When to Renovate a Rental Unit
Is renovating a rental unit generally a good move or should I hold off until it becomes absolutely necessary? I own a TH in North Slope (owner’s duplex & 2 floor-thru rentals). One rental unit is vacant and it has an old, ugly kitchen and bathroom. I think I could upgrade both to pretty decent…
Is renovating a rental unit generally a good move or should I hold off until it becomes absolutely necessary? I own a TH in North Slope (owner’s duplex & 2 floor-thru rentals). One rental unit is vacant and it has an old, ugly kitchen and bathroom. I think I could upgrade both to pretty decent quality for about $9-12k. I think the likely benefits are it’ll attract a tenant with higher income and the tenant will be likely to be happier and stay longer. I’m not sure how much more rent a reno’d rental gets vs one that’s not reno’d. Any thoughts on that incremental rent ($0 to $200)? Payback at best seems like 4-5 years.
From my perspective, this is a simple income/expense problem. First, does everything work properly now? If yes, will you achieve an acceptable return on investment over the time you intend to hold the property? Or, will you be able to recover the costs when you sell? If the answer is no, don’t do it.
If there are problems in the unit that require attention, then it’s simply a matter of doing what needs to be done at a price that will bring you the best return.
As for ugly kitchens and bathrooms, sometimes simply painting the cabinets (I use an HVLP sprayer) and replacing the hardware goes a long way. You can also replace the countertops with formica relatively inexpensively (17-20 dollars per linear foot)if you do it yourself. Linoleum is also pretty cheap and gives a new clean feel to the areas. All of this will cost you much less than you indicated.
Then, paint, paint, paint.
In my experience, there is no such thing as a “good tenant;” some are only better than others and all of them have a tendency to be less careful with your unit than you would like. This holds true for both high and low income units. In the past, I’ve done plenty of expensive repairs, only to find that I need to do them again in a year or two when the tenant moves on.
Good luck..
yes, i agree although not sure what your renovating- we spent 8000 on our garden rental- our tenant noticed immediately the new, clean bathroom (all home depot but a nice kohl pedestal sink)- every other place she looked she the bathrooms were awful- and also we purchased a nice GE stove- we did not change the cabinets or the counters and redid some sheet rock but overall it really made a difference- offering some eye candy- and if you have a good tenant and they are happy in their space then life in general is good.
Improving your rental apt will definitely make it more competitive. We lived in ours for a year while renovating the rest of the house so we knew it was a good space that folks would be likely to enjoy living in and not experience constant repair hassles. A tip: when our first tenants moved in — and stayed 4 years — they told us they chose the apt over a similar one nearby because we had installed a washer/dryer. Our new tenant was also thrilled to be able to do her laundry at home.