Rental Unit Upgrades

[Trevor Lofstedt]

Hello Bigger Pockets community,

My college roommate and I about to close on our first investment property! We got a good deal on a duplex in a growing neighborhood in Minneapolis, MN. We plan on living in one unit, while renting out the other. My question for you guys is where do you recommend making updates to a house built in 1908 to increase the cost of rent we can charge in the future?

I would like to put in new wood floors, but I have heard people are starting to just refinish the original wooden floors?

What other projects would you recommend for increasing the overall rental value of the unit?

All suggestions will help. Thank you!!

[Nick G.]

@Trevor Lofstedt Congrats on the first place man! Very exciting times. 

The answer to your question depends a lot on the present condition of the property, as well as the market you're in. In my expensive market, upgrading a property that's already livable actually has a pretty minimal effect (<10%) on rent value, our rents increase predominantly come from market forces. 

In other words, I live in a $520,000 3+2.5 1400sqft house right now that would conservatively rent for about $2,600/mo. The house has a modern carpet upstairs, a hardwood entry, laminate downstairs, except in the kitchen which has tile - and my kitchen and bathrooms are original 80's. If I installed a sexy laminate flooring throughout, plus remodeled my 80's kitchen, plus remodeled my 2.5 bathrooms, I might be able to get $2,700-$2750/month. 

The biggest value of upgrading is actually not increased rent amounts (though those are awesome) - the biggest benefit is actually in the quality of tenant you will attract, which is hard to put a price on, but is incredibly valuable. 

At the end of the day, in my experience, here are a handful of things that aren't terribly expensive and can really help when multiple ones are done together:

- Nice laminate floors throughout (or, if you have hardwood and can get the cost in the same range, refinishing those,)

- Fresh paint throughout with nice earthy/neutral tones and contrast - I hate obvious paint patching, it makes a property feel like such a cheap rental, as opposed to a classy little place to live. 

- When you paint, have the painter also scrape the ceilings if you have popcorn/acoustic ceilings.

- Brushed nickel fixtures (or something similar) - light fixtures, faucets, etc.

- Brushed nickel knobs/handles (or something similar.)

- If you have a couple bucks left in the budget, get new (and when I say new, I mean on sale/refurbished/wholesale) stainless steel appliances. Not a priority, but some tenants love a classy appliance.

- Curb appeal - trim and tidy the place up, particularly in the front yard/patio, this is a very effective thing that is often overlooked, and it's so cheap to do if you pay one of your buddies with pizza and beer and have them come out to help you on a Saturday.

- Clean! Seriously, grime and dust and dirt can make a place feel pretty undesirable - you don't even always notice it when it's there, but you will notice it when it's gone because the place will just look, feel, and smell nicer.

- On that same note, one of the other most important things is also to make the place feel light and bright. This one's a little tougher since it can vary so much between properties and largely comes down to what you bought, but people usually don't love living in caves. Make sure you pick light paint colors throughout, get rid of any heavy/dark curtains and such, upgrade or install bright light fixtures where needed, etc.

This all comes from my own experience in Southern California. Every market has little eccentricities of what people like and look for, but I think that the things I laid out above are fairly universal. Everything I laid out above can be done for a few thousand dollars if you did it yourself, maybe up to $7,000-$8,000 if you paid a contractor. However, in my experience, you will increase the general look and feel of your property far more than if you spent the same amount remodeling a kitchen or a couple bathrooms. 

Congrats again, and good luck!