Tenant asked for upgrade

13 Replies

Last January I purchased a triplex. At that time one unit was vacant, so we remodeled it before filling it. New plaster,  new kitchen & bathroom, all new flooring. Fairly extensive rehab.  This month I had another unit come vacant, so we did virtually the same thing to it. Today I was at the property dropping off some materials, and the tenant in the unit we have done little improvement to approached me. He asked if there was anyway we would consider removing the wall paneling and installing drywall/plaster as we have in the other units. He offered to pay partially for it, although I doubt he realizes what the cost of the upgrade would be.  He said he would be willing to vacation while the work was done. His rent is currently at $625, I think market rate is $775. I bumped him up $25 last summer and was planning on doing the same this year. My thoughts are I was planning on doing the upgrades once he moved out anyway, and if I could get him to cover some of the cost, it may be worth doing now.  Or on the other hand, I could say no and bump the rent anyways. But in the case he would get mad and move out, I could get my rent up to market rate immediately after the rehab. What are your thoughts, what would you do?

Why not tell him you'll do it if he signs a year lease at market rate to reflect the new condition of the unit.

Agree - tell him you will do it if he goes on vacation and up his rent. I would not have him pay for it, just increase the rent. You were going to do it anyway, why not do it now.

Originally posted by @Austin Smith :

Last January I purchased a triplex. At that time one unit was vacant, so we remodeled it before filling it. New plaster,  new kitchen & bathroom, all new flooring. Fairly extensive rehab.  This month I had another unit come vacant, so we did virtually the same thing to it. Today I was at the property dropping off some materials, and the tenant in the unit we have done little improvement to approached me. He asked if there was anyway we would consider removing the wall paneling and installing drywall/plaster as we have in the other units. He offered to pay partially for it, although I doubt he realizes what the cost of the upgrade would be.  He said he would be willing to vacation while the work was done. His rent is currently at $625, I think market rate is $775. I bumped him up $25 last summer and was planning on doing the same this year. My thoughts are I was planning on doing the upgrades once he moved out anyway, and if I could get him to cover some of the cost, it may be worth doing now.  Or on the other hand, I could say no and bump the rent anyways. But in the case he would get mad and move out, I could get my rent up to market rate immediately after the rehab. What are your thoughts, what would you do?

 I have a simple policy. I will not do any upgrades. Period.  What you see when you are being shown the place is what you will get, and that's what you will have to live with. If you want upgrades, go get yourself home and you can upgrade the hell out of it.  Only time something will be replaced is, if it breaks.. 

When some tenants come to see the place they think its their home.. No its not.. Its mine. You are just renting it. 

@Austin Smith How long has he been there and what kind of tenant has he been? If he's been a good tenant and always pays the rent on time, you might as well work with him since you're planning on doing the upgrade anways? Why not do what you are already planning to do and look like a hero? Plus, it would be to your benefit. If you wait until he moves out, you're going to lose time getting it rented again while you do the work. This looks like a win/win to me.

I do not do upgrades for existing tenants unless they agree to a rent increase to go along with the upgrade. I usually will give a rent increase number high enough to discourage them from wanting any upgrade. It is irrelevant how good of a tenant they are since they are already a paying tenant.

You have a advantage in regards to the tenant being willing to vacate and you are planning to upgrade anyway. I would only agree to his request if he is willing to raise his rent to $775 after the reno. If he says no then jack his rent to $675 anyway and maybe he will decide to leave....That would be your best win/win senerio.

@Austin Smith Yikes! Once I hear tenants or even potential tenants asking for upgrades, it's a bad sign...in my experience. Sure, they're only asking for one thing now. But how about down the road? When does it end? Some do ask to see what they can get and how much they can get. I'd rather hold out for more low maintenance tenants who pay rent on time and are happy with a fair deal. That's just me. Good luck! 

@austin smith, if you have the budget and cash flow do it and let him know you’ll be raising the rents a bit. If you don’t, wait until he leaves to renovate. Doing it with him there could also be a liability, something to consider.

I have done upgrades/repairs when a tenant is on vacation. I don't do it on request but rather because I was going to do it anyway. If you were going todo it anyway on move out consider it. Is this someone who is going to stay? do you want them to stay? do they keep the place in good order? Can you do it in a week? I would do it and raise rent in line with the improvement if the answer to those questions is yes. Usually though I am the one bringing up a repair.

If he's a good long term tenant I'd do the repairs with the understanding that the rent will increase and possibly request that he sign a new 2 year lease.

I agree with doing the Reno if it's in your budget & he agrees to a $775 12 month or $750 24 month. Vacancy kills cash flow.

Remember, this is a people business as well as real estate.

Originally posted by @Mike D'Arrigo :

@Austin Smith How long has he been there and what kind of tenant has he been? If he's been a good tenant and always pays the rent on time, you might as well work with him since you're planning on doing the upgrade anways? Why not do what you are already planning to do and look like a hero? Plus, it would be to your benefit. If you wait until he moves out, you're going to lose time getting it rented again while you do the work. This looks like a win/win to me.

 He's been here about 4 years, I'd consider him a pretty good tenant. No major issues, always pays on time. 

Are you renting the other units at market? If he'd be willing to move to market rent, and leave while you do it, it might be worth doing. It really just depends on what your gut is telling you. I would think that it would be a TON of extra work trying to work around his stuff and redo all of the walls. Would he be willing to move everything to the center of each room and cover it all in plastic? I think it would also depend on how much stuff he has. Some of my apartments are pretty loaded. I can't imagine having to plaster and paint around it all, even if it was in the middle of the room.

personally, I would tell him that you dont perform major upgrades in tenant occupied units, but you will gladly allow him to sign a new lease in one of the vacant units when rehabs are complete.

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