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Royal LePage
Royal LePage

Making Investment Property Renovations Make (Dollars and) Sense

Renovating an investment property can enhance its value and appeal, but it’s important to approach renovations strategically to ensure they maximize your return on investment (ROI) and make financial sense.

1. Prioritize High-Impact Renovations

  • Focus on renovations that provide the highest ROI.
    • Kitchens and bathrooms typically offer the best returns as they are highly used and significantly affect the property’s impression.
    • Other high-impact renovations include:
      • Updating flooring
      • Painting
      • Fixing areas that are noticeably worn or suffering from deferred maintenance.

Tip: High-traffic areas and dated spaces should be your main focus for the best return.

2. Budget Wisely

  • Set a realistic budget for your renovation project:
    • Include costs for materials, labour, permits, and a contingency buffer for unexpected expenses.
    • Get multiple quotes from contractors and create a detailed budget to account for anticipated costs.

Tip: Sticking to your budget ensures that renovations don’t counteract the property’s value increase.

3. Avoid Over-Improving

  • Avoid over-improving or adding luxury features that don’t align with the neighbourhood or target market.
    • Improvements beyond the neighbourhood’s standards can lead to higher costs without value increases.

Tip: Match the quality and style of renovations to the market segment and local standards.

4. Prioritize Functional Upgrades

  • Invest in renovations that improve the property’s functionality:
    • Upgrading electrical systems, plumbing, roofing, and HVAC enhances safety, efficiency, and overall appeal.

Tip: Functional upgrades make the property more cost-effective and comfortable for tenants.

5. Enhance Curb Appeal

  • First impressions matter, so focus on exterior improvements like:
    • Landscaping
    • Fresh painting
    • Upgraded doors and windows

Tip: Low-cost improvements like fresh paint and tidy landscaping can greatly enhance the property’s visual appeal and value.

6. Use Quality Materials

  • Choose durable, high-quality materials for your renovations.
    • While these materials may cost more up front, they can save money over time by lasting longer and requiring less maintenance.

Tip: High-quality materials increase the property’s longevity and reduce future maintenance costs.

7. Optimize Space

  • Maximize the use of space through smart design choices:
    • Consider open floor plans, added storage, and flexible spaces to make the property more attractive and functional.

Tip: These upgrades can make the property feel larger and more appealing to tenants or buyers.

8. Improve Energy Efficiency

  • Energy-efficient upgrades can reduce operating costs and appeal to environmentally conscious buyers or renters:
    • Consider installing energy-efficient appliances, HVAC systems, insulation, and windows.
    • Smart thermostats and solar panels are additional upgrades that can cut costs.

Tip: Check for government incentives and rebates for energy-efficient upgrades to help offset costs.

9. Avoid Disruption

  • Plan renovations during tenant turnover periods or coordinate with tenants to find mutually agreeable times for renovations.

Tip: Minimizing disruption ensures a smoother process and maintains tenant satisfaction.

10. Maximize ROI Through Strategic Renovations

  • Carefully chosen renovations increase your property’s market value, rental income potential, and tenant satisfaction.
    • Focus on high-impact, cost-effective improvements
    • Avoid over-investing to ensure each dollar spent contributes effectively to your bottom line.

Final Thoughts

By focusing on strategic renovations that improve functionality, curb appeal, and energy efficiency, while avoiding over-improvements, you can significantly boost your investment property’s value and appeal.