Bought a triplex for $179k in May 2017 with 3 inherited tenants who paid monthly and were pleasant. Mortgage + insurance is $1100. Gross Income has been $2,075.
Now I suddenly have two units vacant. Unit C is a one bedroom that took <$1k to get ready for a new tenant. This unit will now rent for $700 (was $500)
Unit B is a 2 bedroom townhouse that was a mess. I spent $2200 to rip up carpet/ install wood laminate downstairs; $1200 to entire unit painted/rwalls epaired; $60 for upstairs carpet cleaning. It still needs a scrub down + a garage door repair. Unit B will rent for $950 unfurnished, $1,800+ furnished (was $750).
My concern is that I over-spent to update unit B. I put in the wood laminate downstairs before shampooing the carpet upstairs. $60 shampoo today and the carpet looks brand new. I’m now beating myself up for spending $2200 on new floors when I could have shampoo’d all the carpet for <$100. What do you think? How much do you generally spend to prep a unit between tenants?
@Ericka Grant Short answer, I have no clue if you overspent :) Longer answer, I’ve told my PM that I never want to buy non-bedroom carpet ever again. And I don’t really want to buy bedroom carpet. Shampooing is great but I’ll have her install vinyl plank (waterproof) flooring or tile instead of replacing carpet.
So, in your situation, I might just think “bummer, I replaced the carpet too early.” But I wouldn’t kick myself over it too harshly. Now if you (or your tenant base) love carpet, who knows.
@Ericka Grant - It sounds like you just purchased this property. Spending $2,200 on wood laminate floors is by no means a waste of money. Laminate is typically cheaper and more durable than hardwood and much easier to clean and maintain than carpet.
Assuming you will hold onto this for awhile, I can't image that $2,200 is going to destroy you financially. Going forward, I'd recommend not spending $2,200 in between tenants. A deep clean, fixing any minor items, and maybe a fresh layer of paint usually does the trick. Check with your lease and local laws, but this should be able to be taken out of the lease if the tenants are in fact the ones that caused these problems.
Don't get too down on yourself though! $2,200 might set you back a little bit, but you will recover it.
No. Upgrading makes your unit competitive and attracts better tenants. Tenants do not like carpet in the living area...in my market...and happy tenants stay longer.
@Andrew Johnson @Craig Curelop @Marian Smith Thanks for your input and reassurance. I will try to let it go...hate feeling like I made the rookie mistake of over-improving, but will just need to shake it off. Place looks better and hopefully will fill quickly so I can start recouping what I put in.
Tenant in unit B was inherited and a relative of the former owner so he had neither a lease nor a deposit. He is a decent person though and did write me a promissory note for $950 when he moved out and he paid $100 towards the mess he left last week...we’ll see if I see any more from him.
Without knowing many more details, I’m pretty sure you did not over spend. Sounds like the unit needed the new floors and new paint and you just bought this property.
$950 unfurnished, $1800 furnished? I'd be buying some used but nice furniture for a few thousand $$ and increasing my monthly rent by $850 if that is true! furniture would be paid for in a few months and the increased rent seems like it would be worth it.
@Kyle M. Bought the property in May 2017...
What other info should I be sharing/considering to evaluate if I over-improved?
@Brian Pulaski good point...we will likely go the furnished route as it not only is more profitable but also attracts a much better quality tenant. I’m just already self-managing 4 of our furnished rentals + 4 “regular” non furnished units + a demanding full time job and family, so the idea of taking on another furnished unit is a daunting. The work required in the first few weeks/months of setting up is hellish.
BUT so far all signs point to that being the better route, so I may just have to suck it up and make it work.
Think you did fine.... I would have done vinyl plank over laminate due to the water resistance and better long term durability but....... did you upgrade a little early?.... maybe.... but the $$ you invested up front will likely pay for itself pretty quick. Carpet in rentals has to go....sooner or later.....
To me over upgrading is stuff like granite counter tops....fancy cabinets.... fancy tile..... stuff that doesn't get good bang for the buck..... flooring is a "need"....not a "want".....carpet is a disposable commodity that has a lifespan no matter what....
If I'm reading right, you're at about a 20% COC. Nothing unimpressive about that!
I wouldn't worry about the floor. It's probably something that you would have had to replace within 1-3 years, or atleast until the next turnover, so you just addressed it early and spared the trouble down the road. In the grand scheme of things it's small potatoes.
It's also something that isn't worth your effort to worry about now. Take that energy and use it to find another great deal or use it to keep being such an awesome person / mom / wife. Congrats.
Ned Jackson @Alex Huang
Thanks for the input and encouragement - I wanted to do the vinyl flooring as we have that in another property and I love it, but my handyman pushed for the laminate as it is easier to install...Prob need to find a new handyman :)
What’s done is done so I will stop beating myself up and just roll with it. Really good lesson to always try a good cleaning before ripping up carpet, though, if you’re not dealing in super high end rentals.
I agree with @Andrew Johnson about the carpeting. Unless it is a flip/sale, we NEVER install carpeting as a renovation in a rental, unless, of course, we are managing for an owner and they insist on it. Tenants love the 'hypo-allergenic' flooring--usually solid vinyl planking, although a good quality laminate, properly installed with underlayment/moisture barrier works nicely. Easy to clean, easy to repair, and tenants take their area rugs (and dirt) with them when they leave.
Suggestion: when you are doing kitchens and baths, try comparing ceramic tiles over vinyl planks. And never put laminate in wet areas, or areas that tenants will try wet mopping--it just doesn't work out well (read pucker up at the seams).
Strangely, I have found different results regarding furnished/unfurnished; maybe your area is more transient or differing situation, but in our area, we want a tenant that has furniture and moves in and feels like it's their home. Other benefits: harder for them to pick up and move in middle of night; no questions about 'that stain on the sofa was in when we moved in': no 'accidental theft' of your property when they do vacate, etc.
Oh, one other small but significant and potentially costly item, especially in a multi unit building where you supply the furniture: Bedbugs. IF you are supplying the furniture (particularly used furniture), and a bedbug infestation breaks out, you will be (more than likely) on the hook, even if the tenants brought them in. Most courts would side with the tenant--it's owner's furniture, therefore owner's responsibility. Eradication of bedbugs is COSTLY, plus you will probably have to lose the furnishings to be safe.
Additionally, in a multi-unit building, you usually will have to treat all the units at the same time. That's a big financial OUCH! that will make you laugh at your concerns over carpet vs laminate replacement. A landlord in NYC just lost a case where the Judge sided with the tenant and awarded a $300,000 (Three Hundred THOUSAND Dollars) judgement tin favor of tenant against the owner for not acting quickly enough to exterminate bedbugs.
BTW, I'd suggest you contract with a licensed pest control person to not only treat your properties/apartments on a regular basis, but also conduct a periodic inspection for ANY type of infestation, especially those pesky bedbugs. Those lil critters are just plain nasty.
Hopes this helps.
gotta spend $ to make $. you may have spent a lot now but you will go months/years with minimal expenses. plus, seems you are asking, and getting, $200/month more in rent. that's awesome!
your margins look good so why are you beating yourself up?
@Marc Winter interesting points. We do have quarterly extermination for our GA properties...but you raise a good point about the potential liabilities of furnished rentals. Hadn’t ever considered the bed bug issue.
Ironically, I had a qualified tenant come forward ready to pay and move in the next day so I decided to rent unfurnished. If this guy doesn’t work out I’ll bite the bullet and go the furnished route. Our furnished tenants are class A so we definitely have fewer issues with them than the traditional route...it’s just a lot more work handling cleaning, linens, utilities, etc. I’m praying this guy works out and stays for a few years.
@Scott W. It’s true that sometimes you have to spend money to make money, but I hate spending $ if I don’t have to. I had no idea what a difference a $46 carpet cleaning would make. Now I know :) The new floors look great and the place had a solid applicant (who moved in yesterday) within 24 hrs of first showing, so it worked out fine,but I’m pretty sure this guy would have taken the place with the carpet too.
Overall, I agree it is best to have vinyl or laminate when needing to replace tho and will eventually phase out all the carpet as needed. I just try to avoid discarding anything while it is still usable. Feeling much better now that I have a tenant in there though
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