Commercial investment properties, like apartments or multi-unit housing, typically need a little TLC before they’re ready to rent.
Rental property investors are trying to charge higher rents to maximize their cash flow.
Simple renovations and upgrades can make a dull, outdated apartment look like a vibrant, exciting place to live, encouraging potential tenants to pay higher rent rates - which means increased rental income for you as an investor.
This begs the question however: which upgrades are going to have the biggest bang for my buck?
Property investors often put down a good amount of money already to purchase the rental property, and aren’t looking to add too many more expenses to the list.
But there are a few strategic property upgrades that can bring a healthy return on investment through increased rents.
When real estate investors calculate ROI on a rehab project, they often fail to take into account the life of the rehab.
Getting 10% return on the cost of the improvements each year is fine and dandy, but the improvements won’t be fresh in a few years and won’t command the same increase in rent rates.
Actually, refurbs can occur every five or ten years, making it necessary to really understand the purchase price of upgrades for future real estate investments.
With all that said, there are definitely lower-cost upgrades that can have an impact on your bottom line.
Replace Old Flooring
Carpeting is one of the most advantageous renovations for multi-unit housing properties.
Prospective tenants are sensitive to the apartment’s cleanliness, and are immediately turned off by old carpeting with noticeable stains and strange smells.
Laying down fresh carpeting for a brand new look and feel is budget-friendly and one of the easier upgrades to make in an apartment.
People touring the unit will notice the great feel of a new carpet flooring, especially in bedrooms and common spaces.
Professional carpeting services offer competitive rates for new carpeting and flooring, and there are several viable options to consider: carpet, laminate flooring, and hardwood.
Real wooden floors are the most expensive option, but could generate a healthy return depending on the neighborhood of the property. (Oak wood is usually a popular choice among residential homebuyers or renters)
Estimated costs per square foot of new flooring:
- Laminate flooring = $2-3
- Carpet flooring = $3-4
- Hardwood flooring = $5-7
Fresh Coat of Paint
One of the most convenient renovations to make when timing and a quick turnaround are in the works is a fresh coat of paint.
When it comes to making a noteworthy visual impact, a freshly painted space will surely do the trick. Painting the unit is an essential upgrade to make it appear clean and inviting while covering up any scratches and blemishes on the walls.
If you’re going for a look and feel to attract a wider spectrum of potential tenants, avoid bright or bold colors.
Stick to the warm and neutral tones like beige and off-white colors to give tenants the opportunity to decorate how they please.
Painting the unit can be a very lucrative investment, especially if you are a DIY kind of person.
Getting your hands a little dirty and painting the apartment yourself can save the labor costs and lower the project expenses without requiring expensive equipment or experience.
The average cost for a professional painting job is around $3-5 per square foot.
The kitchen in a multi-unit floor plan is typically designed to provide a social environment where a blend between aesthetics and functionality is key.
This is underscored by tenant concern over broken or outdated appliances.
No tenant wants to move into an apartment with a fridge, stove, and oven that are barely functional.
Replacing appliances can be a major expense. Save money by prioritizing functionality over appearance.
Most tenants aren’t expecting the works like stainless steel appliances, so don’t spend the unnecessary cost unless it’s truly a luxury rental.
Instead, make a run to the nearest big-box retailer that sells appliances like Best Buy or Home Depot where you can find great deals and savings.
Functional microwaves and dishwashers can make a big impact, but if you have the space, consider installing an in-unit washer and dryer.
It’s easy to find both in a compact, combined unit that can fit in a smaller space like a closet or near the kitchen.
This can be a major selling point if there is no laundry unit in the building.
Replace the Front Door
Door replacements are a simple and easy way to add a quick renovation to your commercial investment property. Doors often take the brunt of wear and tear over time and can easily be replaced to give a fresh look.
Furthermore, consider replacing the front door. When it comes to winning the battle of curb appeal, a new front door is quite the statement. Replacing the front door will usually cost around $1,500 to $2,500.
Modernize the Bathroom
The bathroom might bring the most value to the property when kept updated as it’s often criticised by potential tenants.
The flip side is that a bathroom remodel is an expensive project where costs can quickly add up with new fixtures and amenities.
However, a full remodel usually isn’t necessary. If the bathroom is functional and doesn’t look and smell like grime, then minor improvements can go a long way.
Here’s a quick list of possible bathroom upgrades to consider to give off a polished look:
- Add more lighting
- Use brighter light bulbs
- Get a new shower curtain
- Replace the shower head
- Add a curved shower bar
- Clean tile grout
- Replace the sink faucet
- Replace the toilet
- Add a bathroom fan
If you’re extra budget conscious but want an effective renovation to make a noticable difference, try adding a backsplash or upgrading the faucet handles in the bathroom or kitchen.
Adding a backsplash usually isn’t much of a cost burden for apartments with short wall spaces, but can add a new dimension to the room.
Shiny new faucet handles give off a polished look in the bathroom or kitchen and cost much less than brand-new appliances.
If you’re a real estate investor planning to spruce up your rental unit as an investment decision to increase your cash flow, chances are you’re trying to minimize those expenses for the greatest ROI.
Consider several of the renovation ideas above to make a positive first impression with prospective tenants and make them forget about the rent rate.
You don’t have to break the bank to have a serious impact on improving the aesthetic appeal and functionality of the apartment. Simple upgrades can go a long way!