BRRRR - Am I over improving my rentals?

Question

I am wondering if I am over-improving some of my rentals with the BRRRR strategy. Specifically regarding painting cabinets instead of replacing them and putting in shower surround instead of tile.  Normally we have brand new kitchens with quarts countertops and brand new bathrooms with shower tile design. Most deals I borrow 100% of the money for the purchase and rehab since I am always happy to use other peoples money rather than mine so I figured rehab them similar to a flip because many times I end up selling within 5 years for one reason or another.

I recently purchased a house that had a brand new shower surround so I left the bathroom how it was and it rented in 10 days at the same rent I would get if I redid the shower. This made me rethink my rehab process.

Part of the reason I do kitchens and baths so nice other then to get a premium on rent is if I decide to sell in a few years I dont have to spend my own cash updating the kitchens and baths.

Am I adding un-needed work by doing them so nice? I know a new kitchen will help sell a home fast but will a tiled shower as opposed to regular surround?

Jeff Morelock · Answer

Sounds like you may already know the answer. As far as your five year exit strategy, how "new" do kitchens in rental houses look after five years? Maybe doing less now, and then some upgrades when you're ready to sell is something to consider.

David Woz · Answer

My experience had been that improvements like that don’t necessarily get you more per month, but you will experience less vacancy.... assuming it is priced appropriately.

Vacancy is very expensive.

Bryan Blankenship · Answer

@Adam Craig @Jeff Morelock Is right. I make the decision whether or not to upgrade/update things if they're in solid condition based on the neighborhood/asking rent. In desirable areas especially, if the surround is in great shape, why spend the money to replace it? You're going to fare better by letting it rent quickly and getting your cashflow started ASAP.

Keep in mind that houses that get lived in ... well, they get LIVED IN :) If you absolutely must upgrade things to sell it, then when you get to the point of selling it, go ahead and do the upgrades. Doing them beforehand is a gamble. You never know what damages tenants may do, or how the trends may shift over just a few seasons.

Ilidio Cardoso · Answer

I agree with @Jeff Morelock and nicer things doesn't really mean higher rents or if you can get higher it will be like 5-10 % or area.  I started to concentrate more on rentals after 2014 .  Give the tenants the basic.

Adam Craig · Answer

All good stuff -

The property we just purchased that had a bathroom in good condition is rare. Most times its a 40 year old bathroom that requires a gut job. I am just wondering if I have to gut the bathroom should I put in a shower surround and call it a day or put in the tile since its open and I am rehabbing on OPM?

I know improvements can always be debated and is a fine line but I like the idea of less work and same rent :)

BRRRR - Am I over improving my rentals?

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