Optimizing Rental Property Renovation: Where Renovations Go Wrong
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This is the last post in my series of optimizing rental property renovations. So far, I have shared our methodology for determining what to renovate, what to remove, what materials to use, and (painful and expensive) lessons we learned after 550+ rental property renovations. However, renovations can still fail. Why?
Renovations typically fail for four main reasons:
- Being cheap
- Over-improving
- Decorating to personal taste
- Renovation creep
Being Cheap
Being cheap is different from being cost-conscious. For example, a client made a cost-conscious decision when she chose not to install granite kitchen counters because the competing properties in the area didn't justify the expense.
An example of being cheap is a (former) client who refused to spend $350 to fix the front yard, which was full of dirt, broken glass, rocks, and weeds. Despite warnings from the property manager and me that the poor curb appeal would deter tenants, he insisted, "I won’t spend another dollar until the property generates income." The result? The property sat vacant for three months (while similar properties rented in two weeks) and eventually rented well below market rate. His decision to save $350 cost him over $6,000 in lost rental income.
We didn’t work with him again.
Over-Improving
Despite our advice, a client spent $10,000–$15,000 more than necessary on a renovation, convinced that premium upgrades would command rent far above market rates. The property was initially listed at $200/month over market rate. After sitting vacant for months, he reduced the rent to market rate—but still couldn't find tenants. Eventually, the property rented for $100/month below market value.
Over-improving created two problems:
- Overpricing eliminates the demographic typically attracted to that property. Additionally, those who can afford the higher rent won't consider it since it is inferior to correctly priced properties.
- When properties are overpriced, they sit on the market, making prospective tenants suspicious that something is “wrong” with them. This often forces landlords to drop prices below market rent to overcome suspicions.
Decorating to Personal Taste
A client once insisted on installing a hot tub, saying, “If I lived here, I’d want one.” Despite our warnings that families with young children—our target demographic—avoid properties with hot tubs, she spent $3,000 on it.
The property took longer to rent and eventually attracted a single person who stayed only a year. The lesson? Your preferences don’t matter. Only the preferences of your target tenants do.
Watch Out for Renovation Creep
Don't give in to the urge to make unnecessary "improvements." For instance, we use appealing, cost-effective granite for kitchen countertops. One owner insisted on a higher grade of granite because "he would never live in a property with our standard granite." This led to a $1,500 increase in material costs—with no increase in rent.
Final Thoughts
One of the lessons I emphasize during new client onboarding is that you are buying an asset, not your residence. Your taste and preferences do not matter. My main advice for an optimal rental property renovation is to follow the property manager’s recommendations—no more, no less. If you deviate from the property manager’s recommendation, you risk spending more without increasing the rent. On the other hand, if you try to cut corners, it will likely take longer to rent, rent for less, and attract undesirable tenants.
Thank you for following this series on rental property renovations. Please let me know if you have any questions or feedback. If there are other topics you'd like me to explore, I'd love to hear from you.
