Hey All,

My most recent purchase is a property that needed (needs) a lot of work. We are in the process of rehabbing the house in order to rent it out this summer, and then hope to refinance later this year in order to work towards another similar deal -- that's the plan for now, at least. Before we closed on this as-is deal, we strategized to get the necessary work to make it "rental ready" and not go over the top with anything in terms of spending, partially due to an upcoming wedding and a few pending repairs needed at other properties. Fast forward a few weeks later, and we have bumped up our budget (and standards) multiple times along the way in hopes of rehabbing this place into an higher quality SFH that will generate more income than first anticipated.

One option we are currently discussing is adding electric baseboard heaters to the recently finished top floor, which consists of two large, symmetrical rooms. Based on our appraisal from a few months back, the house is currently considered a 3 bedroom property, due to a lack of heat source (ductwork doesn't go up to the top floor) in the then-unfinished top floor rooms. I spoke with realtors, appraisers, and contractors to conclude that adding a heat source (along with existing means of egress) would indeed make these considered "bedrooms" (but please chime in if you disagree here). So, we had an electrician come over and to our surprise, due to a dedicated circuit that was installed for the air conditioner unit (needs repaired, but circuit is fine), the process of wiring/installing electric baseboard heaters is fairly cheap and easy to do.


Having said that, I am racking my brain for possible pros and cons of adding these heat sources and being able to call these "bedrooms". Since this is my first endeavor, I'm looking for expertise on the subject just to make sure I'm not overthinking (or underthinking!) the long-term effects of this decision: Converting a 3 BR house to a 5 BR house would be the optimal move here, as it won't cost us much and it will greatly enhance the appaisal and cash-out refi amounts later this year, no? In turn, this helps accomplish my next deal (whatever that may be) faster. Additionally, this property will be able to rent out for more money each month, also helping recuperate some rehab costs in the near future. On the flip side, a few seasoned investors warned me that by going from 3 BR to 5 BR, you are inviting a whole different tenant pool: more people, larger families, kids, etc. This part doesn't especially concern me, but someone actually recommended that it might be best to get the heat sources installed for the refinancing benefits, but to list the rental as only a 3 BR or 4 BR home if I wanted to attract a slightly different tenant pool. I'm not sure if this is common or even sensible... Another "con" might be the electricity usage of these bad boys -- I know it isn't very kind to your electric bill. However, I won't be paying the utilities here, and I'm fine telling a tenant up front to consider using them sparingly.

If anyone out there has experience with a similar scenario with adding bedrooms to a house or has additional pros/cons they can add to the list for consideration, it would be much appreciated. Thanks!