Should I upgrade/update my rental property?

Question

Hello,I have recently inherited a house that is near a college. It is around 2,500 sq ft with 4 bedrooms and 2.5 baths. I just replaced the roof on the property but I am now wondering if I should make any further updates to the property or if I should just rent it as is.My dad built the house in the 90's and pretty much has not been updated/maintained very much. It is a tough decision for me on whether to update it or not because the property means a lot to me personally.I believe I can currently get around $2.5-3k in rent but I am not sure if any upgrades would add value. I do not plan to rent to college kids but I am not against it if it becomes my only option at certain times. Thank you.

Kevin Aumack · Answer

@Nathan G.That makes sense, thank you. I will consider what may be worth upgrading versus just keeping as is. @Evan Polaski That is also part of my thought process beyond just the numbers on the P&L (more intangible aspects). I do suspect that if I upgrade it would eliminate the worry of maintenance since it has been so long since anything has been taken care of and I feel as if I left it as it as now, the tenants would neglect the property more so then not. @Andy Grizzell I agree. I was leaning towards renting towards families even if it meant receiving less income because I felt they may take better care of the property. I may then have to lean towards more amenities in that scenario. @E.S. Burrell I like that idea. Instead of putting everything out all up front I could do it incrementally to make sure the property is bringing in the returns I suspected it would. I think I will finish with the outside (I have already started this) and maybe update the kitchen and do the rest from there.Thanks everyone!

Nathan Gesner · Answer

The only updates I would make is to make it as bullet-proof as possible. Flooring with a long wear life. Solid doors, not hollow core. Good paint. Strong bathroom fixtures, kitchen cabinets, and countertop. You want something that is functional, generally attractive, and can stand up to a little abuse.

Kevin Aumack · Answer

@Kevin Sobilo Yes, I put much thought to the situation and I do want to rent the property out. My only other options would have been to sell it which I did not want to do or let a family member stay there since I will not be occupying the property. I will not be self managing the property as I will be hiring a property management company to do most of the legwork. This will be my first rental property so I am trying to learn how to approach it.

Kevin Sobilo · Answer

@Kevin Aumack, are you sure you even want to keep and rent the property? Having an emotional attachment to a property is starting things off at a disadvantage because even a decent tenant isn't going to act like you think they should all of the time. Also, if this is your only rental and you plan to self manage that can be difficult as well because when things are going well, you won't really even notice or pay attention and when they go badly it will be ALL you can think about. If its your only rental you don't have other cash-flowing rentals to carry things when something bad happens and bad things do happen sometimes. If you self manage just one rental you will also never become proficient at managing the property.

Evan Polaski · Answer

@Kevin Aumack, there are two main reasons to upgrade something: a) and as Nathan mentioned, to get rid of a maintenance issue and b) if there is upside to the improvements. For many, upside is rental income. but I have changed my view on this, slightly. I now upgrade for hopefully more income but also to appeal to a more selective tenant base, since this tenant base tends to be more responsible overall, they take better care of the property (partly because they respect that I have pride in it too) and generally, have better financial means (so a more secure rental stream).I have found that when I left things showing some age, my rents were slightly lower, but more so the applicants were of lower quality, overall.

E.S. Burrell · Answer

I would first start collecting rent then cosmetically upgrade something every year; your tenant would be paying for the upgrades. I would start with curb appeal and go from there.

Andy Grizzell · Answer

@Kevin Aumack That is a great sized house near a campus. Generally, a college student doesn't rent a rooming house based on amenities, and you could get more renting to 4 or more students at once. I'd think the rest of your potential renters would look for significant amenities if they're going to spend near 3k a month on a rental near a university.