Attract tenants by size or by quality?

4 Replies

Hello, So I am doing my first house hack. I am looking at one property that is in pristine condition and move in ready, but it is a 3 bedroom 3 bath 3 unit home with the option to finish the basement. Another property 2 blocks down the road is slightly higher priced but is a 5 bedroom 4 bathroom house with 3 units with much better sq ft. The latter home, while not in awful condition, is in need of some updating and fixing as well as having the possibility of finishing and renting out the basement. I am using the FHA 203k loan and would be able to make the updates. My question is what would be more attractive to tenants and allow me to get higher rents? The first place is in pristine condition but is smaller. The second place may not be as nice as the first but is larger. Both in the same area. Any advice? Nick

I'd first calculate returns on each, including any renovation costs, and the different market rates/demand for different bedroom configurations.  If roughly equal, then think like a tenant -- consider things like parking, heating/AC sources and equivalent cost to heat/cool, noise (eg are the units side by side or above/below, busy roads etc), W/D hookups, how the unit "feels" (a sunny bright open unit will feel bigger than dark one), distance to attractions/bus lines/work/school/whatever.. 

LAST would be quality of trim, for me.  If its way too fancy it might actually be a problem since it would cost more to repair, and even high end tenants do dumb things to expensive finishes. 

Most tenants just want a regular, clean, safe, quiet place at a fair price. 

@nickyreader Thank you so much for that reply. I will get to work running the numbers. That was a very helpful post.

I agree. Start by running the numbers. You can also research your area to see which is in higher demand: large units or nice units. We can't answer that for you because we don't know your market. In my market, the nicer unit would probably be easier to rent. But I still need to consider the return.

@nathan g. Thank you for the great advice. I did the research and it has proven to be quite helpful. Truly appreciate your post.

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