During the beginning of Autumn, SingleKey surveyed over 200 landlords – and proud SingleKey customers – to hear their take on one of the most critical aspects of running a rental operation: renovations.
Given how costly and time-consuming renovation projects can be, we were interested in learning how landlords approach them. We also wanted to know what challenges they face and collect renovation tips to share with budding landlords.
Not surprisingly, our survey results revealed that landlords’ primary motivation in renovating their rental units is to boost profitability and remain competitive in the rental market.
We learned that landlords:
- do extensive research and planning to ensure their investment yields a solid return
- prioritize the needs of tenants
- focus on areas that are the most lucrative, and monitor costs closely to avoid overspending.
In this article, we’ll explore these topics and more to learn how landlords successfully navigate a renovation project.
Why renovate a rental property in the first place?
Nearly 67% of landlords said they primarily renovate their rentals to attract higher-quality tenants. This result isn’t surprising, as one of the keys to a profitable rental business is finding and retaining renters who pay timely rent and keep the property neat and clean.
Careless, negligent, and irresponsible renters are more likely to cause damage to a property and miss rent payments. The outcome is lost rent income and higher expenses, especially if the landlord needs to evict the tenant.
Other common reasons cited for renovations include general upkeep and to justify a higher rental fee, at 55% and 42%, respectively. These figures indicate that landlords wish to keep their property well-maintained to ensure its appeal and grow revenue consistently.
Only about 22% of landlords said their renovation goal is to boost the value of their rental. Most intend to rent their property for the long run and earn a steady income. They’re not looking to flip their property for a quick buck.
The importance of gathering multiple quotes
No matter the size and scope of the renovation, keeping costs reasonable is vital to earning a solid return on the project. It’s never wise to accept an offer from just one general contractor.
Most landlords agree with that sentiment, as nearly 51% obtain, on average, price quotes from at least three contractors. Over 8% seek a cost estimate from at least four sources.
Obtaining a quote from a minimum of three sources seems to be a rule of thumb for any major renovation project, so it’s no surprise that half of the respondents chose this number. By securing multiple estimates, landlords can better gauge the average cost in the market and compare contractors wisely.
How landlords prefer to conduct research for a renovation project
Over 68% of respondents replied that they seek the advice of friends or people they trust to provide helpful advice on their renovation plans. A similar percentage said they also consult with a tradesperson or another professional to gain further knowledge about how to approach their renovation project.
A sizable portion of landlords indicated they turn to YouTube (43%), various websites (29%), and online forums/social media groups (23%) to gather information. These figures highlight the growing authority of online influencers, DIY YouTube channels, discussion groups, blogs, and social media channels.
More and more experts increasingly provide valuable tips on property renovation in the digital world. Landlords will happily consider their advice if they deem the source trustworthy and credible.
What’s the most common area of a rental property to remodel?
About 65% of landlords plan to remodel the kitchen in their rental. A sleek, modern, and versatile kitchen is a big selling point for many renters, so landlords won’t hesitate to give it a facelift if need be. And of all the areas in a rental property, the kitchen has the potential to generate the most profitable return on investment.
The second most common area that landlords focus on is the bathroom, which can potentially increase the property’s value by an average of 16%. Not surprisingly, over 59% of landlords indicated their renovation plan includes a bathroom makeover.
About 30% of landlords replied that they were doing a full-scale renovation. This figure suggests there are quite a few aging properties on the market that need a major upgrade, and landlords are willing to get the work done.
Rental renovation pitfalls – what are landlords concerned about the most?
Nearly 80% of landlords cited cost overruns as their biggest concern in undertaking a renovation project. The higher the renovation price tag, the longer it will take to recoup the investment, so it’s no surprise that most strive to keep their expenses reasonably low.
Around 53% of landlords said they worried about the renovation not being completed on time. Usually, the longer a project takes, the more expensive it will be, as labour and material costs increase with each delay. Plus, if tenants are required to vacate the unit during the renovation, the landlord loses out on more months of rental income.
Over 44% of landlords expressed concern about the personal commitment required to carry out a renovation. This figure suggests that many landlords lack the time and inclination to do the work needed. They may prefer a hands-off approach to property management and wish to outsource the entire project.
Tips for new landlords
When asked to share their best renovation tip, most landlords we surveyed replied with the following three:
- Do proper research and planning before starting
Sourcing multiple quotes, asking contractors questions, and gathering as much information as possible on best practices are essential for any landlord before tackling a renovation project. Determining the project’s scope and creating a budget is also important, as is obtaining any permits and following all local government regulations. Failing to do all the above can result in major cost overruns.
- Pay extra for higher quality
While excessive spending is a big no-no for a rental renovation, being too frugal isn’t ideal either. Landlords must take steps to provide tenants with a living space that’s modern, convenient, and eye-catching. Their property must satisfy the rental market’s demand, which may entail splurging in some areas. Otherwise, they’ll fail to attract high-quality tenants.
- Do the work yourself to save money
Because rental renovation costs can quickly spiral out of control, many of the landlords we surveyed suggested taking the DIY route to complete a project. As an example of how pricey things can get, the average kitchen renovation in Canada is approximately $31,000.
The lower the cost, the higher the return on investment. For this reason, many landlords prefer to do the work personally wherever possible.
What stands in the way of a successful renovation project?
Sixty-four percent of landlords indicated the massive commitment in time and money as the most challenging part of revitalizing a rental.
Landlords may spend a considerable amount of money to obtain permits, prep the work site, purchase materials, hire professionals to complete specific tasks, etc. And handing control over the project to a general contractor is even more expensive.
The number of hours needed for a large-scale renovation is overwhelming for some landlords, too. Some have full-time jobs, family commitments, and other priorities that make it impossible to squeeze in the time for renovation work.
Thirty-six landlords said finding the right contractor is a significant hurdle in the renovation process. Finding a contractor capable of completing the work to a high standard, at a reasonable cost, and on time can be challenging. Also, landlords without experience analyzing quotes and vetting contractors may not know how to spot a quality candidate – or one to avoid.
Our survey results show that landlords don’t take rental renovations lightly. Considerable time, effort, and money are needed to coordinate such a project. If done poorly, a renovation will take away rather than contribute to a rental’s profitability.
The main takeaway from the survey is that a business-oriented mindset is crucial for a successful rental renovation. Landlords spend considerable time crunching numbers to ensure their efforts generate the highest return at the lowest cost. If you’re contemplating a renovation of your rental, taking this approach will help you make profitable decisions and avoid costly pitfalls.
Are you new to rental renovations? Then browse our Rental Property Renovations Guide for some valuable tips. If you do things right, your newly transformed rental will draw first-rate tenants and give your rental income a boost.
Still, unforeseen issues can arise that threaten your bottom line. Suppose your tenant suddenly falls behind on their rent payments. Or they cause considerable damage to your property. In either scenario, you may have no choice but to evict them, in which case you could end up spending a bundle.
SingleKey’s Rent Guarantee program will allow you to reap the benefits of your rental renovation while eliminating the financial risk of troublesome tenants. You’ll receive compensation for up to 12 months of lost rental income up to a maximum of $60,000. Plus, you’ll also receive up to $10,000 in damage protection.