How to Best Prepare an Investment House for Rental (As Opposed to Sale)

by | BiggerPockets.com

There’s an awful lot of advice out there for how to make a house look amazing, and if you’re the kind of person who tends to run with the first ideas you come across, you can end up really shooting yourself in the foot when it comes to your rental properties. That’s because the advice that’s intended to make a house that someone owns look amazing is actually entirely different from the advice you need to follow for a rental. In fact, most aspects of rental house renovations and repairs are quite different from those same tasks when performed for an owned house.

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Repairs

Almost every investment property you purchase is going to need repairs. (Heck, a close relative of mine just spent $400k on a house and it needed $24k in repairs the day he moved in–and it was newly built!) But what you repair if you’re going to live in it–or flipping it so someone else can live in it–is very different from what you’d repair if you’re planning on renting it.

In part, that’s because renters are less picky than homeowners. They know it’s not “their” house, and so they don’t care as much about the finishing details. They don’t care about having plant hangers under the eaves or what color the fixtures are. They just want to know that everything works and they’ll be safe and warm and able to put their stuff somewhere. Anything you give them past that is usually money poorly spent.

The rest of the story is pure math: You’re still going to be responsible for the repairs eventually, so there’s no point at all in doing repairs now. Why buy a new water heater when you could get a solid 3-5 years out of that old 1987 water heater before it bites the dust? All you’re doing in that case is sacrificing 3-5 years of perfectly good water heating.

Related: 5 Crucial Questions to Ask BEFORE You Buy That First Rental Property

Upgrades

Similarly, in most markets, a solid investment property is probably going to be pretty old, which means the stuff in it is probably going to be pretty old, too. If you’re planning to flip the house, you need to upgrade basically everything to within-the-last-decade tech.

When you’re renting out the property, however, the same logic from repairs applies again. If you need to upgrade the wiring, plumbing, or gas lines because they’re unsafe, of course you will. But beyond the actual safety issues, it’s mostly a waste of money to upgrade items like the range, the cabinet hardware, or the bathtub fixtures. There are exceptions, of course; if the cabinet doors are noticeably off level, you need to fix that. But by and large, unless the tenant complains, it’s not your problem.

EXCEPT:

You have to keep up with the Joneses. No matter where your property is, there’s typically a baseline of renter expectations. If all the competing rental properties have appliances from within the last decade, you’ll have to give serious consideration to upgrading to match. If you don’t, you’re either going to wait a long time to fill your rental, or you’re going to have to keep lowering the price.

You can also make upgrades that focus on rental-appropriate attributes (i.e. a floor that will survive several consecutive tenants) rather than sales-appropriate ones (a floor that matches the aesthetics of the room perfectly). Combine those two factors, and you can end up making your upgrade costs back, plus a decent amount of extra by the time your upgrades have to be re-upgraded again.

Related: 10 Home Staging Tips to Help Sell (or Rent) Your Property FAST!

Aesthetics

Here’s the big, bad difference between flipping and renting a home. When you’re flipping a home, you can afford to decorate with a specific aesthetic in mind. The MLS listings reach enough people that being able to put “Art Deco styling” or “ultramodern” into the description will help you sell the home. So go ahead and put a few grand into getting those particular crown moldings; someone will love them!

A rental, on the other hand, has to appeal to a huge variety of potential viewers. It has to come across as a blank palette ready to be turned into whatever your next tenant might love. This is why almost every rental you’ll ever see advertised is painted a color somewhere in the “taupe-ecru-eggshell” spectrum–because those colors don’t exclude any visions of what the space might look like. It’s also why you should paint your new acquisition in the same vein if you intend to rent it out.

Any tips to add to this subject?

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About Author

Drew Sygit

Drew is the manager of Royal Rose Property Management, a fairly high-tech solution for Detroit Metro area property owners & investors.

35 Comments

    • Katie Rogers

      I say add the screen door. It will not raise the rental price, but tenants will appreciate it. And as someone else mentioned, a little extra quality is likely to be cost efficient because it will last through several tenancies, and may also encourage better care than the cheaply-done rental. It is not that renters are less picky. It is more like renters have choose from what is available, and it is the landlord who is less picky because he doesn’t live there. In general, a little more empathy is in order.

      • Marcia Maynard

        Screen doors are a necessity in some locations and more of a bother in others. We prefer not to have screen doors. One more thing to get damaged… and they do get damaged easily. Very few tenants in our location want them or even ask for them. However, we do put screens in the windows.

        • Drew Sygit

          @WENDY BLACK: our biggest guiding principle is “Maintain to the neighborhood standards and don’t exceed them”.

          Exceeding the neighborhood standards, while it may rent a home faster, will not typically increase ROI.

        • Katie Rogers

          Then you better have lots of windows. Too many rentals do not have enough windows, and the tenant must be able to leave the door open to get air flow on hot days.

      • Drew Sygit

        @KATIE ROGERS: We wouldn’t recommend just adding a screen door, for example, unless we knew it would be a detriment to the property’s ROI.

        Owners need to be careful in balancing how far they take maintenance in relation to ROI.

    • Drew Sygit

      @DINA EISENBERG: How often do you offer existing tenants a small upgrade of their choice to a home to entice a lease renewal?

      We are all guilty of looking for “the grass is greener” situations, tenants even more so as they are more transient by nature. Keep in mind the landlord-tenant relationship is really a business negotiation — and in what business negotiation to do you show all your cards upfront on?

      While we like being the most sought after rental property based on location, it makes little business sense to be the most sought after based on the price-for-what-you-get ratio. That usually means a landlord is leaving money on the table!

      If you think you must supply the best home on the rental market to attract tenants, we suggest you visit the current homes of a few of your applicants. We guarantee you’ll be surprised by the difference between what tenants say they want versus what they expect and will accept.

  1. Eric Reichelt

    I can barley stomach this idea, I see it where I am and of course everywhere where landlords don’t care about the community. It’s shameful at best and purely driven by zero empathy. I love how the money dictates what you believe people desire in a home. How many homes have you seen with no real appeal and thought awesome, I’d love to live there?

    • Drew Sygit

      @ERIC REICHELT: the empathy side of our brain hears you loud and clear! But, the business side of our brain rules, as it should.

      If you have enough money to just give it away as a philanthropist – we’ve got lots of ideas on how to spend your money to make a positive impact on a community:)

      In the meantime, our owner clients expect us to focus first on make money for them, everything else is secondary. Now if we can find ways to serve both, we do:)

  2. Jerry W.

    I agree that how a house needs to look to sale it compared to how it needs to look to rent it are very different. If you were planning to flip and ended up renting for a year there is a lot of touch up that would be needed. The cost of wow would rarely pay off in a rental.

  3. Nathan E.

    When I needed to replace the counters in my rental, I thought about this question. Since the surface was small, the upgrade from laminate to granite was proportionately small. No rentals in my area / price have granite so this is something that gets people on the phone, in the door, and ultimately on the lease quickly. Its also a durable surface. That said, now that I know how to install the prefab laminate counters from HD, I’ll probably stick with those all day.

    • Drew Sygit

      @NATHAN E.: it sounds like you made a business decision as you thoroughly calculated the additional cost of granite and found it to be small enough to absorb into your ROI.

      Great job!

      Upgrading to a very durable product can make sense in the right rental location as it will last longer and improve your ROI over time when it doesn’t need to be replaced again. We make the same argument with hardwood floors versus carpeting. Hardwood costs more upfront, but less in the long run as it’s cheaper to maintain.

      You just have to be careful NOT to do an upgrade like this that WON”T last long enough to improve your ROI or won’t add value you to our rental. Putting granite in a low-income home would probably be a foolish investment as it would take “forever” to improve your ROI.

      BTW: quartz is actually better than granite. Granite is actually porous and fairly easy to stain. That’s why it must be sealed annually.

  4. Cheryl Hutchison

    When it comes to counter tops, I address my acquisition with how current does it look and what condition is it in? I have used quartz in a recent acquisition because of the durability factor. I know those counter tops are going to last through several tenancies whereas a laminate says, cheap rental and no need to be careful. My philosophy is create a rental property that the tenant would enjoy living in…not just existing. But then I guess that is why there are econo lodges and Hilton hotels. Would you rather rent to someone who can afford a little more or the basis low cost applicant? I find giving a little more gets more in return.

    • Drew Sygit

      @CHERYL HUTCHISON: We don’t disagree with you, but a landlord must be careful when walking what we think is a fine line.

      Check out other replies above about checking out an applicant’s current home and when a higher-cost upgrade makes sense.

      Congrats on choosing quartz over granite:)

  5. Deanna Opgenort

    I’ve been happy with having modular flooring (carpet tiles — twice now indelible stains have been removed by simply pulling out the damaged carpet tile and replacing it with a new one. I have the legato style (post-it-note type adhesive, wavy edge). I got them on Craigslist, so 20% of new price, but they’ve seen me through 5 years of tenants with dogs & kids, and it still looks really good (color looks darkish brown).
    I like the idea that I’ll be able to replace JUST the damaged part, rather than 800 sq feet of carpet at a time (or handing over an increasingly dilapidated rental).
    Next project is click-lock vinyl planks for the kitchen/dining room. Anyone have any suggestions for these?

  6. Waverly Rennie

    Hi @Deanna- I just did the click lock laminate flooring in a short term rental, Super easy and fast. I got it at Costco when they had their $10 off per carton sale, which they apparently do several times a year. I ended up with enough to do 2 bedrooms for about $450 in materials. I also had to spend about $20 for an installation kit at Home Depot (the mallet and a puller-thing that helps you pull the boards together) plus about $6 for a little handsaw and $12 for the plastic covering you put on the concrete subflooring. I had never done it before, and am not at all handy, so I got a semi-handyman friend who had done it in his own house to help. The main challenge was that we put it in and then realized we were going to end up with a very thin strip to fill in on the front edge of the room. So we then cut the very first row, at the back of the room, in half, so that the very thin strip at the front would be more like 3/4 of a plank wide, and shifted the whole pre-assembled floor back towards the back of the room. Longwinded but just to say that if even a dummy like me can do that……

  7. Marina Kimak

    I am very surprised by the tone of this message and low esteem for people renting apartments or houses. It is also counterproductive to think about your home as being a “cheap rental”. In the end, what you put out, is what you will attract. If you are not able or willing to add value, to keep your property at the highest level possible, and consider your tenants as deserving beings (after all they pay your mortgage), than maybe you shouldn’t be a land lord, just a slam-lord. I am not sure for which purpose this article was written? Maybe just to stir a discussion?

    • Marcia Maynard

      The author makes some good points. Although I don’t agree with his blanket statement that “… renters are less picky than homeowners. They know it’s not “their” house, and so they don’t care as much about the finishing details”, in my experience of 20 years, what he said is more often true than not. The key is in knowing your market and being responsive to it.

      We choose durable and good looking materials and will make upgrades from time to time, even while a tenant is in place. We also employ a policy of “make it your own home” whereby we will make an improvement or add a feature that is of importance to the tenant, upon their request.

      I didn’t read into it that the author was advocating to offer a “cheap rental” or to be “slum lord”. To the contrary, I think he makes some valid points, especially…. “A rental, on the other hand, has to appeal to a huge variety of potential viewers. It has to come across as a blank palette ready to be turned into whatever your next tenant might love.”

    • Drew Sygit

      @MARINA KIMAK: If what you are doing is returning an acceptable ROI, then just keep doing it and ignore the advice of others:)

      We are interested in your comment, “If you are not able or willing to add value, to keep your property at the highest level possible, and consider your tenants as deserving beings…”

      This would imply that your rentals are the best properties in your area. How do you balance your ROI against putting so much money into your rentals to maintain them as the best rentals?

  8. Wendy Hoechstetter

    I disagree that tenants don’t want as much in a home as purchasers, *and* that you can go wild with style when doing a flip.

    *Good* tenants very much do care about what the place look likes and how it functions – and will take better care of everything. But you’ve got to have amenities and quality to attract them, and obviously the right location as well. Tenant don’t *expect* as much in a rental, but good ones do still appreciate having more than less – and having quality workmanship.

    If you really want to sell a property as fast as possible, keep it generic, to appeal to a broader cross-section of potential buyers, but still use high quality materials. Think “staging” – which is intended to appeal to more people than fewer. And do actually stage it, in a style complementary to the property and what you’ve done with the interior.

    The same is true of rentals, although of course you need to take durability and life cycle cost more into account than with a flip.

    • Katie Rogers

      “…although of course you need to take durability and life cycle cost more into account than with a flip.” I do not like a flip that cut corners on durability and life cycle, mostly because it usually means that the seller is expecting premium payment for lower quality.

    • Drew Sygit

      @WENDY HOECHSTETTER: Everything you state is true:)

      A bit confused as you open with stating what tenants “want” and then state they don’t “expect” as much in a rental.

      Just to be clear, our position is that there is a difference between what tenants want and what they expect. To prove this to yourself, just visit the current residence of your next rental applicant. To further clarify our position, this difference between “want” and “expect” is usually larger in low-demographic rentals and smaller in high-demographic rentals. So, the more a tenant is spending on a rental home, relative to the marketplace, the higher their expectations are. Movie stars spending tens of thousands of dollars per month on rentals, expect perfection. A tenant with only $300/month to spend won’t have those same expectations, but they still would like a perfect home.

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