|Scott McGillivray hosts Income Property Mondays at 9 p.m. ET/PT on HGTV.
As anyone with an income property knows, market fluctuations can push your property values sky-high or diminish them to below what you originally paid.
How do you avoid being subjected to this volatility? The key is to avoid vacancy. If your property is always rented and you are receiving consistent cash flow, you are insulated from virtually all market fluctuations.
Attracting the best long-term tenants means having the best product. This often involves renovations and modernization – but not all projects are created equal when it comes to generating a return on your investment.
Here are the top five renos for ROI:
This is by far the most profitable reno a landlord can undertake. Picking neutral tones and doing a good job is key. This simple, inexpensive way to freshen up a home is an easy do-it-yourself project, and it can dramatically improve the look and feel of a space at a low cost. Expect to see 100% ROI.
TIP: No measuring, no cutting, no power tools. Even if you’ve never painted before, a couple of quick tips from the paint store’s employees and you are on your way to complete the No. 1 most cost-effective reno.
The kitchen is subject to intense examination by potential tenants, so it’s time and money well spent – earning it my No. 2 ranking in terms of best bang for your buck.
Kitchens should be bright and spacious with a smart layout. Replacing old appliances with inexpensive and more efficient new ones also adds a lot of appeal. Add a dishwasher whenever possible; I can’t even count how many times a tenant chose one of my apartments because it had one. An intelligent kitchen renovation should produce about a 75-100% per cent ROI.
TIP: A kitchen reno can cost between $5,000 and $100,000, but over-investing can actually create a negative return on your investment. If you’re on a tight budget, simply updating the hardware in the kitchen can dramatically transform the look of the cabinetry.
Second opinion: Top 5 home renos for your money
Before and after a bathroom renovation by Scott McGillivray. (photo courtesy of HGTV)
Bathrooms are equally important. It is often to costly and impractical to change the layout or number of bathrooms in your income suite, so focus on the finishes. Bathrooms with neutral tones and bold fixtures score highly. A beautiful faucet can take a bathroom to a higher standard. That gives it my No. 3 position, with about 75-100% ROI.
Flooring can have a dramatic impact, and hard surfaces are the way to go. Laminate is inexpensive, easy to lay, durable and great-looking. With modern styles and improved design, it has become the flooring of choice for real estate investors.
Stepping things up a notch and using real hardwood can deliver an even greater impact. Refinishing existing hardwood with a modern look presents the best possible scenario, cost-wise, for updating floors. New flooring can generate an average of 70-90% ROI.
TIP: Real estate investors often look for hardwood hidden under wall-to-wall carpeting when scoping out properties. If you suspect hardwood under the carpet, sneak a peek by removing a floor vent and lifting the edge of the carpet and underpad. Refinishing existing hardwood can save you a fortune, and it looks incredible. Don’t be floored to see a 200% ROI in this scenario.
5) Light fixtures
These can reveal the true age of a property. Proper lighting and a few nifty fixtures in the right places – namely the kitchen and dining room – will brighten up the space and create atmosphere.
With the right touch, updating light fixtures can generate a 60-75% ROI.
Once you’ve made the decision to renovate your income suite, necessary repairs and maintenance should always supersede any cosmetic renovation. If ignored, these required renovations can often overshadow other improvements.
Please your customer while being mindful of the ROI, and you’re on your way to becoming a successful landlord.
Scott McGillivray is host of HGTV’s Income Property. New season airing Mondays at 9 p.m. ET/PT beginning September 6.