How much $ to spend udating to raise rents by $300

Question

Hey guys,
Just purchased my first Condo property and wanted to get some thoughts about putting money in and upgrading.
Currently the unit is rented for $900 and they know this is under under market value so they are willing to go up to $950-$1000. Lets say $950 to be safe. The unit is in fine working condition and does not need anything new, but the problem being it has not been updated since it was boughtand looks like its 1979 when you walk in there. Another investor in the area with the same 2 units is renting out for $1250 each but they have been remodeled.
Main things that need get remolded are
1. patio deck needs new roof and floor boards. size is 8x8 was quoted $600 for roof and thought I could just go buy wood at lowes and do floor myself and apply finish/coating.
2. Carpet in upper level master suite is old and blue. Around $400 sqft including open loft and halway and stairs. Was thiniking of replacing with carpet or with fake wood floors, would install myself but haven't checked around prices. - I am assuming that normally carpeted stairs are wood underneath? Can this just be painted to match hallway to look nice if I decide to go with laminiate wood or carpet?
3. Carpet in anothe bedroom downstairs is also blue around 10x12 room. Will replace with same as above(carpet or fake wood), don't know if thats tacky/wise to do.
Now things that could use updating
1. the cabinets and counter top kitchen and two bathrooms (good workign condition but is it better to buy used/new or can they be refinished/painted?)
2. Tile throught bottom floor in dinning room/living room guess I could upgrade to carpet/wood but they don't seem too bad looking they are the big size tile's like foot long.
3. Loft in upper level could be extended out to create additional 6x8 space was quoted $600 for basic floor and railing and to add 1 outlet.
4. Can screen in patio as my friend might give me his hot tub and this is florida so lots of bugs, also previous owner loved plants/trees so very jungle looking in backyard this will be cleaned up by me.
So basically my question is to raise rents by ~$250-300 which I know is possible in this area how much would you be willing to put in a place to achieve this? If I can get $300 more a month it would be worth it to put in $3-5K with just about all of it going towards supplies and not labor? Do you think this is possible, I would do all the work I can and my gf's dad is a contractor so he would help me with the hard stuff.
Also what type of payback period do you guys look for in a place? I am looking around 5.9yrs for my payback = Total inital investment if I make no changes at all to the place, 75% in financed.

Mark H. · Answer

The other side of the equation is losing a $950 tenant for a month to complete the upgrades, and another month to find a new tenant, so $3600 + $1900 in lost rent = $5500.

Ken Latchers · Answer

You can plan all you want about how much more rent you will get sustainably, but reality is that you are competing with every other landlord for good tenants and being more expensive for similar things is not a good thing for longterm. Comparing yourself to one other landlord is hardly solid market research. maybe he got lucky. Maybe it is not totally true. What happens when your new remodelling gets used for 4-5 years and is no longer new or gets trashed? What happens if your taxes go up because the building is nicer?? What if?

And this good market we are in for landlords is no guarantee things will stay that way.

I find this kind of thinking as somewhat naive.

And this good market we are in for landlords is no guarantee things will stay that way.

I find this kind of thinking as somewhat naive.

Steve Babiak · Answer

Market rents are market rents; you can over-improve and not get any more rent, just like a flipper can over-improve a house for sale and not get a higher sales price. Fix it to match what the competition in your market has to offer, and your price will be able to get to market rent.

Some related reading;

http://www.biggerpockets.com/forums/52/topics/66798-rental-upgrades

http://www.biggerpockets.com/forums/52/topics/69025-strategies-to-increase-profitability-of-rental-properties

http://www.biggerpockets.com/forums/52/topics/69512-ways-to-increase-revenue-from-rentals

Joseph L. · Answer

Thanks. I have decided to redo all the floors. So tile in kitchen/bathrooms. And still undecided on either a laminate wood floorin or another tile throughout the bedrooms hallways and living,dining room.

James Townsend · Answer

Choose the things that need repair or upgrades the worst, and start there. Some might not be extremely expensive, which could give you the best return on your dollar. Some of the more expensive items might take a little bit of time to recoup your initial expenses, but if your going to make more money in the long run, why not? If you go with energy efficient upgrades, you might even qualify for certain government tax credits and incentives.

As for the flooring, i would go with either tile through the entire apartment (they are easier to clean and keep clean, plus they wont stain like carpet, it wont mold like carpet, and it wont hold smells like carpet). Always put something other than carpet into areas such as bathrooms, laundry rooms, and the kitchen. Carpet is nice in bedrooms, as the padding underneath makes walking and living on it more comfortable. I would check with the big carpet stores, as they usually have leftovers and "defects" all the time come in that can be bought at huge savings. Most of the time, the defect is that the roll isn't cut to the standard length (12 feet long), but instead cut a little short. They also will have left overs from other jobs, that could be perfect for smaller areas, such as hallways, closets, and the such. Just look around, you might be able to find a lot of good deals, and all these will in return, maximize your investments return.

James H. · Answer

If a slab foundation, all matching ceramic tile downstairs and in upstairs bathrooms, laminate or carpet upstais in dry areas.

Joseph L. · Answer

Thanks for all the advice. I have seen two of the units which were just signed/renewed a couple months ago for $1250 each and they are really nice. He is going to do a walk through of my place today and give me advice of what he did and also the cost. He hired contractors to do all his work but because I will be living/fixing it I can do most the work myself with your guys help and google.

One thing: downstairs there is living,dinning. 1 bedroom and hallways with 1 certain tile. In another bedroom there is ugly *** carpet that needs to go. Upstairs there is carpet that also needs to go. But I dont think I can find that tile to put in the bedroom downstairs. I want to lay laminate wood flooring upstairs thought. But I'm kind of confused on the bottom cause everything is different.
Options would be
1. Replace all floors(living,dining,hallway,2bedrooms)with 1 uniform tile. (too expensive probably)
2. Have laminte floors in upstairs and 1 bedroom down stairs.
3. Put carpet in that 1 bedroom downstairs?

Any thoughts?

Bill Gulley · Answer

What I noticed was calling the flooring "fake wood" and doing it yourself. Stairs were also mentioned. Any place pulling a grand plus in rent to me seems it should look pretty decent, even if it's out dated the material and trim should fit well, carpet stretched and areas around stairs should fit well. Unless you can actually do a professional job, have it done!

Another thing I'd do is get into those other units and see what was done. I've always been pretty good at meeting a tenant, strike up a conversation in a parking lot/yard and walk off. Next time, knock with some excuse and tell them you heard they had a really nice place and you'd like to see sometime if you could since you're redoing your place. Take note of materials, fit and finish and colors. The owner never needs to know you were there if you make friends with the tenant.

3K for 3.6K annually is a no brainer, 1,500 for 2.5K is even better, meaning that you need to see exactly what really needs to be done, begin with the worst issues first and work up to your budget and touch up.

Without seeing that roof, can't say if the whole thing needs replaced, but I'd bet you could replace joists, beams and posts...even decking without tearing the whole thing out, save as much as you can, IMO. Same with the deck, replacing the deck boards is something you should be able to do. :)

Mitch Kronowit · Answer

Also remember this when comparing rents - two nearly identical places, one renting for $1,000/month, the other for $1,100/month - rented just about the same time. Why the difference?

Answer: The tenants paying $1,000/month signed a one-year lease, the others are paying month-to-month.

Joseph L. · Answer

Hey guys sorry it's been a while been busy.

I am sorry I forgot to clarify in my original post but I am currently going to live there and the renters moved out. I plan to live there about 6-8months while I save for my next place and fix it up. Currently I could get 950 a month for not doing any major changes. The difference between a remodeled place is ~300 a month. I am looking at spending around 8K in remodeling as I would be doing just about all the labor myself.

How much $ to spend udating to raise rents by $300

How much $ to spend udating to raise rents by $300

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