to all buyers.
- Landscaping - Landscaping is the icing on the cake to the curb appeal of your home. Adding shrubbery and small trees to the front of your home welcomes in your guests and makes a cozy scene for their home away from home. Larger shrubs and trees in the backyard will also give that lived-in feel and can be a great way to add privacy and bring in shade for your guests. While landscaping in and of itself might not add significant value to your home, it is that final touch that will get renters to your front door and help guests have a wonderful experience especially if you have a backyard.
- New Patio/Deck - Moving beyond the more decorative elements of your exterior, a new patio or deck brings the ultimate functionality to your backyard. In certain climates, an outdoor patio can feel like an extension of the interior of your home and be a great option for outdoor dining and gathering. Your guests will enjoy the fresh outdoors, a beautiful sunset, possibly a lake or ocean view from your outdoor patio or deck or simply just a place to enjoy coffee in the mornings. This enjoyment extends to potential buyers who look for outdoor living options in home listings.
- Outdoor Grill/Kitchen - For the ultimate outdoor oasis, a grill gives your guests more options for cooking their favorite meals at home. Outdoor seating along with a grill is the perfect atmosphere for a gathering with friends and family. Take it up a notch by installing a built-in outdoor kitchen to the backyard at your investment property. Depending on your location and construction costs, the return on investment of your outdoor kitchen can be extensive especially if this amenatiy isnt common in the area.
Have A Plan And A Budget
Choosing which best ROI home improvements to take on is the tricky part. Certain renovations will add value, while others may be better to pass on. Before diving into the possible projects you can take on, you need to establish a budget. Setting aside a specific amount of money for your home improvement project before starting ensures that you will not get caught up in the moment and spend more money than needed.
When setting your budget, there are a couple of factors to take into consideration. You do not want to spend more money on your investment property than it will be worth on the market. Take a look at comparable homes to yours in the neighborhood that have recently sold. Estimate the value of your property and do not complete renovations that cost more than the potential amount you would sell your house for.
If you are remodeling your investment property with the intention of continuing to rent it out, you will not want to go overboard on the amount of money you spend because you will have to make all of that back in the rent that you demand. Focus on functional upgrades with durable materials that will stand up to the constant turnover of tenants and guests. Certain upgrades will allow you to increase the rental rate of your property if they add value for your tenants.
If you are remodeling your investment property with the intention of selling, you can focus a little more on the design of the materials you choose as long as they would appeal to a wide range of buyers. Again, keep in mind the value of properties in the nearby area and do not spend more money than you will receive back in the sale of the home.
Create Your Team
Once you have a good idea of the best home improvements for resale that you want to take on, it is of the utmost importance that you put together an incredible team. The people you work with throughout these renovation projects will make your life easy or incredibly difficult, so make sure you choose wisely.
If you are not already working with a property management company, this could be a good time to hire one. Your property managers will not only handle all the aspects of renting out your short term rentals, but can assist you in your home renovation projects as well. A good property manager will have a network of contacts, such as contractors and other home improvement professionals, who they have worked with in the past and trust to get the job done right.
The contractor you ultimately decide to work with is another important decision. Your property manager can help you solicit bids for your projects and find the best fit in a construction company. A good contractor will keep their promises when it comes to budget and schedule and complete quality work without cutting corners. The construction process will undoubtedly have some bumps in the road. A quality contractor will help navigate you through the issues as seamlessly as possible.
Best of luck and we hope you are able to make your renovating dreams come true and receive the income you deserve for your time and effort spent!