Is your rental ready to go further than a fresh coat of paint? Renovations can increase rental income and a property’s asking price when the time comes to sell.

When planning a renovation budget, it’s important to remember not to price yourself out of the market. While raising the monthly rent by $100 dollars per month may be nice, those in your potential tenant pool may not bite. Here are some tips on renovating your rental property for maximum returns:
1.Start With the Kitchen and Bathrooms

They’re usually a focal point for potential tenants, as many people can live with a smaller bedroom, but not a grimy bathroom. These are the spaces with the highest contact and are most susceptible to the corrosive effects of water, so they wear a lot faster and tend to grow mold like a Petri dish.

What are people looking for today in their kitchens and bathrooms? Says Jamie Gold, San Diego-based owner of Jamie Gold Kitchen and Bath Design and author of New Kitchen Ideas That Work, “Contemporary or transitional styling and kitchen islands are hot items. Stainless steel appliances are also still popular. Hands-free faucets and toilets are increasingly desirable as people worry about germ spread. Also trending this year are LED lighting, home automation features, and accessible bathrooms.”

When it comes to the basics, like kitchen and bathroom countertops, advises Gold, “The countertop I like most for budget remodels is solid surface, as it can be repaired if damaged, potentially resulting in less cost over the long run. It is also low maintenance, which can mean fewer issues between tenants.” Splash out on more expensive fixtures like faucets and showerheads to avoid repeated replacements. Spending more on toilets may also be a good idea, as these are most often the culprit of maintenance requests.

When you plan on selling your rental investment, you may recoup about 70 percent of the kitchen and bathroom renovation costs, according to national averages in the “Remodeling 2015 Cost vs. Value Report”. How much should you invest in these projects? According to Appraisal Institute spokesman John Bredemeyer, the general rule-of-thumb for a kitchen renovation is to spend 10 percent to 15 percent of a house’s value, while the bathroom should get 5 percent of a house’s value. If your bathtubs, showers, and cabinetry haven’t met the end of their lifespan, consider cost-efficient resurfacing instead of replacing.
2.Fix the Flooring

We’ve mentioned before that vinyl flooring is experiencing a renaissance with all the beautiful colors and finishes it now comes in (like wood, stone and ceramic). Not only is it economical, and extremely durable against the frequent wear rentals often face, it’s also easy to install and maintain. Vinyl flooring comes in plank, tile and sheet options, and the thicker the better. Set it, forget it, and profit.
3.Install a Steel Front Door

What—really? Year after year, no single upgrade has provided such a healthy return, according to Remodeling’s “Cost vs. Value Report.” This year, it took the top spot, thanks to its energy efficiency, aesthetic value and easy maintenance. Who knew?
4.Evaluate the Exterior

“Curb appeal is huge,” says Gold. “The first impression your property makes on a renter will stay with them. In today’s very social world, people think about what their home’s appearance will say to their visitors, and they want their place to look good—both inside and out. I would also upgrade any outdoor amenities to be as appealing as possible, as these spaces are used for a tenant’s quality time.” Consider installing a patio or deck, which is a great feature that attracts families.

So, the taxing question is, can you deduct renovations on your rental property? If a certain task can be classified as a repair (e.g. repainting a room), the full cost can be deducted from that year’s taxes. On the other hand, improvements (e.g. installing carpeting) can be depreciated over a set period of time. It’s important to understand the difference between making an improvement and making a repair, so be sure to discuss with your tax professional.

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