Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
Hi BP!
I am turning my former primary into a rental. I have rented out the spare bedrooms since I purchased it in 2016.
There's a lot I hoped to do before the tenants moved in on the 5th, but some of the projects we started took longer to complete than we expected. These are small things like paint a room, stain a deck/fence, and pull some carpet under which we know is good-quality hardwood.
I'm hoping the new tenants won't care, but if they do want this work done, I'm ok with letting them do it and taking a small amount off the rent because I'd like these things done anyways. Or should I just tell them that these are unnecessary cosmetic changes that they can choose to make at their own cost?
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
7y
Hi @Nicole Heasley Beitenman. When I've been in this position in the past, I've marketed the home as a lease-purchase with an attractive Decorator Allowance (say $3-5K) that the resident will only get once they are qualified and ready to purchase the house, sometime down the road.
Great tenants do want an attractive home, but they are often willing to overlook cosmetic concerns if they are given both the opportunity to purchase and the promise of a big check to make things pretty once they buy!
For you, it means not only do you get a better-quality tenant, but you also never have to come out of pocket for the repairs, since you only cut the check on the same day you get paid at closing for the sale. In fact, we've issued the Decorator Allowance right on the HUD-1 payable to the tenant/buyer at closing.
I am turning my former primary into a rental. I have rented out the spare bedrooms since I purchased it in 2016.
There's a lot I hoped to do before the tenants moved in on the 5th, but some of the projects we started took longer to complete than we expected. These are small things like paint a room, stain a deck/fence, and pull some carpet under which we know is good-quality hardwood.
I'm hoping the new tenants won't care, but if they do want this work done, I'm ok with letting them do it and taking a small amount off the rent because I'd like these things done anyways. Or should I just tell them that these are unnecessary cosmetic changes that they can choose to make at their own cost?
Never trade discounts for work done with your tenants. Never a good idea.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Nicole Heasley Beitenman Having tenants do maintenance on a property for a decrease in the rent never works out the way you think and almost always turns into a nightmare. I would highly advise against it.
Did you tell the tenant that the work you described would be done prior to move in? If so, find a way to get the work done by hiring it out if you don’t have the time, if not just let them rent the apartment in the condition the place was in at their showing and let it play out from there.
Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
7y
If you want to go into landlording half-assed then by all means have a tenant do work. If you want to be professional and have your tenant treat you professionally then present them with a move in home/unit.
Do not mix the two.... even if the tenant is a licensed and bonded contractor. Period.
Remember..,, even contractors can rip you off. He asks for a break of $800 off the rent when his cost for materials is only $100 (Anyone can come up with a receipt for $350), and he tells you his labor costs are normally $30/hr.... how do you know?
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
I’d be lying if I said I didn’t try this for some little jobs around the buildings that I didn’t have time to do . In my experience I concur with James wise . It’s a lousy strategy for cheap labor . The tenants are not only lazy but when they finally get around to it you can count on it being done poorly and haphazardly. Although tempting, it’s just not worth the trouble to allow them to do anything . Pay a contractor or handyman if your tight on your time plus you’ll get a break on taxes this way
Investor · Columbus, OH · Member since 2015 · 61 posts · 29 votes
7y
@Nicole Heasley
Yes my first property needed painted and minor things fixed before moving in, the tenants made a suggestion, that they can fix and finish everything if I go down on their deposit! Which worked out great and plus they used my maintenance man for the job! Only cost was the materials!
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
7y
@Nicole Heasley
I let one of my tenants do work and take it off the rent. He does great work and it’s less of a hassle for me. I hire him for other handyman work on other rentals. I guess I’m in the minority on this. I’m all about ease and less hassle, and it’s worked just fine for me for years.
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
7y
@Patrick M. Oh no, this isn't my first rental. It's my 3rd (kind of my 1st in the sense that it's where I started landlording and lived in it with my tenants, but it's now my 3rd pure investment property. It is move-in ready. None of the work that needs done prevents the tenant from living comfortably. These are minor cosmetic details.
Thanks for the input, everyone! I am probably picking at things the tenants won't care about. I'll leave it be unless the tenants complain.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@Nicole Heasley Beitenman if you do have a tenant do work, don't do it as a trade. As you know the IRS does not like it when people trade services. You should realize his full rental income and pay him separately based on an invoice. There is two reasons for this:
1. You want to clearly track that he is being paid for work done. This eliminates disputes later. The invoice should clearly describe scope of work.
2. He needs to report his income to the IRS. If his income is high enough, you need to report it to the IRS under 1099.
Rental Property Investor · WA · Member since 2019 · 60 posts · 15 votes
7y
In most cases this cheap labor strategy leads to poor results and spoiled relationships. Even though your tenants are interested in a good looking housing, they are not professionals who make a living doing it. Better to find a contractor and spend more in the beginning but free yourself from worries and costs of redoing the repairing in the future.
I've had one tenant do some work (insulate the floor). They complained the floors were cold and asked if they could insulate it. It was a simple project, so i said yes, but gave them a deadline. Once it was done AND I inspected it, I paid them for the work. I didn't deduct it from the rent.