"Dress it up" or keep it "good enough" - How do you decide?

Question

I am curious to know how people run the math on a "facelift" for a buy and hold rental.

In my case it is a $55,000.00 property.  Considering up to $5,000.00 in upgrades.  This is assuming that I am going big.  Nice counters, new tile, and other higher cost upgrades.

Rent without upgrades $835.00.  With upgrades $885.00 possibly more.

My simple math says it will take me 8.3 years to get my upgrade investment back.  Of course, I will also be able to sell for more as well.

Your thoughts?

Eddie Memphis · Answer

Do it.

If you can afford it, the money spent on upgrades will add to the value of the property. Don't waste money or spend yourself broke for fifty bucks a month.

A nicer place will command a higher price, which will attract a more responsible tenant... in theory.

Be frugal. Not cheap, just careful.

Eddie

Al Williamson · Answer

Yes, you're asking a great question @Jay Dean

Since you're not taking about safety issues, I lean towards what your math suggests.

Making those upgrades don't justify the rent increase.

And as others have stated, if vacancy rates are low and you're not planning to sell in the immediate future - I would pass on the upgrades.

Another way of completing your thought is to compare your $5K upgrade investment to a buying another investment - such as placing a shed in the back yard and bumping up the rents.

Brian Karlow · Answer

Consider tenant quality and market time...will you be more desirable and therefore have a more selective approach to tenant determination??? Just my 2c.

BK

Ryan Dossey · Answer

If its clean/comparable with what's going on in your area....

You've got 50% of what's needed to buy another one... So 50 a month? Or another unit faster?

JD Martin · Answer

You're on the right track. Also to consider is how your unit will compare against others. Sometimes upgrades are really a no-choice type of thing because you end up at a competitive disadvantage. It really depends on your market. Selling it for more won't matter a whole lot for a unit that sees regular tenants, since they'll wear out materials.