In unit washer/dryer vs. laundry room in C class area

Chicago, IL · Member since 2018 · 90 posts · 37 votes

I am wrestling with putting in plumbing, vents and stack units for a two flat with garden unit. I estimate I can get an extra $150 to $200 per month for each unit, but I also want to add central air and I am thinking about the cost effectiveness of what would run about $22K altogether - 14K for the plumbing, venting, new stack units and the rest for either mini splits or central air.

Currently I have a laundry room in the basement, but it could use some upgrades and tenants have to go outside (very briefly) to get to the door down to the basement. The area is improving quickly as Pilsen becomes more expensive, and I am also wondering if it will ever be cheaper to do it. Had I done this 3 years ago, the cost would have been much cheaper for sure.

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Charles Carillo

Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes

@Jay Garrison

When doing repairs/upgrades to rental properties; we use a 36/48 month payback. For example; if we invest $1,200 into upgrading a unit (adding a washer/dryer for example). Are we able to increase rent by at least $25? If so, that is like a 25% ROI.

For your situation; the plumbing costs $14k, and it will bring in $150 per month. That payback is nearly 8 years. If the area is quickly improving, maybe you will perform this, in anticipation of rent increases of $300+; but, that is all speculation. What is your estimated rent increase for investing the $22k? I personally would want to see an increase of $450-$500 per month which is probably not viable in a class-c (currently) area.

One last question, since it is a class-C area, would these improvements actually create resale value? Will another investor pay more for these improvements? Some improvements that I would pay more for as a C-class investor might be; separate electricity meters (including an owner meter), separate water meters, or newer mechanicals. C-class investors/renters are less concerned with central AC and are used to not having a washer/dryer in the units.

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Charles Carillo
Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
3y
@Jay Garrison

When doing repairs/upgrades to rental properties; we use a 36/48 month payback. For example; if we invest $1,200 into upgrading a unit (adding a washer/dryer for example). Are we able to increase rent by at least $25? If so, that is like a 25% ROI.

For your situation; the plumbing costs $14k, and it will bring in $150 per month. That payback is nearly 8 years. If the area is quickly improving, maybe you will perform this, in anticipation of rent increases of $300+; but, that is all speculation. What is your estimated rent increase for investing the $22k? I personally would want to see an increase of $450-$500 per month which is probably not viable in a class-c (currently) area.

One last question, since it is a class-C area, would these improvements actually create resale value? Will another investor pay more for these improvements? Some improvements that I would pay more for as a C-class investor might be; separate electricity meters (including an owner meter), separate water meters, or newer mechanicals. C-class investors/renters are less concerned with central AC and are used to not having a washer/dryer in the units.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
3y
Is this in Pilsen? If so yes to both. If Little Village I would still do in unit if possible but not central AC it's not needed. In unit laundry will not just get rents higher but will also get you higher quality tenants. In unit laundry is a pretty easy job if install it near other lines.
Even in Pilsen could skip the central AC if the units aren't high end type units. I find its not that big a issue for renters but laundry is a big checklist item.
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Jay Garrison
OP
Chicago, IL · Member since 2018 · 90 posts · 37 votes
3y
Quote from @Henry Lazerow:

Is this in Pilsen? If so yes to both. If Little Village I would still do in unit if possible but not central AC it's not needed. In unit laundry will not just get rents higher but will also get you higher quality tenants. In unit laundry is a pretty easy job if install it near other lines.
Even in Pilsen could skip the central AC if the units aren't high end type units. I find its not that big a issue for renters but laundry is a big checklist item.

Not Pilsen, in New City, further south. C class area.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
3y
Oh then forsure not central AC. I wouldn't even do in unit just have coin shared.
1 Reply
Jay Garrison
OP
Chicago, IL · Member since 2018 · 90 posts · 37 votes
3y
Quote from @Charles Carillo:

@Jay Garrison

When doing repairs/upgrades to rental properties; we use a 36/48 month payback. For example; if we invest $1,200 into upgrading a unit (adding a washer/dryer for example). Are we able to increase rent by at least $25? If so, that is like a 25% ROI.

For your situation; the plumbing costs $14k, and it will bring in $150 per month. That payback is nearly 8 years. If the area is quickly improving, maybe you will perform this, in anticipation of rent increases of $300+; but, that is all speculation. What is your estimated rent increase for investing the $22k? I personally would want to see an increase of $450-$500 per month which is probably not viable in a class-c (currently) area.

One last question, since it is a class-C area, would these improvements actually create resale value? Will another investor pay more for these improvements? Some improvements that I would pay more for as a C-class investor might be; separate electricity meters (including an owner meter), separate water meters, or newer mechanicals. C-class investors/renters are less concerned with central AC and are used to not having a washer/dryer in the units.

Thanks, valuable POV
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Sarah Ziehr
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
3y
Tenants want in unit laundry over central air. Three bedroom units with AC are going as high as $1800 per month nearby. Hope that helps!
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Paul De Luca
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
3y
Quote from @Jay Garrison:

I am wrestling with putting in plumbing, vents and stack units for a two flat with garden unit. I estimate I can get an extra $150 to $200 per month for each unit, but I also want to add central air and I am thinking about the cost effectiveness of what would run about $22K altogether - 14K for the plumbing, venting, new stack units and the rest for either mini splits or central air.

Currently I have a laundry room in the basement, but it could use some upgrades and tenants have to go outside (very briefly) to get to the door down to the basement. The area is improving quickly as Pilsen becomes more expensive, and I am also wondering if it will ever be cheaper to do it. Had I done this 3 years ago, the cost would have been much cheaper for sure.

In my experience in-unit laundry is not common in C class areas so if you already have a laundry room I would probably just leave it as is. Based on the cost estimate you have, it's probably not worth it unless you plan on holding the building for a long time. It also depends on the rent comps in the area to see if it's worth the expense. Do you already have furnaces in the building? If so, putting in central AC shouldn't be too difficult or expensive. If you have a boiler/radiant heat system though I'd say it's not worth it and just stick with window AC units.
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Jonathan KlemmBusiness Member
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Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
3y
Hey @Jay Garrison - This is someone that comes up for most of us Chicago investors. Spend the money to get top rent and improve a current rental or put your money into the next deal....for me, I try to let the numbers do the talking.
More than likely from my own experience it's better to move on to the next property, then once you are in a MUCH better financial position you can come back to optimize the individual units. If we didn't guy renovate them in the beginning that is our business model for the most part.
Happy to connect and discuss more if that would help. If you want to do it in person our next in-person meetup is here: https://www.biggerpockets.com/...
[email protected]
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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
3y
@Jay Garrison in C class areas we focus on painting the walls grey and giving clean flooring.... I would steer clear of in unit laundry, plumbing, etc. You will not get the return you are thinking, and once you provide the amenity, you are responsible for maintaining it whether or not it continues working. There are a whole host of reasons not to do in unit laundry, but I would steer far, far away from AC. AC in C class areas will burn out quickly and will require constant maintenance. Also, keep in mind that we only need AC in Chicago for about two or maybe three months. Window units are $200 a pop. Just provide those if you want.
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Sarita ScherpereelBusiness Member
Real Estate Agent · Chicago, IL · Member since 2018 · 659 posts · 376 votes
3y
Hi @Jay Garrison You don't need to add these in the units. You have it in the building which is already great. Even in class A and B areas of Chicago tenants might have to go outside briefly to get to laundry. I would save money money for either my next purchase or other updating in the units. Especially, if the garden is non-conforming. Any updates you add to a non-conforming unit will not count towards your appraised value of the building.
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Jay Garrison
OP
Chicago, IL · Member since 2018 · 90 posts · 37 votes
3y
Quote from @Sarita Scherpereel:

Hi @Jay Garrison You don't need to add these in the units. You have it in the building which is already great. Even in class A and B areas of Chicago tenants might have to go outside briefly to get to laundry. I would save money money for either my next purchase or other updating in the units. Especially, if the garden is non-conforming. Any updates you add to a non-conforming unit will not count towards your appraised value of the building.

Yes, that was one of my central concerns, how could that budget be better used.
0 Reply
Jay Garrison
OP
Chicago, IL · Member since 2018 · 90 posts · 37 votes
3y
Quote from @Jonathan Klemm:

Hey @Jay Garrison - This is someone that comes up for most of us Chicago investors. Spend the money to get top rent and improve a current rental or put your money into the next deal....for me, I try to let the numbers do the talking.
More than likely from my own experience it's better to move on to the next property, then once you are in a MUCH better financial position you can come back to optimize the individual units. If we didn't guy renovate them in the beginning that is our business model for the most part.
Happy to connect and discuss more if that would help. If you want to do it in person our next in-person meetup is here: https://www.biggerpockets.com/...

Cheers for that advice, I need to attend a meetup for sure
1 Reply
Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
3y
Quote from @Jay Garrison:

I am wrestling with putting in plumbing, vents and stack units for a two flat with garden unit. I estimate I can get an extra $150 to $200 per month for each unit, but I also want to add central air and I am thinking about the cost effectiveness of what would run about $22K altogether - 14K for the plumbing, venting, new stack units and the rest for either mini splits or central air.

Currently I have a laundry room in the basement, but it could use some upgrades and tenants have to go outside (very briefly) to get to the door down to the basement. The area is improving quickly as Pilsen becomes more expensive, and I am also wondering if it will ever be cheaper to do it. Had I done this 3 years ago, the cost would have been much cheaper for sure.

Go with the in unit washer/dryer & increase the rent.
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Max Traveler
Handyman · Miami, FL · Member since 2020 · 32 posts · 10 votes
3y
Which is better for in-unit washer/dryer? All-in-one Combo unit or conventional stackable washer/dryer (ventless)???
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