Do Upgrades Equal a Good Return?

We have all heard that upgrading your kitchen and bathroom will increase the resale value of your home (if done properly). Does upgrading the kitchen and bathroom of your rental property increase rents? Absolutely, but only if it is done thoughtfully. 

 When you invest time and money into your rental, you will reap the benefits such as:

• You pay below market value when you first buy a property
• You benefit from tax advantages (hopefully)
• Increase your rental returns
• You will attract better quality tenants. 
• Lower maintenance - at first (everything regular maintenance)

What to invest in.

It's a far more logical approach to invest judiciously, rather than go all out and gut rooms and start again. You could easily double the financial outlay if you are putting in high end appliances/brand new fixtures, with a reconfiguration of the layout and knocking walls down. You don't need to go that far to reap the rewards. If you did do this it might indeed backfire. 

Before purchasing a property and deciding on upgrades, talk to your property manager, and look at comparable rental properties in the area. If you made these improvements, will that price your rental out of the market? Would these upgrades ensure a high rate of return?

So you have decided to go ahead and upgrade the property, there are more areas to look at than just the kitchen and bathroom, but these are the areas that sell a house.

Kitchen 

In the kitchen look at cosmetic changes:

• Paint/Wallpaper the room.
• Cabinet or refacing change cabinet hardware,
• Counter-top resurfacing.
• Flooring and lighting.
• Appliance upgrades.
• You can make a big impact with one or two 'splurge' items, like a great backsplash, or high-end stove. Your potential tenants will remember your property and will be willing to pay more for it - if the rest of the property is good condition.

Bathroom
Again cosmetic changes: 

• Paint/wallpaper the room.
• Cabinet door refacing and new hardware.
• Change out counter top. 
• Resurface the bath and put new tile around it.
• New shower head
• New mirror.
• Vent fan.
• New flooring.
• Again think about a key piece or two to make a statement - maybe mosaic tiles in the shower, or a statement counter top.

Rest of the house
Don't forget the rest of the house, it would look pretty dismal if you upgraded the kitchen and bathroom and the rest of the house looked very tired. Think about these things:

• Walls - paint them, don't underestimate the return on a new coat of paint.
• Flooring - consider floorboard, either floating or solid. If you have them already make sure they are polished and in good condition. If you do have carpet make sure the carpet is updated or at the very least cleaned.
• Lighting - Installing down lights if appropriate.
• Landscaping - It's the first impression. If your property lacks curb appeal your prospective tenants will drive on by. So clean up the garden. Maybe the property could even do with a  new coat of paint or at the very least a wash!

Trying to prove my point I was doing some research and came across this great case study that shows before and after pictures and stats on rents, value of property, costs involved and return on investments. Pretty Impressive. 

What has been your experience on upgrading your rental's kitchen and bathroom. Are there other areas that you would work on first?