Rehabbing Units

Rehabbing, Fix and Flip, Rental Properties
1

When it comes time to update a unit, or if your unit needs to be rehabbed, what are you guys doing to raise quality enough for a rent pop, without over improving, all while saving cost?

We have some SFR rentals, but we’re not doing much rehab while it’s a rental, but we plan to do a full rehab when we eventually sell. What interior design qualities, or amenities, do you find your tenants willing to pay a little extra for? Granite? Stainless? I’m sure this is subject to your asset’s price point, but in general what do you guys do to improve, without over improving?

Thanks!

2

You said it correctly — it is subject to your asset’s price point. Bingo. Ding Ding. LOL!! You won’t put granite in a $50k condo flip, probably, but you might put it in a $200k single family house.

Checkout: http://www.amazon.com/FLIP-Find-Sell-Houses-Profit/dp/0071486100/

That is the absolute best book on rehabbing homes. And it discusses this in detail. I highly recommend you read it.

And additionally, if you want to know what is “trendy”…ie what types of granite looks great, which rooms do and do not have tile, what color carpet and paint combinations look good together, etc - I highly recommend you tour new model homes. I have always enjoyed touring model homes…especially ones that are nicer than what I own so that I can dream about the future, LOL…but a side benefit is you know what’s cool/current and know whats looks good.

Hopefully that helps

3

For our cheap houses, it’s formica countertops all the way!
I love getting the old HW floors refinished. That really makes a place look better. It’s amazing what painting everything will do to improve it too. I also like to change all of the light fixtures. I usually put the $25 builder’s special ceiling fans in bedrooms and the $35 fans in the LR.
I like to make our places look nice and we have a good reputation because of it, but we just don’t go to extremes because of the type of house and the rent it will bring.

4

Make it clean and functional. Forget attempting to “get extra rents.” This is an amateur mistake.

5

Jay,

I just threw out granite and stainless, although I think there is a price point where these are are applicable. It seems counter-intuitive to say that no upgrades will give you more rent. All I’m asking is what, in your experience, tenants are willing to pay a little bit more for.

My thought is that if you have a unit that is completely out-dated, I think there is some level of upgrades that will be reflected in rent – the idea being that you’re bringing the unit up to market, without over improving with hopes to gain a rent premium. And this applies equally to reducing cost as it does growing rent… For instance, do you ever pull carpeting and put down durable laminate throughout, that way you don’t have to keep paying for carpet cleaners or replacing carpet? Things like that.

6

The guy I use charges me <$1/sq ft to refinish the HW floors and he does an amazing job. I’ve given him several jobs over the past few years. I will absolutely pull up carpet so I don’t have to keep replacing it. IMO, carpet is the enemy of LL’s who have cheaper rentals. The things I already mentioned can really help update a place. I also like putting down vinyl floors in the kitchen and baths. I’ve used both the old style glue flooring as well as the no glue vinyl. I was surprised at how nicely the no glue flooring laid down.

7

I guess it’s a judgment call.

The problem is, some people don’t have good judgment! :banghead

I’m just kidding a little here.

Renters don’t pay extra for anything. Go talk to a pool home landlord if you want proof.

Meantime, “dated appearance” is not the same as dysfunctional. “Dirty” or “damaged” IS the same as dysfunctional.

My answer wasn’t highly qualified, because so many things are used as a justification for improving a rental that I didn’t want to address it all.

Pride of ownership coupled with an inability to separate personal taste from what is profitable is a common amateur mistake.

Frankly, I made this mistake myself in the beginning, and I knew better! I’ve been involved in property management since I was eight.

But when it’s our first rental, and all the inner interior decorating hormones kick in, and our right brains get swollen with creative juices, before we know it we’re replacing kitchen cabinets and gutting the bathroom down to the studs, because one of the cabinet doors had a gouge, and help us, there was a rust stain around the tub drain, and lime deposits on the sink, and the toilet tank rocked back and forth…! Oh the humanity…!

I’ve done everything with floors, vinyl, carpet, tile. It all gets beat up. Tiles crack and chip. Carpet uglies out before it wears out. Vinyl gets ripped, stained and even shrinks. Grout gets nasty. And heaven forbid the renters get water all over an inlaid wooden floor and it starts buckling.

Of course we’re not using our heads, we’re operating on emotion and self-indulgence, if not our egos. We’re preparing to live vicariously through our future renters and justifying it all as a business decision. Pffft.

So, my answer is still, forget remodeling and upgrades in an attempt to justify higher rents.

BONUS:

Budget in the low-grade carpet replacements every 30 months, or until the carpet is damaged, or won’t clean. Use the cheapest, medium-brown, cut pile you can find. As long as you can’t see the carpet backing from six feet away it’s good enough for a rental. Is there such thing a 12oz carpeting? Use that.

Where I don’t skimp… is my paint. After using Dunn Edwards, and even Home Depot generics, and other off brands, I’ve come back to Sherwin-Williams. “Antique White” is the standard rental color. I use the “200” grade, because it covers in one coat. It’s not inexpensive, even with my contractor’s discount of 20% (which you should request and receive as a landlord).

If you always use the same brand and color, touch-ups become really efficient and quick. I’ve avoided having to repaint entire interiors just painting over the spots and defects. After it’s dry, it looks like new.

Labor is money. Having to apply two (or three) coats of cheapo paint is enormously uneconomical.

Then there is odor. Most paints will serve as an all-purpose deodorizer. So, if the unit stinks, a full repaint job might be necessary to re-freshen the place.

Hope that helps. :beer

Fix it, clean it, and forget it!

8

Amen to that… I’ve also thrown in upgrades at times and a year later or so when the tenant leaves, it’s all trashed… all that work and money you put into it just goes out the door… most renters don’t give a hoot about your house…

Fix it, clean it and get it rented as soon as possible…and get a bigger deposit!

–Mike