Considerations when rehabbing a rental
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
Recently I was reading something that suggested putting in crown molding and finer touches to a rental property. The purpose to attract quality tenants. The idea on the surface sounds good, we all want to attract quality tenants.
I suppose there are upscale rentals that this might make a lot of sense in.
My experience has been that many of these details are not that important to tenants. I'm sure that there are some tenants out there that will treat the rental like it was there home, but I haven't found many of these over the years.
I'm curious about other landlords experiences. Do you provide nice appliances for your rentals? Do you put in crown molding or other finer touches?
I work at providing a nice place at reasonable cost. There are many things that I don't put into rentals.
So what are your experiences? What would you consider when rehabbing a rental property?
I certainly like to ensure that my properties are completely move in ready -- all appliances including washer/dryer, mini-blinds, etc -- as these things are functional differences between my house and others. Tenants like to know that it wont cost them additional time/effort/cost to get settled into my place, which differentiates it from my competitors.
That said, any non-functional upgrades -- like crown molding, upgraded appliances, etc -- are likely to lost on the tenant.
For example, a washer/dryer is going to make my house 10x more attractive than a similar one without WD. But an upgraded WD isn't really going to add any incremental value.
So, if you're considering putting money in, my opinion is to put it into functional items, not purely aesthetic ones like molding...
Just my $.02...
Hi Charles,
The target market I am in is the lower end of the middle class so there are no expectations for crown molding or high end appliances. If there is room in the budget I will do one "extra" thing for the rental to make it different from the others in the area.
I did put in a new dishwasher in one of my rentals. I put in a fancy vanity and sink in the other one because I got a good deal on them.
But my goal is to make the property safe, clean and attractive for my target market at the lowest cost possible for me.
/Stefan
Stefan, That is my target as well. I have found that higher end areas or home are very difficult to cash flow. I know some buy these types of homes for rentals but I know that they must have negative cash flow.
I work at making a rental look good, but I deliberately avoid putting in better quality products. I now have a source for carpet where I pay less than a dollar per square yard.
Hi Charles,
My target market is lower-middle class. I started out by putting the cheapest stuff in my rentals. After time, however, I decided that I would go just a little bit better than the cheapest items. This is because I try to get the most rent I can out of a place. If I can squeeze an extra $50 per month out of a rental by putting in nicer appliances, I will do it. However, even the items that are upgraded a little would not be items that I put in my house. So it's relative to the customer. So over time I've found that if I spend just a little bit more money on the rehab, I can get just a little bit more in rent.
That's interesting. When you look at a little extra I assume that you prefer to add this to kitchen and/or bath areas. Have you experienced higher repair costs?
I certainly like to ensure that my properties are completely move in ready -- all appliances including washer/dryer, mini-blinds, etc -- as these things are functional differences between my house and others. Tenants like to know that it wont cost them additional time/effort/cost to get settled into my place, which differentiates it from my competitors.
That said, any non-functional upgrades -- like crown molding, upgraded appliances, etc -- are likely to lost on the tenant.
For example, a washer/dryer is going to make my house 10x more attractive than a similar one without WD. But an upgraded WD isn't really going to add any incremental value.
So, if you're considering putting money in, my opinion is to put it into functional items, not purely aesthetic ones like molding...
Just my $.02...
"Do you provide nice appliances for your rentals?"
No. I provide good, working, used ones.
"Do you put in crown molding or other finer touches?"
No - but it's usually in there because my houses are circa 1900s..
"What would you consider when rehabbing a rental property?"
Work on ways to make rehab between tenants cheaper and use that as a means to lower your costs of landlording and be able to undercut the local market. Hard floor surfaces that can be cleaned instead of carpet that inevitably needs replacement, painted cabinets instead of replacing laminated ones, commercial grade tile in kitchens, etc...
Of my 2 rental condos in FL, one had already been upgraded prior to my ownership with stainless steel appliances, granite, tile floors. I got the rent I wanted and a tenant in place a week after I advertised it. The other unit has basic appliances and countertops, and took a few weeks longer to rent.
For my Trenton, NJ properties, everything is basic, appliances used but nice, houses freshly painted and clean. No washer/dryer but there are hook ups if the tenant wants to install them at their expense and maintenance. One did. These are single family houses, and the cost of water is a consideration for those tenants.
But clean and fresh really make a difference. That new paint smell is a powerful incentive. My properties got many compliments on how clean they looked/smelled, so I have an idea what my competition is like. Cleanliness trumped upgraded appliances.
That said, any non-functional upgrades -- like crown molding, upgraded appliances, etc -- are likely to lost on the tenant.
For example, a washer/dryer is going to make my house 10x more attractive than a similar one without WD. But an upgraded WD isn't really going to add any incremental value.
So, if you're considering putting money in, my opinion is to put it into functional items, not purely aesthetic ones like molding...
Just my $.02...
J Scott, I see your point in doing this but aren't you also opening up yourself to additional maintenance?
I know several landlords who don't provide any appliances because if they are in the property when the tenant moves in, the landlord is responsible for maintenance on the appliances.
Given the fact that tenants usually (at least in my target market) don't treat the rent-house as their home but rather a place to live, won't they abuse the appliances more then normal hence increasing the operating costs for you as a landlord?
Just curious as to what your experience is...
Sorry for hijacking the thread Charles.
My lease states that the appliances are available for tenant use, but that I'm not responsible for any maintenance should the appliances break.
Now, to be honest, it may be that that argument wouldn't hold up in court (I'm not sure about the specific laws in my state regarding this type of stipulation in a lease). That said, even if I found out that I'd be responsible for the appliances (i.e., the law stated I couldn't weasel out of it), I'd still put them in there, for two reasons:
1. First, I'm not too concerned about a tenant taking me to court in order to get me to fix/replace an appliance that they broke. Most of my tenants wouldn't question whether my lease violated an obscure law like this, and would just deal with it (as they should);
2. If they did decide to take me to court, and if I happened to lose (I'm guessing I wouldn't but again, I don't know the laws specifically), I still think it's financially worth the cost. Worst case, if I was forced to continue maintaining appliances that a tenant continued to break, I wouldn't renew the lease.
I can purchase a set of used appliances for about $1200. I'm likely getting a premium of at least $25-50/month for my property over my competitors (for this reason and a couple others), so the appliances pay for themselves if they last at least a year or two.
Most importantly, many of the flips I do have some leftover appliances from the previous owners, so I can take the appliances from my flips and move them to my rentals at essentially no cost. So, appliances are often free...
Great points J Scott,
I believe TX state law states that if I provide appliances I am liable for repairs if they break.
But I tend to agree with you, most of the time the tenants knows probably less then the landlord about the state law and wouldn't fuss to much if it is in the lease like you mentioned.
There will certainly be state differences. In Washington - refrigerators and stoves come standard with any rental. I provide a washer / dryer hookup, but no the appliances. I don't put in garbage disposers or dishwashers. In most cases I put in good quality used appliances when appliances break down.
I agree a fresh coat of paint can do a lot to make a unit look clean and fresh. I tend to always paint between tenants.
I dont supply appliances at all. Tenants will just tear them up and I will either have to fix it or replace it. If an appliance is left I tell the new tenant to sell it or keep it but it isnt mine. Saves me tons of money and time. But all my units are single family, I may not get away with that with apartments.
I install Sonic Surface laminate wood flooring, its not too expensive, waterproof and easy to install. Plus its very durable.
In my rentals I provide all appliances including washer dryer, window treatments, fresh paint and new carpet (when needed) and laminate flooring. I've installed new stainless appliances in a rental that I rent for $1100 to used appliances that go in my lower rentals ($800/month). I do spend the few extra dollars on crown molding, decent pad/carpet and tile in the bathrooms. I can say that I have great tenants that do appreciate the small " luxuries" and have made comments that they are not leaving anytime soon. I also insure that my properties are energy efficient by insuring that there is sufficient insulation, good windows and good seals around the doors/windows.
I have heard that some states allow you to rent out a SFR without any appliances. I would not be able to rent out any of my units without a refrigerator and stove. They are as basic as heat in my state.
What kind of paint, flooring, wood trim/finishes do people use. My sense so far is that the majority here would say that they look at lower end products or perhaps a little better.
If you use a better paint product for your rentals can you discuss why it might be more profitable or might encourage better tenants.
Are there repairs, rehabs, appliances that you might put in that you believe would either increase the likelihood of better rents, better tenants or perhaps decrease the cost of upkeep?
I have many rentals in the Washington DC market. And these are high end rental homes. We have wood floors, Woodmode cabinets, granite tops, flagstone walks, Au Pair suites, crown molding, very nice appliances, etc. It's a great way to reduce vacancy, attract excellent tenants and charge high rents, atleast in our area. So I would argue that if your rentals are in a nice part of town, in a large metropolitan area (New York, New Jersey, L.A., San Diego) investing in higher end finishes works.
Glad to have at least one landlord like you here. Sounds like you invest in higher end homes. Your market may be quite different than mine. I have never been able to make properties like these pencil without placing a heavy emphasis on appreciation. Often in my area these properties would have negative cash flow or at best break even cash flow.
Do you mind sharing a little more about your higher end rentals and what market you invest in?
I'm in the Washington DC, Maryland and Virginia market. And only in the best areas and best school districts in those areas. Yes, if you don't put a lot of equity (less debt) it is very hard to get to break-even. And you are exactly correct, appreciation is what makes it work. So this model is only good in either high income areas or if you use a lot of equity.
William, the idea of doing this is great. I like to think that it might make a difference, but I my experience tends to say it doesn't work well. Sounds like you have had tenants so far that treat your place well. If it is possible to recoup the costs of higher quality over time or charge more in rents because of the perceived value it might make sense.
I would love to hear more about your experience and how long you have used this approach.
Good topic.
In the three rentals I've rehabbed I took a middle ground approach, leaning more towards durability and functionality than aesthetics.
For example in one home all the carpets were crap, so I put in new laminate hardwood floor in the kitchen, living room and hallways. Price for this is close to carpet and should be a bit more durable. An added benefit is hardwood floors tend to make a room look bigger (in my opinion).
I also do window blinds in all my houses. You can buy cheap ones at lowes/home depot and they install very quickly. It's just another added touch that makes the place look a bit more attractive to a potential tenant but doesn't set me back a whole lot.
Also, a nice two dollar addition for each of my rentals is a "zip it" drain un-clogger. Pick some of these up and give them to each tenant and show them how to use it. Will save you a ton on plumbing headaches.
Sometimes we just paint over paneling walls, but find that the ceilings are so far gone that new drywall gets installed there. Crown molding sometimes makes the transitions look better in this situation (and sometimes joint compound and tape works good enough too).
Otherwise, you have to be in some upscale area to make these amenities a factor.
In the three rentals I've rehabbed I took a middle ground approach, leaning more towards durability and functionality than aesthetics.
For example in one home all the carpets were crap, so I put in new laminate hardwood floor in the kitchen, living room and hallways. Price for this is close to carpet and should be a bit more durable. An added benefit is hardwood floors tend to make a room look bigger (in my opinion).
I also do window blinds in all my houses. You can buy cheap ones at lowes/home depot and they install very quickly. It's just another added touch that makes the place look a bit more attractive to a potential tenant but doesn't set me back a whole lot.
Also, a nice two dollar addition for each of my rentals is a "zip it" drain un-clogger. Pick some of these up and give them to each tenant and show them how to use it. Will save you a ton on plumbing headaches.
I had never heard of the zip it drain un-cloggers. I'll have to check them out. Are they something you find in Lowes or Home Depot?
I like the idea of putting in better materials when there is a chance they might last. I do install new blinds. I learned though to use inexpensive ones.
I had never heard of the zip it drain un-cloggers. I'll have to check them out. Are they something you find in Lowes or Home Depot?
....
I had never heard of the zip it drain un-cloggers. I'll have to check them out. Are they something you find in Lowes or Home Depot?
....
and Lowes
http://www.lowes.com/pd_161219-319-LX-00400_0__?productId=1038705&Ntt=zip+it&pl=1¤tURL=%2Fpl__0__s%3FNtt%3Dzip%2Bit
Great topic.
I picked up two units in the past year and both needed various stages of rehab. My third rental was my first purchase and I lived in it for 3 years. That unit has the improvements I put in when I resided there.
Its pretty standard here in FL to supply a fridge and stove in rentals. I'm not sure if thats the law.
My rentals are geared towards the middle and lower income tenants. One of the units I got with laminate wood floors, new kitchen cabinets and granite countertops. That went under contract the first day it went on the MLS and I was starting to roll the walls. Prospective tenants from the same complex walked in and made an offer on the spot.
Another unit in the same complex with a spectacular lake view but older kitchen was on the market for months. The floors are cheaper tiles and I got a few comments about the kitchen needing to be updated. When I mentioned to my realtor that I was replacing the kitchen counter, it rented that week.
It seems that when I'm targeting middle to lower income families I get a lot of single mothers. Without too much data to back this up, I'm guessing that they put more emphasis on the kitchen and baths so i try to make those areas stand out a bit.
In second bedrooms I usually take out the clothes bar and get one of those rubbermaid wire closet solutions that brings in shelves and double the hanging space. That also seems to be a hit for little money.
I'd like to redo the floor in the last unit with laminate and have been lucky so far with the other two having laminate floors and nobody mopping them and causing the boards to warp and swell. Do you guys who do laminate use the commercial quality or residential and do you get the tenants damaging the floors?
I read on of these threads a few months ago about one landlord who used hardwood and just sanded and repainted when necessary. Anyone else take that approach and care to share their experiences?