BPers! Quick question when you purchase a multi-unit property and you see the property needs some obvious repairs (ie. purple carpet) yet the units are occupied, do you incorporate any repairs into your analysis up front even though you can't do anything until they move out? (goal aiming at getting more CF)
@Chris Zeh I would.... just because they are living in the building and in those units doesn’t mean they wont move out at some point and you will need to renovate them.
If there are already tenants then that probably means they are fine with the current color of the carpet. When we have inherited tenants we just do repairs as reasonable request come in... then if we want to increase rent or the unit becomes vacant we do repairs/upgrades. Good luck! Post pics of the purple carpet!
We bought a multi-plex that has a unit with avocado green counter tops! Never had trouble renting it. One tenant's daughter even encouraged her mom to pick that apartment over the one with white counter tops because the green ones were "retro cool".
Once the carpet wears out, you can choose a different color. Who said you can't do anything until a tenant moves out? We've upgraded features many times while tenants were in place. Hope for a good long-term tenancy.
Now if there's a real deficiency with the property, then factor that in and ask for a concession on the price.
As leases come up for renewal, I offer to do something for the tenant based on the overall condition of the rental. As all of my tenants are inherited tenants that have been with the properties for a long time (some over 10 years), I provide something along the lines of painting, carpet cleaning, general repairs, even if it is something they should be responsible for. What ever it is, it will be less than $500. I have found this does several things that benefits me:
1. the tenant knows I care about the property and when it looks a little nicer, they care a little more too.
2. The cost of the repair is insignificant compared to turning the unit over
3. Allows me to bring rents up closer to market rent with no complaints from the tenants (they feel like they are getting something for the money)
4. Allows me to spread the cost of the upgrades/repairs out over time AND reduces the overall turnover cost when that comes because items have been repaired along the way vs. allowed to deteriorate to the point of larger more costly repairs.
5. And lastly, it provides me with a better baseline on establishing move in vs. move out conditions. As I mentioned all are long term tenants, shortest is 3 years, longest is 13 years in the 6 units we have. All were purchased as distressed properties, which was reflected in the purchase price. That said, 5 of the 6 do not have move in reports. I have taken pictures of all the units when I took possession, but there are some issues that have obviously been there a while, so based on the lack of proof, I would probably eat those costs anyway. As they are renewed and these repairs take place, it provides me a known condition and if this area gets messed up, it will be a precedence for other areas as well.
Overall, this has worked well for me and pays for itself in the long run.
We avoid carpet as much as possible. Rather use hardwood, ceramic, or our new favorite, vinyl, wood-looking solid plank flooring. It by far outlasts carpeting, easier to care for/clean/repair. Let the tenants put down their own area rugs if they wish (and take their dirt with them when they vacate). Found that many tenants have some sort of allergies and they are pleased there is no carpeting to aggravate those types of problems. Good luck.
@Bryan Petrinec My philosophy exactly!
If there's something you would like to change in the unit ... I'd say first ask the tenant. They may be fine with it.. or they may welcome the change. I have done some simple upgrades that literally can be done in one day. Schedule a day that you want to change out the carpet, ask them to take out all fragile or sentimental items prior to work, have a crew of 2-3 people move the furniture into another room. tear up the existing carpet, unroll and cut the new stuff, put the furniture back, you'll be done before sundown!
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing