One of the most popular questions we get asked is if improvements made to a house increase its rental value? Perhaps the home you own was purchased many years ago and was recently remodeled – with new floors, counters, fixtures or cabinets. Or you purchased the home recently, maybe even brand new, and upgraded certain aspects of it to make it pop! How does this affect rental value?
Homes in Las Vegas are traditionally built in planned unit developments (aka PUD’s), or as we like to call them, tract homes (some call them cookie cutter homes). Homes are replicated by a builder with minor variations. As a result of this, when a rental analysis is performed on a home in one of these neighborhoods, other comparable, or identical model match homes that have leased are used to establish a value. For example, if your looking to lease a home that is a 3 bedroom, 2 bath, single family home with 1500 square feet, we would look to see if there is another model match in the neighborhood that has leased recently. In many neighborhoods, we can usually find a handful of model match homes. And due to this, because we are working with a similar size home, rental values will usually be within a specific range – not spread apart too far.
How, then, are upgraded features handled that may make your home stand out compared to others?
First, upgraded features definitely have advantages. They make your home stand out and make it desirable, allowing, in many cases, for it to rent quicker. How about rent value? Rent value can typically be increased, however, within reason. A home priced significantly above other comparable homes in the neighborhood may appear overpriced, even if it is highly upgraded. Consistent rental rates within a neighborhood play a significant role to tell a prospective tenant about what is competitive in a neighborhood. Of course, certain upgrades add solid value. For example, a pool can add rental value.
There are some additional factors to also consider. If you find yourself in a depreciating rental market, you may find that adding value is more challenging. An over supply of rental properties on the market can also affect this. The general economy plays a role as well – unemployment or decreasing wages for example.
So, whats the point of this article? Upgrades within a house make it more appealing to a prospective tenant to rent, even adding modest rent value. However, in many cases, upgrades do not add significant rent value above the rental range of a neighborhood or area. Depending on the economy along with supply and demand, this can also change. So, before you upgrade your home for the purpose of renting it, calculate to see if what you have in mind will be a good return on your investment.
Contributed by Nicklin Property Management. Opinion article reflects the views of Nicklin Property Management and is based on our years of experience.