Renovation Costs for Rental PropertiesDec 01, 2023
Rental properties have the potential to be lucrative income opportunities, especially when they feel upscale, modern, and well-maintained. Maintaining the property and keeping it updated can help attract more prospective tenants. It can also allow you to increase rent, therefore increasing your rental income.
However, there are plenty of things you need to consider before starting a remodeling project. To help you feel more prepared, I’m sharing a round-up of renovation costs for rental properties.
7 Renovation Costs for Rental Properties
Although not as exciting as other renovation opportunities, it’s a good idea to focus on your rental property’s essential needs first. This includes HVAC systems, plumbing, electrical wiring, and roofing. Taking care of the essentials can help you avoid huge costs down the road.
For landlords, there are several benefits to focusing on repairs. Repairs that resolve maintenance issues are tax deductible. Per the IRS, to deduct remodeling expenses for your rental property, the repair must “not materially add to the value of your property or substantially prolong its life… A repair keeps your property in good operating condition.”
Examples of tax deductible repairs include fixing broken pipes, replacing damaged windows, and exterior or interior painting projects.
After you take care of essential repairs, you can then focus on remodeling projects that will improve the property. For any repairs, upgrades, and remodeling projects, make sure to keep a list of each expense incurred. It can help minimize your tax liability and the amount of capital gains owed after you sell your rental property.
The kitchen is the room in which property owners tend to see the most wear and tear. To transform the space and get a great return on your investment, consider updating the kitchen.
Some kitchen renovation projects to consider include:
- Upgrade the cabinets by sanding, painting, and adding new hardware. If you DIY, it’ll cost you an average of $500. If you hire a professional, you can expect to pay anywhere from $1,500 to $5,000.
- Invest in new countertops. The average cost of replacing countertops is $9 per sq. ft.
- Make some less expensive upgrades like adding or replacing the backsplash or replacing the kitchen faucet.
When doing a kitchen renovation, keep in mind that specific projects like updating light fixtures and replacing countertops, are considered repairs and are tax deductible.
Also, consider hiring a project manager and real estate professional who can streamline the process and make it easier to transform your vision into a reality.
As you consider renovating your rental property, you might think about upgrading your appliances. Having kitchen appliances with the same finish is an easy way to make the entire kitchen look more clean and modern.
You don’t have to buy brand-new appliances. You can save hundreds to thousands of dollars and still upgrade the space with used appliances. In fact, this is one of my favorite home renovation tips!
For new kitchen appliances, including a fridge, range, microwave, and dishwasher, you can expect to pay anywhere from $2,100 to $5,400 on average.
Many prospective tenants want an up-to-date bathroom. Even making a few simple upgrades can make your rental property more desirable and potentially increase your income potential.
Some easy ways to upgrade your bathroom include:
- Installing a new toilet seat
- Updating the sink faucet and shower fixtures
- Replacing the cabinet hardware
- Refinishing the vanity
Higher-value renovations to think about include:
- Converting the tub to a walk-in shower
- Installing more storage space
Another great way to update your rental unit is to upgrade the exterior. Consider landscaping and improving your curb appeal. Choose simple projects that make a significant impact on the look of your property, but require little to no long-term maintenance. Some exterior renovation projects to consider include:
- Painting the full exterior
- Trimming or planting trees and shrubs
- Installing new pavers
- Repaving the driveway
Do the floors in your rental property need improvement? Unless you can make them look like new with a thorough cleaning job, consider replacing them.
Hardwood floors are a long-lasting option that looks modern. Plus, they’re easier to clean. Avoid carpets when you can. It tends to cling to odors and requires a lot more maintenance.
The cost of installing new floors varies depending on the size of the room and the type of flooring you’re installing. On average, installing a new floor costs a little over $3,000. And unless you can install it yourself, you’ll need to pay for installation, which costs between $1,532 and $4,832 for a 500-square-foot room.
There are several ways to renovate a rental property and knowing the potential costs ahead of time makes the process easier.
With many projects considered tax-deductible, renovating your rental property can have surprising perks when it comes to your property taxes. And that’s just one of the many benefits of rental property renovations.
If you’re interested in learning more about purchasing and owning a rental property as well as ways to upgrade your own home, head over to the blog.