Renovation with Tenant Occupants

General Landlording & Rental Properties
5yFollow

Renovation with Tenant Occupants

Victor Delgado Velez
Houston, TX · Member since 2015 · 11 posts · 1 vote

Hello BP Fam,

I'm starting my REI journey using the house hacking method. I've already got an approval for an FHA with 203k loan.

My question to you all is, how do you deal with renovations with tenants currently occupying units?

I'd like to renovate as much as I can using the 203k loan to avoid dealing with issues tenants may experience.

1Reply
101 views

Most Popular Reply

Jordan B.
Washington, IN · Member since 2015 · 78 posts · 46 votes
5y

I have done it both ways, and looking at it with hindsight I would never do a remodel with tenants living in the unit again if at all possible.  Not saying it can't be done, but it will end up costing more money, time, and energy to get it done with the live in tenants.  You mentioned house hacking, is this a duplex?  Do you need to move in right away or could you remodel one half, move tenants in and then remodel your side.  I wouldn't be afraid to remodel the unit I would personally be living in.

3Reply
See this reply in the discussion

30 Replies

Jump to latestLatest
  • David Robinson
    Specialist · Huntsville, AL · Member since 2020 · 200 posts · 105 votes
    5y

    @Victor Delgado Velez Not sure on tenants during renovations, but do want follow your progress with the 203k process. Is it a 4 unit. Major renovations or minor, the tennants shouldnt mind if their getting nice upgrades but how intrusive will it be. Too bad you couldn't include tenant hotel expenses into the rehab portion of the construction safety expenses.

    1Reply
  • Ishmael Johnson
    New to Real Estate · NY · Member since 2020 · 196 posts · 29 votes
    5y

    Can tenant expenses for 203k loans include that in the budget, or even a trailer ?

    0Reply
  • Michael Ablan
    Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Victor Delgado Velez - It's difficult.   Sometimes it's best to renovate one unit completely and allow them to move into it.  Then renovate the other unit

    2Reply
  • Ishmael Johnson
    New to Real Estate · NY · Member since 2020 · 196 posts · 29 votes
    5y

    @Michael Ablan

    What if both units are occupied?

    0Reply
  • Michael Ablan
    Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Ishmael Johnson - There's too many variables to give any sound advice.

    A lot will depend on what the scope of work is, what the tenants will tolerate, how well they'll cooperate and what your contractor will tolerate.

    1Reply
  • Ishmael Johnson
    New to Real Estate · NY · Member since 2020 · 196 posts · 29 votes
    5y

    My plan is to renovate the units to match the comps in the area. 

    1Reply
  • Jordan B.
    Washington, IN · Member since 2015 · 78 posts · 46 votes
    5y

    I have done it both ways, and looking at it with hindsight I would never do a remodel with tenants living in the unit again if at all possible.  Not saying it can't be done, but it will end up costing more money, time, and energy to get it done with the live in tenants.  You mentioned house hacking, is this a duplex?  Do you need to move in right away or could you remodel one half, move tenants in and then remodel your side.  I wouldn't be afraid to remodel the unit I would personally be living in.

    3Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    5y

    @Victor Delgado Velez   If you are talking remodel to systems it can be done with tenants in place. New roof,  Fuses to breakers, paint the house sure. they are happy to see an improvement.  Unit remodels are tricky and even more so with one bathroom.  So you can't gut remodel a bathroom with tenants in place unless there are 2 bathrooms and even that is difficult. You want to put a new floor in maybe.   A kitchen same thing, you are rehabbing everything they need to be on vacation minimum. 

    If it isn't broken with a full rehab you are giving tenants issues they did not have rather then solving issues they might have.  So if you walk into a unit and they have an issue and want it fixed they will co-operate with more inconvenience.  I would basically see if there are any issues tenants have experienced and want addressed and do those things unless you have an empty unit to work with.  

    2Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Ishmael Johnson

    Same here, but as this will be my first time, I'm confused on how to reno the whole house with tenants living there.

    0Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Michael Ablan

    Thanks, this could be a the best way to go. As this is a triplex and one unit is vacant.

    0Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Michael Ablan

    Looks like I'm going to have to reach out to everyone involved and see what I can work out.

    0Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Ishmael Johnson

    The loan is strictly for renovation and upgrades. It won't cover anything else outside of that.

    0Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Jordan B.

    This is a triplex with one unit vacant. I'm in no rush to move in as I've recently renewed my lease for my apartment. I could renovate the empty unit and see if tenants are willing to move around as renovations are completed.

    0Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Colleen F. This is great advice. Thank you!

    0Reply
  • Andrew B.
    Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    Generally you don't remodel entire units with tenants there because you don't need to. Why would you waste all that money and then not be able to raise rents? If tenants are on a month to month lease, why would they stay and deal with the drama when they can go somewhere with no construction? Its just a bad idea all around. It sounds like you want to start your investing career with a massive project, but that might not be a realistic idea with no experience. Try to start smaller if possible. 

    2Reply
  • Craig Janet
    Member since 2019 · 223 posts · 261 votes
    5y

    Why renovate if you have paying tenants? Just wait until they leave and then renovate. 

    2Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    That's tough. I wouldn't renovate while tenants are living there. It is disruptive, and most people are working from home. You don't want them giving you a bad review for noise, etc., and jeopardize tenants in the future. Most time, they won't even allow you to look or stop by the property if there is a tenant when looking for a home. It's disrespectful.

    Once the property is unoccupied, Look at comps to see similarities among other homes, so you don't overspend on renovations.

    [email protected]832-776-9582Podcast Guest on Show #469
    NETWORTH BUILDERS5236 Reviews
    WebsiteView Page
    2Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    5y

    I am a contractor , time is money . I am not dealing with someones tenants having to move their stuff so I can work .  Too much liability and its not worth the stress  

    2Reply
  • Luciano A.
    Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
    5y

    @Victor Delgado Velez

    I have done one of our recent 5plex with tenants in 4 of the units. Let's say it is not fun and takes a lot more effort. The property was run down. Tenants were excited to see changes were coming that were going to make living there a better experience. We put them up in a hotel with the thought it was only going to take 2 weeks. With COVID most were working from home. It took us 4 weeks over $5k in hotel fees but I see you are in Houston also. What I would do is fix all the exterior items: roof, siding, new windows (which will require going into units but if you get the same size won't cause too much of a hassle to tenants. Paint exterior. Fix up the empty unit. If the property needs new electrical wiring, plumbing then that is when you need to make a more detailed plan with your contractors so that you can relay this to the two tenants and plan accordingly. If tenants will not be there for say two days while your team is working on their unit then you will want to make sure you are there or a representative as you are responsible for their belongings. 

    Another thing to look into if you can put the funds into escrow for items that need to be fixed in the other units. Thus use it when the tenant moves out.

    Best of luck 

    1Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Luciano A.

    Thank you! I will reconsider renovating current tenant units and only work on exterior and the one empty unit.

    0Reply
  • Luciano A.
    Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
    5y

    @Victor Delgado Velez

    One thing you can do to help set up for a rent bump up is to ask each tenant what they would like to see fixed. Seeing the outside being fixed is one thing but to have items inside their unit fixed will give them a good feeling and thus in a couple of months or when their lease expires you can bump up the rent. This will help in them having to go through the construction phase of your rehab.

    Best 

    1Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Matthew Paul

    Thanks! It's good to hear all parties experiences.

    0Reply
  • Victor Delgado Velez
    OP
    Houston, TX · Member since 2015 · 11 posts · 1 vote
    5y

    @Luciano A.

    Great advise. I may be trying to take on too much for my first investment. Thank you!

    0Reply
  • Ishmael Johnson
    New to Real Estate · NY · Member since 2020 · 196 posts · 29 votes
    5y

    @Victor Delgado Velez so when does that rent bump become effective, after the rehab is done in the unit ?

    0Reply
  • Ravi Kiran
    Rental Property Investor · Chandler AZ · Member since 2018 · 28 posts · 4 votes
    5y

    @Victor Delgado Velez

    I recently did a rehab of a 4-plex (one unit was already vacant) while remaining 3 tenants were in place. By the end of rehab I only had one existing tenant (with slightly updated rent & lease), but with minimal rehab. I did full rehab of the other units and common areas. I would always choose full property being vacant during the rehab, due to ease of rehab management.

    From my experience the longer the tenant has been there, the more problematic it gets. They are used to live in a certain way on the property, which they don’t like us changing.

    1) Best Case: All units vacant and rehab. Easy to manage rehab, but Financial pinch during the rehab.

    2) Staggered: Make one unit vacant at a time, rehab and rent at higher rates. Tenant Management is a challenge, Cashflow shouldn’t be impacted a lot

    3) Improve common areas and exterior. Wait for the leases to expire and vacate them to do full rehab. Contractor management is a challenge here. Cashflow would be intact.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free