The duties of a landlord should go beyond collecting rent and making repairs. Ideally, it should also extend to upgrading your rental property and making it more appealing to your tenants. However, even in 2023, some landlords still need to see the benefit of splurging on a new vanity or repainting their home’s exterior.
Considering a home upgrade is one of the top tips to sell your home faster, embarking on a renovation project is worth a thought. Here are six benefits of sprucing up a rental home:
6 Benefits of Sprucing Up a Rental Home
1. Higher Rent
One of the most apparent benefits of sprucing up your rental apartment is that it allows you to charge higher rents. However, better appliances, a new paint job, and improved landscaping are costly. Tenants understand this fact and are often more willing to live in a house that is more appealing and convenient for their use. Besides, if your current renters cannot meet the new rate, you can easily find higher-paying tenants willing to sign a lease for your new and improved property.
2. Reduced Ongoing Expenses
Renovating your home not only secures you higher rent but can also cut your expenses. Certain upgrades like energy-efficient appliances, low-flow plumbing, and optimized electrical wiring can significantly lower your ongoing costs. These updates might seem like costly vanity projects at first sight, but they can save you thousands of dollars in utilities over the years.
Also, even if you aren’t paying for utilities, your tenants would appreciate saving extra cash on their bills. This leverage can give you more power to negotiate a higher rental payment and earn more profit.
3. More Tax Benefits
Another benefit of sprucing up your rental home is that you can enjoy some tax benefits. In other words, your renovation doesn’t have to cost as much as your budget in the long run if you plan it right. The IRS allows landlords to deduct specific upgrades on their rental property. In addition, appliances, furniture, and other items are eligible for bonus depreciation and will enable you to exclude the total price from your taxable income. However, just be sure to keep your purchase receipts, so you fill in the correct numbers.
If you need assistance with keeping the proper records, Bay Property Management Group Richmond can assist in documentation for your tax deductions. Having someone who can do it properly can help you stay organized and maximize all the benefits you’re legally entitled to.
4. Lower Tenant Turnover
Vacancies are the bane of every landlord, but they’re also inevitable. Thankfully, there are ways to curb them, and upgrading your property is one of them. Tenants are more likely to stick around and renew their rent when they have a landlord willing to invest in their home. Upgrades that add property value and make a living much more convenient boost tenant satisfaction and loyalty.
In the long run, retaining renters saves you money and time. If a couple of hundred dollars on a new appliance or update can save you the hassle of advertising and screening new tenants, it’s worth it. Not to mention all the money you can avoid losing from weeks or months of vacancies.
5. Increased Property Value
Besides making your tenants’ lives easier, renovations also add more value to your property. Something as seemingly simple as changing the color of your front door could mean selling your home for up to $6500 higher. Selected upgrades like new kitchen countertops and an expansive deck have massive ROI and can significantly increase the resell value of your home. Thus, if you’re ever in the market to sell, you can profit from your investment.
6. Better Investment Opportunities
Finally, sprucing up your property can give you better investment opportunities. For example, if you decide to fund your home renovation with a cash-out refinance, you can have some leftover money to put into another property. Thus, an upgrade project could help you secure funds to expand your portfolio.
Which Home Projects Can Be Tax-Deductible?
1. Repair Projects
The rules for tax deductions on repair projects typically vary from one jurisdiction to the next. However, often times only repairs necessary due to personal accidents or natural disasters qualify for a deduction,
2. Capital Improvement Projects
Capital improvement projects refer to upgrades that add value to your property and extend its lifespan. For example, upgrades to your heating system, landscaping, and exterior qualify for this allowance. Hence, they may be a good option for landlords that want to renovate on a budget.
3. Medical Care Projects
The IRS allows provision for landlords t excludes upgrades for the sake of medical health from their taxable income. In other words, if you have to make changes because one of your tenants needs additional handrailings or a wider doorway, you can easily write it off during tax season.
In summary, there are many benefits of sprucing up a rental home. First, it can save money by lowering tenant turnover, reducing ongoing expenses, and taking advantage of tax deductibles. Also, it allows you to earn more by charging more rent and increasing your rental value. Finally, landlords can invest in other projects by expanding their financing options.
You can take advantage of a few tax-deductible home projects in your next remodel, including repair, capital improvement, and medical care projects. Contact a real estate expert like a property manager to ensure your choices align with the IRS code for tax deductions.