I recently purchased a property in Portland, OR which was relatively cheap for the area. The plan is to build value by having it be a rental for a few years while we are out of the state but to move there in the next several years. We quickly got renters in but are nearing the end of a full redesign plan with a local design company. Does anybody have experience approaching renters about possibility of doing remodeling while they occupy the unit? Any advice on what we might consider?
It is tough; try to approach it reasonably with them, but if you are planning to move in shortly after the renovations are complete they may be less agreeable to staying in the unit while being rehabbed. You might offer them a discount or even offer to put them up in a short term rental while critical rehab takes place. Worst case scenario is getting new tenants, which you said you were able to find relatively quickly.
I think just being open and honest and seeing what the tenants think is a good first step. Aaron’s suggestion if offering an incentive is a great idea.
You may want to double check with a property manager about this next part: if they move out because you’re doing upgrades are you required to pay them Portland’s tenant moving fee? I don’t know, but that can be hefty, so I’d want the answer before approaching the tenant.
Let us know what happens...and nicely done on getting a good property for a deal here!!
Ugh thats a tuff one. I have lived through renovations and they suck!! especially if you are doing any sheetrock work. That dust gets into every nook and cranny. I would suggest seeing if you could put them up in extended stay or something like executive housing if you could get all the work done in a month or so. Or give them notice to move, do your remodel and lease to someone else. I would imagine that you could significantly raise the rent after remodeling.
major renovations are not something I would want to do with a tenant in place, unless they were absolutely necessary. why are you doing them now though? will you get higher rent, or is it just for you to enjoy when you move in. if it is only for your enjoyment, why not wait until you are ready to move in. the renters will just put massive wear and tear on your brand new renovations anyway.
Thanks for the tips! Mathew, I had no idea about the tenant moving fee, so thanks for bringing that to my attention! I'd like to keep the renters there if possible...I actually don't rent them the basement (officially though we allow them to use it for laundry and storage) and I did let them know when the rented the place that we would be doing work down there while they occupied the unit. They were fine with that. Trouble is that we discovered that to do what we want in the basement, we have to rework the stairs to the top floor - where two of the bedrooms are - which is why I'm really at a loss for whether we should wait till the lease ends...still 14 months away, or try to bargain with them about a solution.
Tenants are entitled to " the quiet enjoyment " of the property they are renting .
I wouldnt allow it if I were renting
I wouldn't attempt a rehab while tenants occupy. I've done this before, and it usually sucks the life out of me.
1. Nice tenants can turn grumpy and hostile pretty quickly when their life is significantly disrupted, dust is all over their clothes and furniture, and constructions guys are walking around their house with muddy shoes.
2. Even if you plan super well, unexpected conditions or events will always arise through construction. Once you tear stuff up and tell the tenants they only have to experience arise week of discomfort, you're on the hook if the carpenter gets the fu for a week, unexpected conditions arise, material gets backordered, etc.
The most I'd do is things that can be started and finished in a day (windows, granite countertops, replacing light fixtures). Just my two cents. Risk vs reward is not there.
Wait till the end of the lease and put them out before you do the reno.
14 months is a unusually long lease. If you were planning reno work you should have had them on a M2M from the beginning.
Have you ever lived through any renovation work? It's rough. And from a liability standpoint I would not want to do it.
If you value your sanity, do NOT do any renovations with a tenant in place. It's a NIGHTMARE!
@Aaron Hollingshead This is very tough to do execute. I would recommend only doing the items that will not impact their day to day and/or can be done quickly. For instance, replacing windows, replacing appliances, HVAC swap out, etc.
That would be a terrible idea. Have you ever lived through a large renovation? It's dirty, noisy and makes parts of the house unlivable. You had the choice when you bought it to either leave it vacant and do your renovations or put a tenant in there. Now there's a tenant in there you need to wait. We only do emergency renovations with tenants in place, like if we have to replace plumbing under a slab. If it isn't broken, then wait.
I looked up those Portland fees for removing tenants, crazy. Any termination of occupancy without cause (even on an expired lease or month to month tenancy) or increase of rent of more than 10% and you have to pay the tenant between $2,900 (studio) and $4,500 (3 bedroom) for "relocation costs". I'd stay well clear of super liberal cities when investing.
I'd avoid doing anything that could jeopardize safety in any area that the tenants occupy/use (you may also want to check with your insurance company about what's covered if someone gets hurt during renovations). And @Andrew Boettcher is right; anything you renovate with tenants in place will look worn by the time they move out. I learned this the hard way by buying inherited tenants all new stainless appliances in 2016. When they moved out in 2017, those appliances had taken a beating.
Another unit desperately needs a new shower surround, since someone had tiled on top of drywall. They also need a new shower valve. To do this work would take 3-4 days so unless I put them up in a hotel or they go on vacation, I can't do it. The last time they went on vacation for 4 days, I did a complete kitchen remodel (flooring, cabinets, countertops, paint, etc.).
Whatever you may save in $$$ by trying to renovate with tenants in place could bite you in the rear in terms of stress, frustration and, possibly, $$$ if they decide to move out.
@Aaron Hollingshead , I do live-in flips, and I get into the middle of the reno - knowing that I'm going to be making $100,000+ on the sale, and I still hate that middle part.
You will regret this decision if you choose to start renovating during a tenancy.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing