Welcome to Part 8 of “Making More Money,” our series on how to earn more from your properties. In our last post, we covered why modernizing your bathrooms in today’s real estate market is a must. This time, we cover the benefits of modernizing your kitchens. As with any project in this series, research your market before getting started.
Modern kitchens rank even higher than beautiful bathrooms and onsite laundry facilities when it comes to tenant satisfaction. Tenants want the space where they store food, cook, and sometimes eat to be clean, functional, and attractive. Even before the foodie wave of the last decade, a kitchen with stainless steel appliances, attractive cabinets, and conveniences like dishwashers and garbage disposals were must-haves for many tenants.
“Investing in a beautiful and functional kitchen will go a long way in leasing your unit for years to come, increasing rent, decreasing vacancy, and improving the property’s value when your client is ready to sell,” says David Last, developer and the principal at Last2Development in Boston.
#1: Fill vacancies faster and keep great tenants
Food and cleanliness go hand in hand, so most tenants demand a kitchen that looks and feels inviting and healthy. And today, a lot of people not only dine in the kitchen but enjoy it as a comfortable place to hang out.
#2: Charge higher rent
Depending on the market, you can invest in luxury kitchens with high-end refrigerators, ovens, and dishwashers. Teak cabinets, indoor grills, marble countertops, walk-in refrigerators, and sky lights? In a very wealthy neighborhood, amenities like these are often expected.
#3: Earn a project management fee
Kitchens are large capital investments and the most expensive rooms to renovate. You’ll need a plumber for a day for each unit to hook up water for sinks, dishwashers, garbage disposals, and gas-powered ovens (or an electrician for an electric oven). You’ll also have to work with designers, builders, and carpenters for major renovations.
The cost of a kitchen renovation today goes for about $25,000, Last says*. So even if you’re acting as the GC or project manager for just one kitchen overhaul, charging 8 percent to oversee the job will earn you a project management fee of $2,000. For a 10-unit building, you would make an impressive $16,000. And for luxury buildings, kitchen rehabs can run $50,000, $100,000, or even more, which can bring you even larger returns.
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*All monetary figures in this series are estimates based on interviews with property managers working in the 2015 Boston market. Your costs and revenue will vary based on your location, your suppliers, your contractors and subcontractors, and other factors.
Much of the principles behind planning and preparing for a kitchen renovation are the same as those for a bathroom renovation. Check out the “Getting Started” section in Modernize Your Bathrooms.
Pro Tip: Renovate a kitchen in phases
If your client is a landlord who is short on capital, know that everything doesn’t have to be done all at once, Last says. You can start with appliances, add new floors the next year, followed by cabinets and countertops. An important reminder: Some tasks must be completed in a certain order. For example, it doesn’t make sense to replace a countertop if two years later you’ll tear it out when replacing the cabinets.
And that wraps up our series on strategies to earn more from the properties you manage. Whether you plunge into managing capital improvement projects, or conduct market research to make useful recommendations, your clients will be grateful for helping them earn more money and increase the value of their properties.
As for you, we hope the ideas we’ve presented in this guide help you enjoy an even more rewarding career — professionally and financially.Read more on Maintenance & Improvements