Newbie First Duplex, repair?

Question

So I'm closing in on my first deal and have a few questions. By closing in, I mean I close in a month.

It's a duplex that could use some TLC, one tenant has lived there for 10 yrs, not leaving and her side has not been updated in forever, if ever.  The other side was slightly updated a year or so ago. That tenant has been there a yr, has trashed it a bit just being sloppy, she is moving out when I take ownership.

There are some windows at minimum that need replaced on both sides, small roof repair. And some cleaning etc.

Do I just repair and replace the unrented side and wait on the long term tenant side? Hit the one that is open and make it as desirable as possible and not worry bout the other side for a while. Current difference in rent is $100 a month.

Long term tenant side only bathroom, has a seized up shower head, only take baths I'm guessin, cause there isn't even a shower curtain.  Do I ask her what she wants fixed?

Advise is alway appreciated.

Matthew Schroeder · Answer

As a general rule (and I have seen several other investors on BP who follow this method), I would make the newly available unit slightly better than what is available in the market so that you will hopefully attract better tenants.  This need not be expensive, sometimes just doing a slightly better paint job, or a feature wall, or painting kitchen cabinets will suffice.  You want to attract several potential tenants so that you can hopefully have the pick of the litter - if you have a nicer product, you have a better possibility of attracting better tenants.

You mentioned that the one unit rented at $600/month.  One thing I do is such cases is that I price the unit at $595.  The psychology of having a "5" instead of a "6" can be powerful & the $5/month is not going to kill me.  Just think about your everyday purchase decisions, and you will understand pricing psychology.  Since I typically have a nicer product and price slightly below market, I am also able to negotiate with the tenant on some other items which could include longer lease term, lawn maintenance, paying water (if appropriate in your area), etc.

Matthew Schroeder · Answer

Scott,

First, congratulations on "closing in" on your first deal!

What you decide to do depends on a lot of factors including if you are using financing (may want to minimize disruptions to cash flow), if the current tenant is at market or below market rental rates and a whole host of factors, too many to list here.

The one thing I would not do is ask the existing tenant and open ended question like "what would you like fixed?".  The answer may surprise you.  You might ask in another way how she likes living there & that answer will probably take into account what she pays & the location and other factors.  You also want to set the tone & precedent from Day 1.

Definitely try to find out if there are any major electrical/plumbing/roof issues, but other than major mechanical items, I would not ask too broad a question.

On the shower head, often it is just some calcium build-up inside the showerhead, and simply placing the shower head in vinegar for several hours will do the trick.  A quick, easy fix.

Good luck!

Scott L. · Answer

@Matthew Schroeder

Great learnings there, thank you. The outside has older aluminum siding, and is directly next to the same layout duplex that apparently redid that building with new siding etc recently.  I looks really nice, so i'm behind it there.  But hopefully i can upgrade some interior things to get ahead of any competition.

What is the best bang for my buck in renovations?

Kitchens? Flooring? bathroom?

Nicole Jones · Answer

I would say the renovations on the empty side should only match what is common in the area. Depending on the area your duplex is in you will only be able to get a maximum amount of rent no matter how much you put into reno. Just my thoughts...

I have the same situation with a tenant I inherited and I have the same concern. I'm all about balance so it seems awkward to renovate the empty side drastically when I know the state of the other side. The inherited tenant is Sect. 8 and has a low fixed rent so although I make speedy repairs for him whenever necessary I am still weary of putting too much money into that side. Interested to see the other comments that follow on this thread.

Scott L. · Answer

@Matthew Schroader

Thank you for the info.

How much should i renovate the empty duplex, knowing the occupied is staying the same? And what should i do about rent?  The one moving our was paying 600 the one staying is paying 520?

Newbie First Duplex, repair?

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