How much do I improve or rehab?

Question

HI BP. I do a lot of rehabs for Buy n Holds. My next one will be a long term hold as a rental due to various reasons.  I could get crazy with this one such as: switch from oil to gas, new HVAC and add central air, windows, kitchen, bath etc.  But as a rental; how far should I go? Can I recoup the cost of adding central air in rent (higher)?  Does anyone have any "studies" that show the top 10 thing that SFH renters want/desire in their property?  I know certain investors limit all maintenance items such as CA, disposals, dishwashers etc. but I'm eager to hear the consensus out there. Thanks in advance for any advice.

Rosston Smith · Answer

Improve to equal or be slightly better than competition. Don't go beyond what your rent will support.

Account Closed · Answer

It depends. If the infrastructure is there and the upgrade won't be too complex or expensive and you can get higher rents, then go for it! For example, if the house already has a furnace and ductwork, then adding central air won't be as expensive as installing a whole new HVAC system if the house curently has a boiler. You may want to find out how rents compare between properties with vs. without central air, then calculate how long it would take to recoup your investment. Example- you pay $6,000 to install new HVAC system or central air, and get $75 extra rent vs. properties without central air. It would take 40 months (3 1/3 yrs) to recoup the investment. That's not counting possible maintenance in that period. If you decide to sell the house, it may be easier to sell or sell for a higher price because of the upgrade.

Brian Erlich · Answer

@Kevin Felmlee,

Do you think it might make sense to upgrade some of these things over time?  It may be that you can promise your tenant the upgrade around lease renewal time, get a higher than average rent increase, and the benefit of doing a little at a time.

Eric P. · Answer

@Kevin Felmlee This will be area-specific. You should look at rental comps to see what features or amenities drive certain rents in that area

How much do I improve or rehab?

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