Does updating a rental property tend to bring a higher caliber of renter?

40 Replies

We have two 4/2.5 SFRs in Murrieta, CA that were built in 1988. They have never been updated so they still have those ugly oak cabinets in the kitchen and bathrooms as well as the old fixtures and plastic shower/tubs in the bathrooms.

The tenants just moved out of one of the properties so we are going to upgrade while we have the chance. I have the time right now to do most of the work myself so we can keep the cost down.

My thoughts: Upgrade with no intention of trying to get more than average rent (they cash flow enough staying right at or just a touch below market). By updating, I'm hoping to receive more applications for an opportunity to pick the best tenants from a larger pool.

Opposing view: We spend time and money for upgrades and still end up with average or below average tenant pool and they end up roughing up the place anyway and undue all the work and money.

We need to be more picky when picking our tenants. That's on me. So, between a more thorough screening process and and updated property it seems like we can stop going through the crappy tenant Blues.

If anyone has opinions I would love to hear. For those that don't know Murrieta, it's in Riverside Co just north of San Diego and east of Orange Co.

I would try to figure out by looking at rental comps if upgrading the property will bring in more rent, and if so, by how much.

Obviously, if you spend 5K upgrading the property and you only get an extra $50-100/mo. then its not worth it.  If you can get more than than then it might be worth it.

Of course, if you have a history of tenants trashing the place then I'm thinking its a C or D property and if so I would do only what is necessary to get it rent ready.

If it is in a nice area upgrading can help give you the edge over other rentals, attract more applicants, and may  increase the rent some if your place doesn't look tired compared to the competition.  If the property will be vacant now and you will upgrade now you may not lose much in vacancy given the time of year if you are attracting families.  I would not go over the top though unless you are in a really nice area. Upgrading for durability may help you as well.   A new granite top vanity in the bathroom won't cost lots and its more durable then formica but it is an eye catcher for some people. Kitchen is a big job, if you have a good layout and solid cabinets just consider new doors, counters, and sink. Low flow fixtures and  updated light fixtures can make people see it as more new. I would match the new look with hardening the property. More durable flooring, fixtures and countertops.  You hope you don't need it but if you do you have picked something that holds up. 

Have you checked Craigslist, Rentlinx, or www.rentometer.com to see what the moderate/high rents are in your area? Do you see properties listed in your area with upgrades, and how much more are they asking? How long have they been listed? 

I have a friend in Temecula, and I recall her saying years ago that Murietta is a more working class area, so if a tenant can afford higher rents, would they go to a better area or pay more for upgrades in yours? I know not to over-improve the SFRs we own in a Class C area, because tenants are more concerned with being in a safer area than in having granite/stainless appliances. If they could afford more, they move to a better area.

Well Randy, I'm a Realtor with Berkshire Hathaway HomeServices and I just ran comps on Leased properties through the MLS with the specifications you mentioned "4/2.5 SFRs in Murrieta, CA that were built in 1988" and the results showed 13 single family homes available for lease and they were priced from $1650-$2299. So you have to make your calculations and then decide if it would be worth spending the money on the upgrade. Good luck buddy.

In my area, and I am not in CA, the rentals on MLS are a small subset of the available pool of rentals. So I'd suggest to be careful looking at only MLS data, since the syndicated sites have a larger pool of prospective comparable rentals than just MLS. 

Upgraded rentals tend to get better tenants who may be willing to stay longer. No tenant wants to live in outdated property, but the question is 'what is the mix of updates vs. cost effectiveness for a rental?' To answer, know your customer. Make your showings into an information gathering session. Ask questions, then just listen and don't talk. They will tell you and answer your question(s).

I know that area very well, I don't think you have any problem of getting good tenants. Start with Craig's list.

I do believe that most tenants take better care of a rental unit if they truly believe that the landlord cares about the quality of the unit and the well being of the tenant. Upgrades, excellent maintenance and just generally being nice go a long way toward making tenants feel respected and comfortable, which in turn often leads to tenants staying longer, taking better care of the house and paying rent on time more often. Of course, just acting like you care about and respect your tenants in order to evoke better behavior usually does not work. It's important to actually care.  We genuinely like all of our tenants, and we care about them as people.

This approach does not work 100% of the time. There will always be a small percentage of tenants that misbehave. These can usually be filtered out through proper screening.

Hi Randy,

In my opinion, better properties tend to attract more renters you would want to have.  If your place looks crappy, then don't expect your renters to maintain the property.  

This loosely relates to the broken windows theory, which can be applied to many different domains, including real estate.  Imagine if you were showing your property to potential tenants and there was trash scattered all about the place.  This is an exaggerated example, but these potential tenants would probably think you, the landlord, just don't care how they maintain it.  

By doing some remodeling work, you are going to attract more tenants who actually care about certain higher-end items in a home including granite countertops, soft-close cabinet drawers, new appliances, new fixtures, etc.  If the tenants care about these types of upgrades, then they will maintain it.  

Jay

@Albert Hasson Why do you say that a rent increase of $50-$100 per month is not worth spending $5k on improvements? This amounts to a 12% - 24% ROI, plus the potential for better and happier tenants and an increase in the value of the property. This looks like a pretty good investment to me.

@Ron Averill  I would not spend 5K on new carpet, paint and appliances to get an extra 50-100/mo.

By the time you recoup your investment (4-8yrs), it would be time for new carpet, paint, appliances, etc.

The nicer the home is the higher the demand.

More demand = more tenants for you to select from.

It is going to be easier to pick out a good on if you have 10 choices vs 2 choices.

Rental comps on the mls??? I thought craigslist is the market?

Frank

I have mainly SFRs in tougher neighborhoods, C and D class hoods.  However, they're mostly in better streets and are generally attractive or desirable in some special way.  E.g. All brick, some hardwood floors or other charm about them.  I also section 8 some of them, if I can find the right sec 8 tenants.   

I take a lot of grief from other landlords because I fix them up nicely and spend more than they would.  Not crazy nice with granite, and I don't supply ANY appliances, but nice enough that I'd be good living in them (though not the neighborhoods).  For instance... No cheap carpet, three tone paint jobs (ceilings, walls and trim) and sometimes with accent walls, new light fixtures, new ceramic tile tub and surrounds and floors when it's time to replace existing carpet or linoleum.  I also put a nice, hard wired alarm into every unit as I like them between tenants and its a selling point. I've recently started painting the unfinished basement floors as it makes the basements look so clean.  

Folks fall over themselves to rent these places and I have the pick of many decent tenants (section 8 and otherwise).  They also stay for long periods, usually 3+ years each.  

As @Colleen F.  Mentioned... A lot of what I do simultaneously hardens the rental too, so it's a dual benefit.  For instance, tearing out an ugly fiberglass tub and surround and replacing with an iron tub and tile surround guarantees I'll have years of low maintenance on those.  Ditto with putting down ceramic tile floor, it's nearly impossible to destroy and easy enough to fix if a piece is destroyed.  

My goal is drama free, maintenance free land lording with tenants who feel lucky to be in the house they're in.  So far, so good.   :)

E.g. Here's a new tile floor that I put down in a section 8 rental.  It covers the ENTIRE first floor of an on-slab house (living room, kitchen, half bath, utility room and closet).  It replaced old linoleum and carpet that was shot.  And sure it cost more, but I won't be replacing it every three to five years, so there's that.  

Happy landlording!

Best,

 - Chuck

Thanks to everyone for taking the time to reply. Much appreciated.

The topic got a bit sidetracked. I'm NOT looking to get higher rent. It flows fine.

I want BETTER tenants.

I did get some good input from some answers (I'm using my app on my iPhone so I can't remember everyone's name to say thanks).

I'm not worried about recouping the cost of the work being done. It will have to be done at some point and since I can do 95% of it it will never be less expensive than now. I find great deals on things that look good but are less expensive and buy nice stuff at cheap prices on Craigslist (we're surrounded by San Diego, Orange Co and Los Angeles. Lots of stuff for sale).

@Aly L Many people in Temecula talk crap about Murrieta... I think they are insecure because Murrieta is a much better managed city with hardly any traffic congestion and has out classed them on so many levels. :) Murrieta just doesn't have the name or the fame.

Thanks again for the posts!

Thanks @James Wise , that's what I was talking about - whether it's true or not (I think true. It seems logical), you got what I was asking. I think I need to ask questions that are a little less convoluted. :)

Better rental = better tenants.

However, that all depends on how well you screen them.

And, you cannot improve a whole neighborhood/area just by improving the inside of your rental.  If your house is in a D area, it will still be a D area even if you spend lots of dollars to improve it.

There is also a line where every dollar you spend makes no more dollars in return.

@Dawn Anastasi I'm not sure how to rate A-D... It's a pretty nice area. We get the Orange County and San Diego families who can't afford a 4/3 SFR with a back yard in those areas. But, there are also people who upgrade from other near by areas that are less than ideal and bring some of those less than ideal habits with them. But, it's a rather low number I would think. Anyone here what Murrieta would be rated at?

Originally posted by @Randy B. :

We have two 4/2.5 SFRs in Murrieta, CA that were built in 1988. They have never been updated so they still have those ugly oak cabinets in the kitchen and bathrooms as well as the old fixtures and plastic shower/tubs in the bathrooms.

The tenants just moved out of one of the properties so we are going to upgrade while we have the chance. I have the time right now to do most of the work myself so we can keep the cost down.

My thoughts: Upgrade with no intention of trying to get more than average rent (they cash flow enough staying right at or just a touch below market). By updating, I'm hoping to receive more applications for an opportunity to pick the best tenants from a larger pool.

Opposing view: We spend time and money for upgrades and still end up with average or below average tenant pool and they end up roughing up the place anyway and undue all the work and money.

We need to be more picky when picking our tenants. That's on me. So, between a more thorough screening process and and updated property it seems like we can stop going through the crappy tenant Blues.

If anyone has opinions I would love to hear. For those that don't know Murrieta, it's in Riverside Co just north of San Diego and east of Orange Co.

Up our rental to the market, the comparable properties at that rent level or a tad above, the caliber of tenant is more to that rent level, if yours is on the upper end in quality and function then you may snag a tenant in the rent spectrum that appreciates your property more, no guarantee, that also goes to your tenant selection.

If you don't keep up with the market, you'll get the lower "caliber" of tenant who settles for less and they are more prone not to appreciate the unit as much.

So long as you aren't a slumlord, the market drives the quality expected at the rent level expected. :) 

I think SAFE, CLEAN & AFFORDABLE trumps UPDATED & TRENDY. We rent B & C properties. Most have old style kitchen cabinets, laminate countertops, white appliances. Some even have gold metal light fixtures! When we replace something, we do so with durability in mind first and foremost. That's why we're slowly changing tub surrounds to tile and flooring to luxury vinyl plank and luxury vinyl tile, as well as removing carpet and refinishing hard wood floors. Also, exterior door knobs are slowly being changed from bright brass to brushed nickel..because they weather better.

We only put stainless steel appliances in one of our rental houses and our first tenant (who is still there) said she wishes they were white! Our most recent lease up (a unit in a 1976 duplex) was attractive to the tenant because she said "I like it because it's not modern and it has unique character!" The red brick fireplace surrounds and exterior brick work, some wheat color and some red, will remain unpainted because it is less maintenance. However, we do seal exterior brick.

If we keep our properties clean and well maintained, do periodic inspections and show pride in what we have to offer, then the tenants seem to also take pride in their home and take care of it.

If something wears out and needs replacement, we will update at that time, but we won't go out of our way to do so. Also, we have three cute vintage rental houses (1920, 1941, 1950) and we updated for safety, but choose design that is in character with the home. 

Our own home was built in 1987 and has the original solid oak cabinets, custom made, in the kitchen and bathrooms. We still love the oak, so I guess we may be stuck in a different era. So are a lot of the people we are renting to! Could this be why we are attracting seniors - who happen to be low impact, low drama, not picky, long term tenants? We're okay with that! We also seem to attract practical younger people who like retro!  Hmmm.... maybe we have a niche there! 

Actually... I do think that updating does attract a bigger pool of prospective tenants to choose from, so it is generally a good idea. Then screen, screen, screen!

@James Wise  - I agree.  The higher quality product you can offer the better chances of a quality tenant wanting the place.

@Chuck B.  - We do the same thing here in Chicago.  We put out a quality product that tenants want to live in,  both market and section 8 tenants.  We have looked through years of our data and have found that the properties that we have upgraded have both less turnover and less maintenance calls.  On avg we get about an extra year of occupancy for updated properties vs dated.  

@Eddie T.   It's a DSC.   I have a long time alarm contractor hardwire them (lots of batteries are a pain).   Basic system with a couple of door sensors, couple of motion, inside and outside siren and the upgraded digital keypad with readout costs me 800-900 installed.  I use the same alarm in my house as we do in the rentals.   

I would say more tenants to screen because you have an attractive property is a good thing.  Hitting a balance between I care and I am updated and I am over the top for the area is important. I have older properties and there is something to be said for updating them in line with the house style.    I also don't like to over improve because that tends to attract those tenants who want everything new and properties built that long ago are not never going to be perfect.     

We do a lot of craigslist and habitat sourcing for our update materials and I can't say enough about picking up display cabinet sets for affordable updates and second hand corian has given some nice islands and countertops. Good luck with your plan.

@Randy B.  I feel the biggest determining factors when it comes to the quality of tenants you attract is your screening process and the property's location. 

Yes, new stuff will attract more people and possibly more quality tenants. Assume for the worst and hope for the best is the right mindset to have when picking out upgrades. Assume they're going to trash it & make your decision from that.

As for the upgrades you mentioned,  I feel the cabinets should stay, maybe refinish or paint them & add some new hardware. Replacing outdated fixtures &  plastic tubs are worth every penny in my mind so long as you don't go above and beyond. 

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