I'm considering "rehabbing" or improving about 76 units that I own which is a portion of my older portfolio. These properties have been good cashflow properties, but they are more maintenance intensive since they are older. They are about 90% occupied.
I was considering the following:
- Replacing all flooring with vinyl plank except for bedroom (add new carpet when needed)
- Painting all units 2 tone colors
- Replace appliances with new appliances that come with 3-5 year warranty
- Change p traps and plumbing under sinks (Noticing more leaks and stop ups)
- Change all filters (should be doing anyway I know)
- Resurfacing Tubs
I could increase rents on the property but I would only do so for my problem "late or non paying tenants" so the move would be a value add/bulletproof to reduce maintenance.
Anyone have any other strategies or suggestions? Is this over improving or should be done periodically anyways?
The properties are all about 35-50 years old.
Also should I finance these through cashflow of the properties a little at a time, Refinance some existing equity that I have, or go to the bank with the rehab plan and show a higher appraisal resulting in higher rents. My rents are about middle of market for my market (some a bit below)
Thanks for you help
Are you looking to do these repairs while the properties are still currently occupied, or are you waiting until they move? It wasn't quite clear in the question.
Regardless, I think it would be a bit difficult to do some of those items (particularly any flooring type of work and painting), while your tenants are still in place in the unit.
What you may want to do first are the little things that can be done in a day, like, changing out appliances, etc. Any larger projects would probably be better suited when the units are vacant because then you don't have to worry about people alleging something was damaged, missing, etc, while you were in the units.
Anyway, I think it's a good idea to do these type of preventive maintenance repairs because as you stated yourself, the older the property, the more problems (sometimes) that can arise. Many of the property managers that I've begun meeting have a rotational sheet/list of items that are bi-annual/annual/5 year/10 year, etc, of things that need to be maintained so they stay on top of those items before they become problematic. Also, I've seen some rehabbers and buy & hold individuals who say they use the same paint colors, flooring, etc, in all of their flips and buy & holds, as it helps them with ensuring things match and it keeps the process more simplified for them.
Good luck and kudos to you for such a large portfolio. You should feel very proud =)
Thank you for your response.
I was going to do all repairs while the property is being occupied. You are probably right on the flooring and painting. Do you think I should wait until those items go out or should I go ahead and replace them?
In my experience with my tenants, its a slippery slope replacing thing, even when they break. What I mean is if I replace one tenants refrigerator or stove with a new because it legitamitely goes out, others will get jealous and I will have 15 that need to be replaced the next day. Funny how that works.
Maybe just the disadvantage of lower income rentals. Most time you really have to treat a lot of tenants like children. Hope it doesn't sound demeaning just my experience in a short career.
Sorry for the typos...
@Ron Steele - I posted a similar question and stumbled across your thread; see my thread below. The general consensus is to improve the big ticket items (painting, flooring) once the units are vacant. I agree with @Chanté Owens to fix the items on all units that can be completed in one day. Since you're at 90% occupancy, you could start improving the vacant units first and then as turnover occurs (nature of the beast in buy and hold), you can rehab those units. I believe Ken McCelroy uses the same approach when completing rehabs with occupied units. Best of luck!
Thanks @Casey Murray and @Chante Murray.
Do you have any information on this with Ken McElroy. He is my idol in the multifamily industry.
@Ron Steele I would have to agree with you, that most people (not just lower income renters; actually most people in general) tend to have the "What about me?" mentality when they see someone getting something that they feel (in their head), they should be getting as well. Don't get me started on my entitlement rant! LOL.
Anyway, I do agree with Casey that you could buy some time and start by doing the complete overhauls on the apartments that are vacant. Actually, as I type this, I think another buy & hold investor does this same thing, and I think that when he was trying to increase rents, he'd give the current tenants an opportunity to rent the newly refurbished properties (at an increased rent). Essentially he was accomplishing two things in a more immediate time frame: 1)Getting increased rents sooner, and 2)Getting those others to move from their apartments sooner so he could rehab their units.
Not all tenants will go for that, and some may move, but again, you'd be accomplishing your goal because once they vacate you could rehab and then get the increased rents you are looking to obtain.
Great Idea thanks for this...
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