Making improvements to your rental property is often viewed as a strategy to increase the net operating income of a property. However, deciding which improvements will give you the best return on your investment can be tough, especially when prices are surging. If you’re a landlord or real estate investor in Southern California, don’t rush and make improvements to your property without reading this article first.
Arguably, the most crucial function of property management firms is to maximize property rental rates as well as increase overall property value for the benefit of the owner. While there are several factors that influence property (i.e., economic, social, location, etc.), the property’s condition is a factor that is in the immediate and direct control of property managers and owners.
Similar to making improvements to a property in anticipation of a sale, improvements made within rental units have a similar effect. When a property has been updated and is in good condition, it attracts quality renters, who tend to rent the property longer. Beyond maximizing rents, improvement can increase the annual cap rate (i.e., the ratio of Net Operating Income (NOI) to property asset value), as well as increase the property value altogether. Lastly, owners who elect to make improvements to their property can take the appropriate tax deductions to decrease their annual tax liability.
Get an Honest Appraisal of the Property Before Making Improvements
Before making any improvements, you must understand the Southern California (or your local) rental market and accurately understand what your property/rental value is, without any upgrades. In other words, figure out the “as is” value of your property. Once you determine the “as is” value of your rental, you can then decide if any improvements are appropriate and financially beneficial depending on your goals. If you determine that making improvements is worth it, you can then explore what types of renovations should be made.
Best Improvements To Increase Rental Rates and Property Value in Southern California
The first improvement, which has the most dramatic effect on living space, is the flooring. If your property still has carpet installed, now is the time to invest in new flooring. With so many different, inexpensive flooring options available, such as laminate, stone, or hardwood, there is no reason to have still carpet installed in your unit. Additionally, all of these options are more durable, easier to clean and last longer than carpet. Lastly, carpet tends to hold odors and becomes a breeding ground for mold and other types of household allergens. The presence of indoor allergens can make a living space unlivable and/or uncomfortable to the average adult and child with allergies.
Appliances are very important to most renters in Southern California, and it’s one of the first things that many renters ask about when apartment searching.
Overall, old appliances should be replaced; this is especially true if you have mismatched appliances in the kitchen. If, for some reason, you’re reluctant to replace appliances, remember that old appliances cost a lot of money to maintain and can be a constant headache due to never-ending maintenance issues. As such, the best rule of thumb is to replace all the appliances in the kitchen and get a warranty. If your budget allows, installing new countertops together with new appliances is ideal.
If your unit is already set up with washer/dryer connections, this is an easy and affordable way to increase the value of your rental property. Washers and dryers are essential for most families and an added convenience for anyone who rents your property. If you do not have hookups already installed in your unit, you probably will need to hire a licensed plumber to install the proper connections, legally.
Upgrading and investing in quality fixtures throughout your property is an easy way to elevate and modernize your property without spending a lot of money. Upgrading small things such as light switch covers, replacing old door handles, installing new locks, and replacing the window blinds. You can also install new ceiling fans and light fixtures throughout the entire apartment, as another way to modernize the residence. Upgrading the faucets in the kitchen and the bathroom are easy yet important upgrades to make to your unit because these fixtures tend to wear easily.
Storage is often a top priority for renters in Southern California. As such, landlords should look for cheap and straightforward ways to increase storage throughout their property. For example, a landlord can add hooks to the entryways, install shelving, install walls storage, and add organizational units in the closets. Additionally, simply offering a space in the basement or a garage is also an additional way to add storage to a rental unit for free.
Install New Windows
Installing new windows is a great way to ensure that the property’s A/C is not being wasted. This is important, no matter who is responsible for these utilities. For example, if the Landlord is responsible for the A/C, then it certainly is in the Landlord’s best interest to install new windows to avoid overspending on A/C. On the other hand, if the tenant is responsible for these utilities, they will be unhappy if they notice that they’re paying additional money on these appliances due to poorly insulated and old windows. Double pan windows are the best option to provide good insulation within the unit. Upgraded windows also help improve the resale value of the home and are a good overall investment.
Don’t Forget Curb Appeal
Whether you are currently looking to rent or sell your property, curb appeal should be important to all Landlords. A beautiful view from the street can help rent your property faster, or at the very least, it will raise interest in your property during open houses etc.
Simple things such as making sure the lawn is manicured, trimming the shrubs, installing flowers, upgrading the front door lights, and a new exterior paint job can all contribute to maintaining the curb appeal of your property.
Overall, deciding on what items should be upgraded within you property is a matter of weighing the options. Specifically, Landlords and property managers in Southern California must prioritize the items that “must” be upgraded over the items that would be “nice” to upgrade. Practically, what good is it to install a brand new kitchen that will get ruined by heavy leaks coming from an old roof. In any event, investing in improvements throughout a rental will keep the vacancy rate low, increase your rental rate, and increase property value.
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