People tend to invest in properties in one of two ways: as a rental unit or as an opportunity to "flip" it. In both situations, repairs and renovations can help increase the value of your home. While putting money into a building can be intimidating, these items have been shown to have the biggest returns on investment.
Short-term investment properties
If you're looking to purchase a property and then resell it for a higher amount, there are some things that automatically increase the value of your home. Several major factors (location, square footage, yard space) can't be changed, but these repairs should make a difference.
- Garage door replacement – Most people don't think of replacing their garage door until necessary, but a damaged, dirty or outdated door can detract from the appearance of your home, especially if you have an attached garage. Consider the neighborhood the home is in when picking a new door. Do most people seem to want more advanced features like an electric opener? If not, consider a traditional option for a mid-range home as these require less maintenance and are not as likely to break with extended use. It's estimated that a new door costs $3,470 and 98.3 percent of that will be recouped, according to Remodeling's Cost vs. Value Report for 2018.
- Entry door replacement – When prospective buyers walk into a home, the front door will give them their first impression of the house. Having a door with scuff marks or worn paint can lead to a general feeling of decay. In addition to appearance, a sturdy entryway can give buyers a feeling of safety and protection. Experts suggest using a steel replacement, which may cost around $1,471. However, it's likely to recoup more than 91 percent of that cost in a future sale. To get even more bang for your buck, think about adding an electronic entry system or video doorbell that can be integrated into a smart home system.
- Minor kitchen remodel – Realtors are known for saying that kitchens and bathrooms sell a house. Instead of putting top tier appliances in, opt for mid-range options and paint the walls. Choose energy efficient appliances, solid countertops and a new sink for maximum value. This type of renovation should return over 80 percent of the money you put in.
- Accessible bathroom redesign – Residents with disabilities will appreciate an accessible bathroom. As the baby boomer generation ages, this is at the top of older buyers' lists since it may become relevant with age. This type of renovation can be accomplished with a widened doorway, a walk-in shower and reinforced hooks, racks and toilet paper holders. While one of the more expensive repairs on this list at more than $16,000, this will typically earn you a 70 percent return on your investment. Plus, if you're in an area that's popular with retirees, you may be opening up your home to a market you may not have appealed to before.
When renting a home to tenants, every dollar counts. You'll want to make sure to take in more money in rent every month than you spend on your mortgage and any relevant repairs so the house remains an asset and not a source of debt. To increase the rental value of a unit, you may want to promote features that appeal to renters including parking, location, public transportation and nearby conveniences. Some of the most important features in a rental unit that are in your control, according to a survey done by SmartMove, from most to least important include:
- High-speed internet – In some suburban and rural areas, it can be difficult to get a good internet connection which makes remote work and common activities like streaming videos difficult. Check the unit's internet speed ahead of time using a free speed-testing website and know where the connection falls compared to the national average. If it's slower than expected, reach out to competing providers and see if your building can be wired for alternative services. In multi-unit properties, it can also be worth the investment to have a building-wide internet connection with multiple access points so tenants don't need to set up their own services.
- Walk-in closet – 89 percent of respondents look for a walk-in closet when viewing new apartments or homes. Storage is extremely important so adding closet space in a hallway, bedroom or large bathroom can be worth the small cost. There are also plenty of options for storage units at furniture stores that resemble built-in closets if you don't want to spend the money on a permanent change.
- Soundproof walls – While soundproof walls are the third-most important feature to tenants, most people won't notice this during a walk-through of a unit. Make sure to point out any soundproofing when showing a rental property so renters are aware of the work you've done. Floors that muffle sounds are ideal, but may be more expensive. Carpet and rugs can also help with soundproofing and there are now decorative panels you can buy for wall and ceiling sound dampening.
- In-unit washer and dryer – Adding an in-unit washer and dryer can help increase rents right away. For smaller spaces, a stacked unit or an all-in-one washer/dryer might fit well. Make sure to get an extended warranty so you won't need to shell out cash for any repairs as that could detract from any increases in rent you earn with this improvement.