As a rental property owner, I am always looking for ways to maximize rental income and keep my units marketable without major renovations. I am always on the lookout for possible properties that I can easily buy and rent that will cover the mortgage and a little more. Having said that, one of the biggest mistakes I see other landlords and rental property owners make is that they are reluctant to or simply don’t put money into their properties because they don’t believe they will see a return on that investment. When I tell some of my colleagues that I put new kitchens and bathrooms in all my rental units, they think I’m crazy. To quote one of my friends who owns some real estate, “Why would you spend $4,000 on an apartment that will be destroyed by the next people who rent it?” To answer his question, I thought I’d write this article.

First, let’s think about the math behind it. Granted, each market or city will have a different result, but in the Philadelphia area where I live, this is true. By doing a little research and finding comparable apartments in your market, you can figure out what the magic number is. What are the three characteristics that are going to stand out in any apartment? The condition of the carpets, the bathrooms and the kitchens. If any of these items look worn or banged up, it will be harder to rent and you won’t be able to get as much for it… that’s just a fact of life. So let’s say you spend $3,000 to upgrade your kitchen and bathrooms. Yes, it is possible to spend that bit on upgrades and I’ll show you how later. Assuming the rest of your unit/building is in good condition, that $3,000 investment can earn me an additional $200 a month in rent per unit. At $200 per month, he paid back his investment in just over a year and is now making more money per unit. Think about it. If a prospective tenant is looking for two apartments: one with an old-fashioned kitchen and one with a modern kitchen and bathroom, which one will he choose? Not only that, but a nicer apartment will command a higher rent, which in turn creates a higher income tenant who is less likely to abuse and destroy the apartment.

For some of you, I’m sure $3,000 to renovate a kitchen and bathroom probably made you laugh. If you’re still buying your supplies from the big box stores, then you have a reason to laugh. Updating both the kitchen and bathroom in an apartment using your cabinets could easily cost you twice as much, if not triple. After doing a lot of research, I found a cabinet source that saves me at least 30-40% per apartment. I started shopping for my cabinets online. If you do a search for RTA kitchen cabinets, you will find my secret. Not only are they cheaper, but they are also made of stronger materials and are easier to assemble and install. By buying cabinets online, directly from the importer/manufacturer, you can get them much cheaper because they don’t have the high overhead costs of a retail store. I’ve been using them for years in my apartments, and you wouldn’t know the difference if you put them side by side with store bought or ordered cabinets. The biggest benefit is that you don’t have to wait 6-7 weeks for cabinets like you do if you go to Home Depot or Lowes. These are delivered directly to your office or property in approximately 2 weeks.

So the next time you’re trying to figure out why the units are empty, or the guy across the street is renting his units for hundreds more, take a look at your kitchens and bathrooms. A simple upgrade will not only give you a quick return on your investment, but will also continue to generate more revenue for years to come.