Renovations can enhance a home’s value, but owners and operators of single-family rentals have special considerations including the costs and logistics around properties needing to be vacant, which cuts into your return. Here are key observations from MCS’s team of reno experts to consider as you decide if renovating a rental property makes sense for you.
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While renovations can enhance a home’s value, owners and operators of single-family rentals (SFRs) have special considerations. Beyond their inherent costs, rental renovations require properties to be vacant, which cuts into your return.
So, when does a renovation make sense for your SFR, and what do you need to know about renovations? Here are a few key observations from MCS’s team of reno experts to consider as you decide if renovating a rental property makes sense for you.
When renovating a rental property makes sense
Because renovations can be costly and may not provide an immediate return on investment, SFR renovations may not always be a priority. But there are two key times when renovating can make sense.
- At acquisition. The best time for rental renovations is typically when the property is first purchased. Newly acquired SFR properties may need updating to attract quality tenants or to achieve target rents, so renovating properties as needed when you add them to your portfolio may make the most financial sense.
- At the end of a holding cycle. Depending on whether you’re on a five- or 10-year holding cycle, hitting this milestone could be the right time for rental renovation. If a property is still in good condition at the end of your first cycle and you want to hold on to it, this can be a good time for renovating a rental property. In this case, your renovation could include making updates that are in line with market demands as well as replacing bigger-ticket items that weren’t included in the initial renovation.
What about during tenant turns? When a tenant moves out, repairing damage, patching holes and updating only the essentials will likely get you the most bang for your investment buck because you want to get the next paying renter into the property as quickly as possible. Additionally, this can be a prime opportunity to review major appliances for issues to replace and standardize products across your portfolio.
Upgrades that can lower your maintenance costs
The focus of rental renovation is often on cosmetic elements, but replacing larger mechanical items can help reduce the costs to maintain your property. For example, if your air conditioning, refrigerator or water heater are within a few years of their life expectancy at acquisition, it can be a good time to proactively replace them.
This tends to be the case for sump pumps in newly acquired properties as well because you often won’t know how long one has been there or how it’s been maintained. Replacing aluminum wiring in older homes with copper (to reduce fire hazards) is another common upgrade. There are also smaller fixes to consider, from replacing wax rings on toilets to smoke detectors and/or their batteries and switching to energy-efficient light bulbs throughout the property.
Looking for more SFR Property Management & Preventive Maintenance tips and advice?
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Rental renovation essentials: scope levels and value-adds
When you do decide to renovate your SFR, keep in mind these two things: the scope level for your property and the value-adds that an SFR property services partner can provide.
Renovation scope levels
Most of the time, you as the owner/operator will determine the scope of the renovation, providing your services partner with basic guidelines. (A knowledgeable renovation partner can help with scoping or make recommendations if you need it). Your scope should include room-by-room aesthetic and mechanical checks (with photos included) for potentially required upgrades, from flooring, lighting and paint to plumbing, electricity and HVAC. Be as detailed as possible to ensure all your requirements are addressed in the pricing and bidding process. Any safety hazards should also be identified and remedied.
Value-adds from your partner
An experienced SFR property services partner can help you get the most value from your investment while staying within your budget. For example, they can assist with things like:
- Value Engineering. Our team of experts is trained in value engineering your renovation project to provide the best performance and appearance for the least amount of investment.
- Data collection. By tracking appliances and major systems within your properties for you, they can alert you regarding potential issues that could impact your investment.
- Ongoing maintenance. Having a trusted SFR partner manage your maintenance needs means multiple small and large maintenance considerations (and managing their timing) are off your list, from smart home installations to changing out batteries in smoke detectors or carbon monoxide units and replacing HVAC filters.
- Occupancy checks. During a tenant turn or an acquisition renovation, your provider can help secure your property via regular occupancy checks to ensure no one has illegally moved into the vacant home until it’s tenant-ready again.
Depending on the state of your SFR properties at the time of acquisition, a renovation may be a smart move to help attract your target renter and ensure the rental income you expect for that property. But in many cases (and depending on your budget), simpler, less expensive investments could be a smarter choice. Once you determine the goal of your SFR renovation, a partner like MCS can help you accomplish all the upgrades on your list efficiently and on budget.
MCS is a trusted SFR property service partner that can assist with renovations of any scope as well as provide ongoing preventive maintenance and complete tenant turns. Contact Jason Myers to learn more about how we can help you save money on renovating, maintaining your SFR portfolio and maximizing your investment.
