How to Best Prepare an Investment House for Rental (As Opposed to Sale)

How to Best Prepare an Investment House for Rental (As Opposed to Sale)

3 min read
Drew Sygit

Drew is a classic overachiever, bringing intensity and passion to everything he does. While in the mortgage business, he rose to a VP position at the first broker he worked for and then started his own company.

Experience
In the pursuit of excellence, Drew obtained several mortgage designations and joined mortgage and several affiliate association boards. He also did WebX presentations and public speaking engagements. It was during this time, he started personally investing in single family rentals, leading him to start Royal Rose Property Management with two partners. He also joined the board of a local real estate investors association, eventually becoming its president.

The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank went on to eventually acquire four failed banks from the FDIC, increasing from $100MM in assets to over $2B while he was there. After that he took over as president of Royal Rose Property Management and speaks at national property management conventions.

Accreditations
Former board member of Michigan Mortgage Brokers Association, Financial Planners Association of Michigan & Mariners Inn (nonprofit)

Former taskforce Member of Michigan Association of CPAs (though not a CPA)

Involved in mortgage business for over 18 years, obtained mortgage designations: Certified Mortgage Planner, Certified Mortgage Consultant, & Certified Residential Mortgage Specialist

Board member of Real Estate Investors Association of Oakland; President since 2012

2009-2012 Shared-Loss Manager for Talmer Bank (now Chemical Bank) handling FDIC failed bank loan loss strategy, reporting, REO management, collections, & gap analysis

Started investing in real estate in 1996

President of Royal Rose Property Management since 2001

Education
Drew received an MBA from Wayne State University, concentration in Finance & Marketing.

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LinkedIn

www.RoyalRoseProperties.com

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There’s an awful lot of advice out there for how to make a house look amazing, and if you’re the kind of person who tends to run with the first ideas you come across, you can end up really shooting yourself in the foot when it comes to your rental properties. That’s because the advice that’s intended to make a house that someone owns look amazing is actually entirely different from the advice you need to follow for a rental. In fact, most aspects of rental house renovations and repairs are quite different from those same tasks when performed for an owned house.

Repairs

Almost every investment property you purchase is going to need repairs. (Heck, a close relative of mine just spent $400k on a house and it needed $24k in repairs the day he moved in–and it was newly built!) But what you repair if you’re going to live in it–or flipping it so someone else can live in it–is very different from what you’d repair if you’re planning on renting it.

In part, that’s because renters are less picky than homeowners. They know it’s not “their” house, and so they don’t care as much about the finishing details. They don’t care about having plant hangers under the eaves or what color the fixtures are. They just want to know that everything works and they’ll be safe and warm and able to put their stuff somewhere. Anything you give them past that is usually money poorly spent.

The rest of the story is pure math: You’re still going to be responsible for the repairs eventually, so there’s no point at all in doing repairs now. Why buy a new water heater when you could get a solid 3-5 years out of that old 1987 water heater before it bites the dust? All you’re doing in that case is sacrificing 3-5 years of perfectly good water heating.

Related: 5 Crucial Questions to Ask BEFORE You Buy That First Rental Property

Upgrades

Similarly, in most markets, a solid investment property is probably going to be pretty old, which means the stuff in it is probably going to be pretty old, too. If you’re planning to flip the house, you need to upgrade basically everything to within-the-last-decade tech.

When you’re renting out the property, however, the same logic from repairs applies again. If you need to upgrade the wiring, plumbing, or gas lines because they’re unsafe, of course you will. But beyond the actual safety issues, it’s mostly a waste of money to upgrade items like the range, the cabinet hardware, or the bathtub fixtures. There are exceptions, of course; if the cabinet doors are noticeably off level, you need to fix that. But by and large, unless the tenant complains, it’s not your problem.

EXCEPT:

You have to keep up with the Joneses. No matter where your property is, there’s typically a baseline of renter expectations. If all the competing rental properties have appliances from within the last decade, you’ll have to give serious consideration to upgrading to match. If you don’t, you’re either going to wait a long time to fill your rental, or you’re going to have to keep lowering the price.

You can also make upgrades that focus on rental-appropriate attributes (i.e. a floor that will survive several consecutive tenants) rather than sales-appropriate ones (a floor that matches the aesthetics of the room perfectly). Combine those two factors, and you can end up making your upgrade costs back, plus a decent amount of extra by the time your upgrades have to be re-upgraded again.

Related: 10 Home Staging Tips to Help Sell (or Rent) Your Property FAST!

Aesthetics

Here’s the big, bad difference between flipping and renting a home. When you’re flipping a home, you can afford to decorate with a specific aesthetic in mind. The MLS listings reach enough people that being able to put “Art Deco styling” or “ultramodern” into the description will help you sell the home. So go ahead and put a few grand into getting those particular crown moldings; someone will love them!

A rental, on the other hand, has to appeal to a huge variety of potential viewers. It has to come across as a blank palette ready to be turned into whatever your next tenant might love. This is why almost every rental you’ll ever see advertised is painted a color somewhere in the “taupe-ecru-eggshell” spectrum–because those colors don’t exclude any visions of what the space might look like. It’s also why you should paint your new acquisition in the same vein if you intend to rent it out.

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