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Reinvesting in Your Rental

How much of the profits from renting do you end up reinvesting in your property? Do you add or upgrade features? Spending on maintenance?

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This month will be changing the air con system in one guest room, it is an 10yr old air con, working fine we want to change to the split system. That will be 100% of the month rental and we also added an air purifier to one room this week.

Technically I haven’t made any profits I’ve reinvested all of it. At first I just rented out what I had, very plain room, futon bed and with hall bath. Then I added a TV with Direct TV and a window refrigerated AC. Then last year I spent $15000 adding a 3 piece bathroom and private entrance, in part so I could expand the rental calendar while still boarding dogs in my home. I didn’t just do that for air rental though. My older diabetic sister had been in decline and I anticipated her having to move in with me. She passed away 2 weeks after the addition was completed. As I told my contractor, I 'd rather have it and not need it than need it and not have it. Now it is there for my brother in law if he needs it in a few years. Meanwhile I think I might finally be profitable if I can do airbnb 2-3 more years.

I purchased a fridge out of my rent money last week. It’s a 260 liters inverter. This is the model, though I didn’t buy it from Amazon, but locally. I also changed all the CFL bulbs in the room and the passageway to LED. That didn’t cost much, though. I have a few other minor improvements planned. Seating on the upstairs terrace, for example. Also, washer/dryers tend to be high on peoples wishlist. And I might replace the CRT TV in the room with a wall-mounted LED. The last person to be here pointed out that it would save space. I’ve been distributing a suggestion form with a list of possible improvements, but the feedback hasn’t been terribly consistent. However, I have only taken a very small sample. Though fridges are a high prority for everyone.

Incidentally, what fridge is a good size for short-term visitors? 260 liters isn’t terribly large, but anything significantly larger would not fit in the space I have available. Fridges aren’t small things.

It’s early days, so I don’t know what proportion of the money I’ll end up spending. How do people do this? Do they have a proportion they invest back, or is it just a seat-of-the-pants thing?

Hi @KKC,

Did you increase your rates much after adding all these improvements?

So far all of it because I need new beds and furniture and new carpet and things need fixing.

No, faheem, not at all. In fact, due to increased competition they are a little lower on average than they were when I started two years ago. But I didn’t do the addition with increasing my price in mind. I did it to increase my number of bookings and my privacy.

Those are good reasons. And more bookings means more money. And better amenities means happier guests. So, win win.

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Sorry to hear about your sister.

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The first year, I used my ABB earnings to fix the bathtub/shower unit that was leaking into the downstairs bedroom, so basically was unusable.
Next years earnings are going to buy new windows throughout the house.

Similar story. Have made upgrades that are out of all proportion to what we’ll ever make from AirBbB.

  • $8K to install ductless AC in both rooms. The old window AC was fine for one room, but we couldn’t fit one in the window of the other room, which was always hotter anyways. The 3rd floor just isn’t served well by our central AC, so the ductless units made sense whatever we use it for. And they’re likely to survive a gut job, which will be the eventual fate of this house.

  • $8K to replace leaking roof. No choice there, but might not have noticed the problem until way too late if the BnB didn’t have us up there all the time.

  • $1.8K to strip & refinish the floors. They’d had ugly oxblood paint which was probably there ever since it was built in 1920. We did this mainly to make the place look better for guests, and we made more than that last year, so I guess you could count that as something we did mainly for the guests, but we’re really glad we had it done. The rooms look so much better.

We’ve done some painting and other work that we wouldn’t have bothered with, but we’re not completely motivated by turning a profit. AirBnB gets us thinking about the rooms, which otherwise were just used for storing useless junk. We’ve gotten rid of stuff we were keeping mainly because we’d been too lazy to think about. Some of the junk is worth keeping, but the older we get, the less worthwhile it becomes to keep anything useless around.

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I hate to sound all crude and mercenary, but isn’t the point of Airbnb to turn a profit?

(Hides face and runs away…)

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Sure, that’s how it started. But we’ve found that it has other benefits that outweigh the original motive - like doing renos we hadn’t thought about (there’s stuff in the non-guest areas that has needed work for years and we’re finally doing work there too). Mainly it gives us something to do. We’ve been married thirty tears, both retired; it’s good to have something constructive to work on together instead of just staring at each other over our oatmeal. And rather to our surprise, we love being hosts. We really like meeting all of these interesting people from all over the place, and doing what we can to make their stay in Toronto enjoyable.

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That’s nice. I’m sure your guests appreciate it too.

And hosting doesn’t just have to be about the money, but I expect for most people it’s a dominant concern. I doubt most people actually enjoy having strangers in their home. I don’t particularly, though I do enjoy meeting new people.

PS: I’ve never really taken to oatmeal, but once upon a time (in a different lifetime) I used to be partial to muesli.

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I get you. One of our guest bedrooms was a second totally unused office. Basically a waste of space.

I have improved our outdoor spaces, and for right now it is what can we hassle for summer. We have BIG plans for our IN season with huge outdoor plans so right now saving as much as we can to do it justice.

I save about 10% of my rental income for investing back in my rental. I keep half of that savings for renovations in the long-term (in 10 years), and I spend the other half for daily improvements (last buy was lightweight duvets for summer months).

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Definitely!

In the beginning, there were certain things that needed to be added. Like, adding another bed would allow an increase in rates, etc. That said, there are limits and certain things provide a bigger return than others.

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