Hello BP Community:
Looking for advice on rehab returns and worthwhile fixes that generally make a property more attractive to renters and buyers
My boyfriend and I are looking to purchase our first property (SFH or duplex) in Rochester MN using the FHA 203k loans. We're focusing on cheaper homes and foreclosures hoping to fix them up to the point that we'll maximize what we charge for rent after we live there for a year and eventually maximize what we can sell it for.
Once the property is livable and decently nice with updated appliances, etc, how much further should we go as far as updates? I realize this question is tough and very broad because it depends on the property, area, comps, cost and our target renter/seller but if anyone wants to throw out any advice or opinions on this, I'd really appreciate it.
For example, if the linoleum floor is outdated but not in pieces, would it be worth the investment to replace? Is it worth the money to replace the outdated light fixtures in the bathroom and kitchen? What's your experience? Personally, when I was a renter in the past, I looked for "clean" and "up to date" spaces but is it typically worth the money as an investor? Any tricks to make a property more appealing?
It depends. The quality of your rental will determine what kind of tenant (and rent) you get. You should always weigh the cost vs ROI. I'm doing this on my current project.
If I build a garage it will cost 15,000. But how much extra rent could I charge? Maybe 50-75/m. My ROI would be pretty low so it doesn't make sense to do that. But on the flip side it could also affect the pool of tenants too. Because I'm not going to add a garage my rent will be lowered accordingly, and lower rent will attract more (and maybe worse) tenants. It would cost a lot more time and money to do a garage, and it's not really worth it. I can always add one later.
I would say just make the property look fresh and clean, then rent it out.
You also may want to look up some "tenant proofing" ideas. We're removing all the fans from the house and putting up dome lights, and we're hard wiring the bathroom fan and light switch together. Stuff like that.
@Marie Edwards if you want to know what renovations to put into a property in an area, see what others are putting into them. For example, my area does not require you to have granite countertops to get top dollar for a home, but where I invest does. Take some time to talk to some other investors and real estate agents that work in your area. They can tell you what is considered minimum for your region of interest.
Hope this helps.
@Marie Edwards , look at other rentals and what they are renting for in this same area on Craigslist or whatever people use most there. And then watch them for a few weeks. See if they rent quickly or not at all (too quick and they were priced too low, too long and their prices too high). Also use rentometer to see what the average rental price is for this area. That should really determine what you're willing to put into the home. However, as you said, get to know your area's rental market. I look at rentometer and find that for most of my properties, the average rent listed is much lower than I can get because this area is very up and coming, but sometimes it can take me longer to rent my units when I'm trying to get top dollar. Sometimes I start high and if I'm not getting a ton of interest right away, I just lower the price. My first few (and each new house or neighborhood still) were all real learning experiences so don't expect to get it perfect the first time! :)
Also, some improvements you may make are going to be more for you in the long run than for the tenant. For example, redoing the floors from sticker tile to sheets of vinyl or porcelain might be best just to protect the subfloors/ water damage, etc long term. I also typically rip up the carpet and refinish existing hardwoods underneath. Carpet gets so nasty so quickly and hardwoods are just so much more durable and everyone seems to prefer them. Remember that tenants are really hard on properties so keep this in mind as you update. Good luck!
Thanks @Shannon Sadik ! All really great advice. I appreciate you taking the time and will look into all of this.
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I like what @Shannon Sadik said. If the house is in a cheaper area you could also update the vinyl floor by overlaying it with a more current vinyl floor. Really you need to know the area to determine what to update/ rehab. Good luck.