BRRRR Strategy Question (Rehabbing for Renters or an Appraisal)

5 Replies

Should you rehab a property to be tenant proof (lower quality materials) 

OR

Rehab a property for the highest possible appraisal (higher quality materials)?

I'm guessing the answer is somewhat in between.  Thanks!

Most of the appraisers that I've dealt with don't do a very thorough interior inspection of the property. It may be very different in your area, but in my area, it usually makes more financial sense to rehab only with the tenants in mind. 

A general rule of thumb is that it's not worth renovating a rental property to a standard that is above the surrounding neighborhood. Going beyond the neighborhood standard usually brings about only a marginal increase in value. So, match the surrounding properties; if granite counter tops are standard for the area then install granite counter tops. If it's a formica kind of neighborhood then just do formica counter tops etc.

@Daniel Guerra If you’re in a decent area I like to rehab a bit beyond the standard rental, I find I get tenants who really like the place because it stands out in the neighborhood and I can push rents because of it. I think you’ve got to feel out what is right for your property and neighborhood, but this works for me in the right areas and I can push 50-75 above rentometers median rent.

Higher quality materials ARE cheaper when properly amortized. There are exception, I consider carpet to be disposable, but it's much less expensive to install higher quality materials, plywood cabinet boxes, mid grade plank vinyl, etc, than putting in cheap garbage and replacing the entire house every five years. 

In my experience, the quality of the materials and finishes have very little influence on an appraisal. 90% of the value will come from comps and square footage, so don't worry about if an appraiser will be impressed with $12 cabinet pulls. They won't. 

Appraisers are human and are subject to emotion like everyone else. They do have to follow criteria and standards. I own 2 identical townhouses next to each other and I received an appraisal of 5k different on a 180k place. It is more art than science. As long as the materials are in line with the area and price point. Marble bathrooms in a C neighborhood, is not going to get you much.

I have taken to using house wash on the roof before an appraisal or sale. It is just soap and water, but cleans off the stains and make the roof look newer. It has made a difference in curb appeal.