Owning a rental property is about more than just leasing to renters. It becomes a relationship between two parties. Part of managing that relationship is deciding whether to allow tenant-made upgrades to your property. It’s important to consider this seriously, as changes could result in an increase or decrease in property value and potential added costs (for both parties) down the line.
That said, with proper communication between both parties, upgrades can be beneficial for all. Successful, tenant-led upgrades can improve the relationship between you and your tenants and even the property as a whole. With proper expectations and documentation, allowing upgrades can be a great choice.
Compromise is King
Any time work is performed on a property, there will be pros and cons. What if a tenant wants to paint the walls? This seems harmless enough, but what if paint ends up on the carpet or hardwood floor? On the other hand, allowing a tenant to personalize their space at their own cost may encourage them to stay at the property for longer and take better care of it, which can reduce the substantial resources required to find a new tenant and prepare the space for them.
In this case, ask yourself the following questions:
- Were you going to repaint when they moved out anyway?
- Will the security deposit cover possible damages?
- Does your rental agreement include clauses that will allow you to recoup additional funds, if required?
- Are the tenants always on time with rent?
- Will keeping them there longer benefit you financially?
In most cases, allowing minor, tasteful upgrades can motivate tenants to ensure the property is well maintained. The fair solution is almost always to compromise by agreeing to the work and setting ground rules to ensure it is done well. In this case requiring your tenants (in writing) to use a drop cloth and undergo an inspection of the completed project is reasonable.
Adopt an Open-Door Policy
Approval for basic improvements such as painting, (and the related requirements) can be written into your rental agreement. However, when it comes to more complicated and impactful upgrades, you’ll want to consider projects on a case by case basis as they arise. Adopting an open-door policy that allows tenants to submit improvements for your approval is an efficient way to handle this. Additionally, by encouraging your clients to ask for permission, you’ll be discouraging them from going behind your back and asking forgiveness later instead.
As an example, sustainability is a hot-button topic. In response to the growing focus on reversing climate change, both commercial and residential tenants are looking for ways to achieve net-zero energy. Whether they are looking to attract more clients with their sustainable business practices or simply reduce their carbon footprint at home, a common first step to becoming more energy-efficient is replacing old appliances with Energy Star rated models.
While your gut instinct may be to prohibit your tenant from making these changes, in certain cases it may be worth considering. For example, newer appliances and lower energy bills are attractive to future tenants. You may also be able to sell old appliances for cash. In either case, you’ll need to put in writing that the new appliances stay when the tenant leaves. You should also require professional installation.
Another common point of contention is a significant change to the exterior of the property. For properties that allow dogs, it may be beneficial to allow your tenant to landscape the yard to accommodate their furry friends. Just make sure you know and approve their plans in advance and agree in writing to whatever changes they hope to make.
Commonly, dog-friendly landscaping includes the removal of hazards, such as toxic plants and metal edging. Your renter may also want to create a pet-friendly area with shade or safety fencing. Again, it’s likely these upgrades will be attractive to future tenants with pets as well. In addition, having pet-friendly spaces outside can help reduce potential damage inside the property.
As the saying goes, an ounce of prevention is worth a pound of cure. Managing your tenants’ expectations and ensuring they comply with the rules starts with awareness and understanding.
Landlords can be proactive by walking new or prospective tenants through the property with lease in hand. Just as you review the monthly rent and late fees, review the clauses allowing for upgrades and the related rules. Point out areas that can be upgraded, such as wall colors or window coverings. Be explicit about anything that must not be changed, and walk them through the process for requesting upgrades on a case-by-case basis.
Most importantly, stay involved as a landlord. It is not only possible, but preferable, to provide tenants with privacy while actively monitoring and maintaining your property. Scheduling a monthly check up to complete basic maintenance such as changing air filters and making minor repairs is beneficial for everyone. In the tenant’s case, it can improve their quality of life while reducing their costs. In the landlord’s case, it allows you to spot items in need of attention right away, reducing costs and preventing more serious problems down the road.
No matter how you decide to approach property upgrades, a few truths are evident. Beginning with a clear and thoughtful lease agreement can eliminate common questions. And when it comes time for a tenant to offer upgrade suggestions, it doesn’t hurt to listen to them. Even if a landlord doesn’t allow the tenant to make the requested changes, the ideas can have merit. With an open mind, you can take advantage of the mutual benefits that come with prudent property upgrades.