Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
It's been a few months since I last updated. The 5 attached units (of 9 total) are finally ready to show. The other 4 will be a few more weeks. I have attached a before and after of the kitchen.
Unfortunately, as I suspected, the 950 sq. ft, 3/1 units are not getting the most positive feedback... "rooms are too small", "there's only one bathroom", "stairs are narrow", "construction is bad" (I am assuming they mean because I didn't completely replace the 1950's walls and trim).
Anyway, here's a "Before" and "After" of one of the kitchens. Hoping to have renters soon, possibly at a little lower rent than I anticipated considering the comments.
Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
12y
Hi @Account Closed
You have done great job with the remodel. One thing I do is if the rooms are small is advertise a small 3 bedroom place as 2 bedroom unit, so when someone comes to look at it, they are pleasantly surprised with the extra room. When you advertise a small 3 bedroom unit, people who come to look at it usually have bigger families, but if you advertise it as a 2 bedroom, families can see themselves growing in the extra space.
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
12y
@Account Closed the pictures of the kitchen look good. I am assuming this is a value add deal? What are your numbers?
Also at 950 square feet, it might be a little small for three bedrooms, but I still think it will get better rents than 2/1 units. Considering that it is older construction, it was quite common for smaller living spaces. What kind of rents are you expecting?
@Anthony Gayden You are correct. This is a value add deal (and my first multi family). I purchased the units at the end of May. There are 9 total, 5 attached 3/1 townhomes (950 sq. ft), and 3 detached 2/1s (950 sq. ft) and 1 detached 3/1 (1250 sq. ft) all on 1 acre of land with a big parking lot.
I had planned on rents of $995 per month for the attached units. I think I may need to drop down to $850 to $875 per month. The detached units should rent for more because they are newer (1980's) and roomier feeling, even though they are about the same size. They will have the same finish out as the attached units. I am planning $1050 to $1150 per month on those.
The location is great and the area is growing. The property is across the street from the newest commuter rail station. I purchased, for a buy and hold investment.
I knew going in that my first round of tenants would be the hardest. The property was owned by a charitable organization that housed needy families who didn't pay rent, or paid very little and received section 8 help.
Unfortunately, the remodel has taken a little longer than I expected but I am sure that with a little patience, I will get them rented.
Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
12y
Rehab looks great but how much did you raise the rent compared to the old rent when it was crappy looking? I'm guessing your issue may be trying to rent a class A/B place in a Class B/C neighborhood and attempting to get a premium for it.
Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
12y
Hi @Account Closed
You have done great job with the remodel. One thing I do is if the rooms are small is advertise a small 3 bedroom place as 2 bedroom unit, so when someone comes to look at it, they are pleasantly surprised with the extra room. When you advertise a small 3 bedroom unit, people who come to look at it usually have bigger families, but if you advertise it as a 2 bedroom, families can see themselves growing in the extra space.
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@Steve B. It's a class B area and a class B place (I would say it started as class C). There are brand new town homes that back up to the property (and more new ones being built a block away) that rent for $1300+ per month. I am not trying to compete with them because of the age of my property. There is nothing for rent in the entire town for less than $1200 per month right now (in MLS... no apartments nearby that compete... only single family homes). Mine are just small, TINY and older! I probably should have replaced all of the sheetrock and trim to get rid of the 1950's look. But at this point, I am just going to try to get some income coming in and maybe freshen up a little more as I get turnover. The rent was $0 when it was crappy looking.... see above, the complex was owned by a charitable organization. They took very good care of their tenants and the property, just needed some TLC. It does have a bit of a reputation that I have to overcome. A lot of our first phone calls were from people who had family members needing a little assistance. Now they have changed to real potential, job-holding people.
@Sharad M. that's a good idea. I may change the MLS listing to 2/1, especially if I lower the rent to $850. I just worry about fair housing, if I change the ad to 2/1, someone could easily claim that I am trying to discriminate against families.
Investor · Nassau County, NY · Member since 2012 · 56 posts · 13 votes
12y
@Account Closed I think you did a fantastic job, keep up the good work! How much are the comps renting for? Sounds like a great Buy and Hold with the improving neighborhood.
Good luck with the rest of the rehab, I look forward to seeing more photos.
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@John McSherry Thank you. See the post above for comp info. There aren't really any apartments nearby (these aren't really apartments either, but have that "complex" feel). The closest are probably 10 miles away and on the other side of a major highway. This is a historic district with older residences, small shops, restaurants, medical centers and city government offices. It's just starting to develop as a transit oriented area with the light rail train across the street from my property and town homes (for sale, but mostly rented out by the owners) going in.
There is some acreage for sale on the other side of the train station. My guess is that it will eventually be developed into condos or apartments like most all of the rail stations along the line. This line runs between Denton (with the University of North Texas and Texas Women's University) and downtown Dallas.
Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
12y
I see that, we were actually posting simultaneously so I didn't see the rental history of the previous owner before my post. Well you have some good suggestions here, and I think you are on the right track of lowering the rent , if needed, over lowering your tenant requirements.
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@Steve B. I won't lower my tenant requirements! There is a housing shortage in the area. Once the rent is right, I shouldn't have a problem finding good, paying tenants. I just probably started too high... although I will give it another week or so before I lower.
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@Sam L. I will have my property manager handle that. I know one of the people that looked (that actually didn't complain about the size) had two big dogs. Not sure I really want them in 950 sq ft.
Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
12y
Remodel looks great! I've never had any issues with tenants being concerned about wall surface material as long as it's painted and looks nice. I do add crown to all my homes. Usually cost less than $500 and really dresses the rooms up.
Based on the comps and info you've provided I can't imagine what you aren't getting better feedback. Just hang in there and give it time.
If all the units are vacant from the remodel it may be a psychological problem.. People like buying something that other people want. If all the units are vacant it may be sending the subliminal message that there's something wrong with the property.
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@Ed L. you read my mind. I am planning to do a little staging this week to set up one as a model until I have the rest full. I think staging "warms" an otherwise vacant, unwelcoming property. A shower curtain, some towels and some flowers and a cookbook in the kitchen make a huge difference even without furniture.
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
12y
We allow pets at all of our rentals. I have found that to be an amazing asset. Since a lot of places won't allow pets we reach a large market that has been excluded. I also charge either $50 pet fee or one months extra security deposit. I personally have found that if the animals are taken care of they are treated like children but less destructive,
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@Melissa Castaneda the remodel was broken out by units and by tasks within each unit. The kitchen included replacing appliances, cabinets, countertops, and fixtures at a cost around $2500, not including replacing the flooring and the demo, which wasn't broken out by room. I would say around $3500 total for the kitchen. My remodel cost per unit was around $9K, not including exterior work.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
12y
IMO you might be expecting higher rents for the 2 bedroom units than what the market renters will pay. In my area, if I had a 3 bedroom unit for $995 with no takers, I wouldn't expect a 2 bedroom to get more rent in the same neighborhood. Granted, being detached and roomier are benefits, but renters don't seem willing to pay extra for those benefits from what I've seen; your market might be different ...
And if you have to drop below $900 on the 3BR units, it might be worth considering Section 8 if you can get closer to those market rents you see in the MLS. Now, when you are looking at the MLS rents I see you are viewing asking rents; can you see the settled rents to verify they are in line with asking? Are you checking market rents and for rent offerings with sources other than MLS? Because lots of renters will.
You have done great job with the remodel. One thing I do is if the rooms are small is advertise a small 3 bedroom place as 2 bedroom unit, so when someone comes to look at it, they are pleasantly surprised with the extra room. When you advertise a small 3 bedroom unit, people who come to look at it usually have bigger families, but if you advertise it as a 2 bedroom, families can see themselves growing in the extra space.
that's a great suggestion.
i'd personally taken out the one room and make 2 larger rooms. keep your head up, lower the rent and you will find people that love it!!
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
12y
Great to see you reporting on this and the kitchen looks great. what about advertising as a two bedroom plus office? You acknowledge you have that third bedroom but also give a hint at the small size. I don't think discriminating against families is an issue when you do it that way. Not sure it is the other way either but saying 2/1 just seems inaccurate to me. Another issue could be furniture and a narrow staircase. You might say something in the ad to address that. I don't know dimensions of the bedroom or maximum bed size it will accommodate (i.e. , not suitable for king size bed) or mention on scheduling a showing that large furniture would be an issue going up the stairs. I had tenants buy a bed that would not come up the stairs one time and I also got an apartment once because the tenants who rented it could not get the bed up the stairs (good luck for me) so this could be the sticking point. Some people do include the layout in ads but I haven't done that yet.
As for the walls people can get past that but not everyone so in one rental I advertise the property as 70's style bilevel with updated kitchen instead of totally updated. Hopefully weeds out the gotta have new people. If there is paneling or that wallboard with strips it might get noticed less with some curtains and paint which I am sure you have done.
For the bathroom. It always gets me when you advertise a 3/1 and they say we really need that second bathroom, well did you read the ad? Room size I get how you have to see it, even layout but if you need two bathrooms don't waste my time and tell me that when you see the place. Good luck.
Real Estate Broker · Dallas, TX · Member since 2014 · 156 posts · 20 votes
12y
@Steve Babiak yes I can see both the list rents and the actual leased amounts. Very seldom are lease amounts negotiated off of list price in our area.
The 2 bedroom units are actually single family homes, not town homes or apartments. They just happen to be on the same parcel of land.
I guess I may find out that my rents are too high there too when it's time to rent. This is a learning experience for me and luckily I have some room to move down on my rents if I need to.
Investor · Duluth, MN · Member since 2014 · 22 posts · 8 votes
12y
@Account Closed
Don't reduce your rent by too much. I can remember one instance when I had a unit that wasn't renting and I wasn't getting many calls. I reduced the asking price by $10 and my phone starting literally ringing off the hook. I could answer the calls as fast as they were coming in. It is amazing how price sensitive some people can be.
Since this experience I have changed the way I rent units. I start at a relatively high asking price. If the unit is not rented within a week, I make a price reduction of about $20. Repeat until rented.
I tell all potential tenants this so they know that if they do not like the price today, they can check back in a few weeks and see if it is still available. Since I have started doing this my vacancies have been reduced to an average of just a few weeks.
Contractor · Chicago, IL · Member since 2013 · 105 posts · 28 votes
12y
Great job on the remodel!
I think there have been some great suggestions. Between staging a unit, changing the units to a "2 bed w/office" and worst case slowly decrease the rent prices by $10-$20/mo you should see some positive signs.
Also seems like your area is at beginning stages of a market increase. Once those other town homes are built, people wanting to pay less in prices may gravitate to your units instead.
Real Estate Investor · North Brunswick, NJ · Member since 2012 · 85 posts · 8 votes
12y
Can we see more pictures... i would like to see what the issues are and what you think could have fixed it as perhaps new eyes on it may be able to get a creative way to dress things up to make it more appealing?