Making a rental too nice... is that a thing?!

Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes

I had this thought as I am house hacking (Syracuse NY) and want to make my unit nice with some upgrades. I am curious on people's thoughts on this topic.

Should you or should you not make your apartment that much different/nicer than the comps in the area (ie. appliances, counter tops, flooring, etc.) Is their a point where you don't "get your money back" ?

Thanks for your thoughts!

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Jose Batista Abikarram

Member since 2019 · 89 posts · 56 votes

Hey Bryan this is a good question. The simple answer is yes you can make a rental too nice and you will at that point where there is no money back. The more complicated answer is that sometimes if you have a C type house in a borderline B/A location you can go and spend a little bit more money to make it more on the A side property. Spending a little bit more to match or surpass comps might work for you especially if there is demand for it. This requires some in depth study of the market and I would even look at trends to see if there is demand for more. In conclusion, keep it on the safe side and try to match comps but if you see the opportunity to make it a little bit better because of demand do it. On another note even if you make the house close to the comps try to add something unique to you and your style, remember branding is extremely important inn this world.

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Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@John Hickey yeah thats great maybe get some eyes on the apartment from local landlords. On top of that I agree that having it at a price point even with comps... But is the best looking will give me an ROI on a good tenant rather than money 👍 thanks for the advice!
0 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Funny that 'good value home renovations' I hear about on real estate today or HGTV return 70% of cost. Remodel your kitchen and get 70% back when you sell. Woohoo. To me that's -30%.

I like 5x or 10x returns on upgrades. Painting. Refinishing the wood floors under the old carpet. Swapping out old carpet for laminate or vinyl/linoleum for EVP. Nicer toilets if removing anyway. Refinishing countertops and cabinets. Cutting back trees, shrubbery, lawns. Nice appliances used as a package on CL. Converting a 3 season porch or sun room to living space.

60% of most project cost is labor. Paying retail for the product and the labor will keep you earning -30% most times. Do high dollar stuff yourself and refinish/resurface vs replace when possible.

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Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@Steve Vaughan loved that last paragraph man👍👍
1 Reply
James Galla
Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes
7y
@Bryan Cavellier,
Over-upgrading has consequences not only to your rental style but also the value of the home. When you over upgrade, you don't actually recapture the full cost of the materials you used for the upgrade. This is because appraisals are heavily geared towards the comparable method.
Moreover, higher grade properties in lower grade areas will face additional limits such as school district and quality of life in the area. These reasons are typically why you don't see developers building castles in the ghetto.
Something you should be cognisant of is the tendency of some property managers to over upgrade the unit in preparation for the next tenant. If they are doing the upgrade themselves, they are cutting some money off the top in a similar fashion on how they charge for service calls.
2 Reply
Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@James Galla love the property management side of this convo, thanks james 👍
0 Reply
Luciano A.
Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
7y
@Bryan Cavellier
Sometimes spending a few extra dollars on a few items can make a place look nicer without killing the budget. Spending money on slightly nicer fans versus those ugly looking 70s looking ceiling fans will change room looks. Putting knobs on cabinets gives it a nice look, buying bathroom fixtures that will be durable and look nice.
I always rehab my rentals so it can look nice better than competition so if market turns I won’t have my units sitting empty long. In a down market tenants have choices. If you have a nice unit it can rent faster.
3 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
Often, some strategic upgrades can really pay off. For example, replacing low-end older light fixtures creates a highly visible impact. I always believed that first impressions count, so I do some inexpensive landscaping and mulching around the front of the house. The cliche that kitchens and baths sell is true. I've got good at replacing old ceramic tiles around showers and putting in an inexpensive, but contemporary vanity / mirror combo. Kitchens, unfortunately are more expensive to upgrade. I am not a fan of stainless steel appliances because they easily scratch. I am a fan of granite countertops. They signal that the property is more upscale.
1 Reply
Sterling Chapman
Rental Property Investor · Baton Rouge, LA · Member since 2018 · 65 posts · 76 votes
7y
@Bryan Cavellier there is definitely a point where you don’t get your money back. I hear over improvement is one of the biggest rookie mistakes made. However if you are living there as well that adds an additional layer of complexity if you just want your own place to be nice.
1 Reply
Tommy Carey
Real Estate Agent · Los Angeles, CA · Member since 2018 · 15 posts · 19 votes
7y
@Bryan Cavellier
Here’s a great tip I picked up.
When the tenants lease is 2 months from being renewed, send them a “Happy Anniversary” Letter and offer them an apartment upgrade of their choice. (Within reason) A new ceiling fan, fresh paint, sink, dishwasher etc. This does a few things.
1. Makes them happy
2. Let’s you know if they are renewing.
3. Allows you to inspect the property for maintenance needs. (Or to see the state of the unit)
4. Keeps the property somewhat perpetually upgraded and maintained
5. Makes them feel okay with the pending rent increase.
If they stay for many years and they personally selected their upgrades, they will be less likely to vacate due to obsolescence.
3 Reply
Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@Luciano A. Another person mentioned the little things like fixtures, love it!
0 Reply
David M Trapani
Rental Property Investor · Franklin, TN · Member since 2019 · 160 posts · 125 votes
7y
Good question Bryan.

How much you spend on upgrades (or reno /rehab) depends on your objective.

For those flipping houses, it would seem spending less and going with the "basics", is a good approach. Flippers want to make the best ROI in a the shortest time-frame possible.

If you're into buy & hold investing or plan to attract quality tenants, it may be worth it to put some extras in. This seems especially true if you're in a high demand area which is growing.

For example, we did full-on upgrade on a 1910 duplex in Midtown Sacramento about 4 years ago. Paid $350,000 and put another $100,000 into it. All new bamboo flooring, interior paint, granite counters, all stainless appliances, barn doors, new (old-fashioned) claw foot tubs, etc. Each unit had it's own washer & dryer, dishwasher along with standard appliances. We immediately rented both units for max rent. When the tenants on one side "broke up", they said they loved it but couldn't afford on their own. The rent went from $1,350 to $1,750 when a professor from Brooklyn came to teach at the local university. We had ZERO vacancy, great tenants and good rents, largely - I believe - because of the upgrades.

We did a 1031 exchange about a year ago for $650,000. So, made excellent rents and appreciation. In this instance it worked splendidly. However, we were in an up market with high demand. This is also before the most recent City of Sacramento and State of Calif rent control laws. So it may not work the same now, in that particular area.

I generally believe investing in "better than average" upgrades is a good idea if it's a longer term hold. That way, you have less vacancy, higher rents and better re-sale value.

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Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@Tommy Carey thats a great tatic to look into, possibly for class A and B 👍👍
1 Reply
Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
7y
@Bryan Cavellier you can absolutely over improve for the neighborhood and comps and that’s a good way to lose a lot of money. I’ve seen this happen lots of times in North Minneapolis where things just need to be decent.
[email protected]512-888-9122
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Amber Gonion
Real Estate Broker · Hugo, MN · Member since 2016 · 688 posts · 596 votes
7y
@Bryan Cavellier we use our own crew to do rehabs for our owned and managed properties, but even with our costs being half of contractor rates rents are limited by neighboring properties. We improve as much as we need to be competitive with our surroundings. Lower end properties may have lesser rehab since we are limited by neighbors rents. Class A properties get top of the line rehabs and we spare no expense to get to the rent goal, but both have a limited amount of potential rent based on the neighbors and upgrades are customized to get max potential rents for as little cost as possible.
We can be the highest rent property in the area but only by so much. Use your money to buy more properties.
2 Reply
James Mulcahy
Contractor · MA · Member since 2018 · 10 posts · 7 votes
7y
@Bryan Cavellier We are guilty of over improving our own unit. I spent over $80,000 doing a complete rehab of our unit that we lived in for ten years including a two story 24x16 addition adding a huge eat in kitchen bedroom and beautiful spa bathroom. Although I regret over improving the unit we now get the highest rent per square foot in our area and we are able to retain a very high quality tenant in that unit. We have had great luck renting this unit but because of the price and quality of the unit we do have high turn over as most of our tenants end up buying homes after 2-3 years in the unit. Your quality of life should be considered when making improvements.
3 Reply
Gary L Wallman
Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
7y
Originally posted by @Bryan Cavellier:
I had this thought as I am house hacking (Syracuse NY) and want to make my unit nice with some upgrades. I am curious on people's thoughts on this topic.
Should you or should you not make your apartment that much different/nicer than the comps in the area (ie. appliances, counter tops, flooring, etc.) Is their a point where you don't "get your money back" ?
Thanks for your thoughts!
Bryan,
I typically renovate one grade higher then the property itself. C properties get B finishes etc. This has allowed me to outshine the competition which results in higher demand for my properties (primarily SFR's).
Higher demand creates shorter turnover, better tenants and higher rents. It's been a win win for my tenants and me.

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Robert Nelson
Towson, MD · Member since 2019 · 44 posts · 18 votes
7y
@Bryan Cavellier ehh i think that’s based on your opinion. Most people I know make the unit livable and good enough to hold. I don’t see a problem in making something “too nice “ if you mean slot of upgrades and stuff. It will hold better but I’m more in favor of making it nice enough to live but cheap enough stuff for when someone breaks something you can replace it without problem. Now if you’re staying in it and renting out a unit to something else then yeah make your owners unit as nice as you want.
0 Reply
Anthony Rosa
Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
7y
I wouldnt worry about upgrading with a countertop, flooring or even a refrigerator regardless of location. Stone tops can take a beating and last longer than formica. Nice floors can last forever as long as it's maintained. My concerns with upgrading would be an expensive kitchen and expensive bath. Unless I can get a return on those upgrades I stay within the comp playing field because kitchens and baths are the most desirable upgrades.
Most expensive upgrades are the ones you must do. They show nothing nice to the eye and you must do them at some time. Roofs, boilers, windows, waterproofing, etc...
1 Reply
Jerry Charlton
Real Estate Agent · Calgary, Alberta · Member since 2015 · 18 posts · 9 votes
7y
@Bryan Cavellier
I believe better quality rentals attracts better quality tenants willing to pay a premium on rent. People are looking for what is comfortable to them and will usually find it.
3 Reply
Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@Amber Gonion love the perspective of having a "max" thanks!
0 Reply
Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@James Mulcahy i think finding a middle ground is great, as you mentioned a better tenant is worth SOME money but not alot. Thanks James 👍
0 Reply
Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
7y
@Gary L Wallman this is gold!!! And you could possibly someday be a "b class" property if you have some type of growth in your market... Great strategt Gary!
0 Reply
Shane H.
Investor · Spokane Valley, WA · Member since 2014 · 175 posts · 94 votes
7y
I know this is something i consistently struggle with... I definitely don't look to make my rentals into marble and mahogany homes, but i do tend to over build, improve things that don't NEED to be improved, and spruce up things are are still functional but ugly.
Many of these things i justify by doing myself, but there are so many times when i have to step back and realize that the improvement i would like to make isn't necessary. I had to get over the feeling that every tenant is going to notice all the things i didn't improve as soon as they walk in.
I recently had my triplex appraised and while doing the walk-through with the appraiser we started talking about the old wooden windows and how i wanted to get them all replaced with new vinyl windows (this is in a C neighborhood). He just responded with "Why? they won't increase your rents or your appraised value..." And it was just yet another reminder that the improvements that i'd do to my home are not the same as those i should do to a business.
0 Reply
Will Chamberlin
Rental Property Investor · San Rafael, CA · Member since 2015 · 190 posts · 90 votes
6y
@Bryan Cavellier, Lots of good tips in this thread. I am around the syracuse area and like to do solid counters with a stainless undermount sink from Lowe's. The laminate always gets chipped right away and looks cheap to me. I also generally replace the bathroom vent with something new and higher capacity then have my guy wire the fan to always be on with the lights. Cuts down on mold issues. Another high-end finish that is pretty cheap is to swap in the usb charger outlets for existing ones in strategic places like kitchen counters. Everyone has a phone or tablet to charge these days. They cost around $3 each and really make the kitchen feel updated (as long as your boxes and wiring can support them). Good luck!
1 Reply
Bryan Cavellier
OP
Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
6y
@Will Chamberlin love the usb charger idea, big fan because I know I would love it!
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