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Updated about 3 years ago on . Most recent reply

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Sean Anggani
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How to consider if a rehab is worth it?

Sean Anggani
Posted

I recently bought a not-too-bad 2b2b condo for 395k at 20% down in West town Chicago that I intend to sell in > 5 years, I intend to live in it for 2 years, and rent the remaining years before selling the property. The total monthly mortgage payment with HOA included sums up to 2,300. There is a 15-25k room for improvement by upgrading the kitchen and both bathroom countertops that would make this place even nicer to live in, but am wondering whether it is worth it from an investment perspective. What data do you use to evaluate whether a rehab is worth it?

For context, right before I bought the property, it was renting $2,600-2,700 and the other apartments of similar size are also renting for the same value currently ($2,600). When I bought it,  I invested ~7k already to upgrade all the oven, microwave, dishwasher, and repainted the walls, with the hope that this will push the rent up. My hope for putting this money down is a 2-3x return, is this realistic? From a rental perspective, how much increase in rent can I expect?

Would really appreciate any insight!

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John Warren
  • Real Estate Broker
  • 3412 S. Harlem Avenue Riverside, IL 60546
5,096
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6,054
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John Warren
  • Real Estate Broker
  • 3412 S. Harlem Avenue Riverside, IL 60546
Replied

@Sean Anggani I would think about this problem very differently. I would look at the surrounding comps and see how they are decorated. Are you competing against quartz countertops, dishwashers, and in unit laundry? If so, then laminate and dated cabinets will have to go at a discount. Really you have to work backwards to solve the problem here, and having leased both dated and old units and also beautiful new units I can tell you that the beautiful, new unit will also get you the best tenant. 

  • John Warren
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