Repairs

[Jocie M.]

I'm am hoping to do some cosmetic repairs on the properties I invest in in order to force some appreciation; I am wondering how to account for actually making them? Does this extend holding time and therefore affect the amount of cash flow? What if there are tenants living in the units? Do I have to wait until they leave?

[Jon Holdman]

If you buy a property, I recommend you bring it up to rental standard for your area as quickly as possible. Get good contractors who can do it quick. Find out what's needed in your area by viewing other rentals. Don't over improve. If your area has rents of $1000 and formica or pre-formed countertops, don't think you can put in granite and get $1100. You won't. People who will pay more will go to a different area. If you overprice your rental, you get crummy tenants. That's because good tenants have lots of choices and will pick a cheaper one, all other things being equal. You'll get the desperate tenant that can't qualify anywhere else.

Conversely, don't scrimp, either. If your rental is worse than others in the area, you'll have to drop your price well below others to get a tenant.

Don't plan to get a tenant then start doing work. This is a BIG inconvenience for the tenant. If they have a lease, you can't change the rent no matter what you do. OTOH, if it desperately needs some work, and you can work around the tenant, do it. Just don't expect to raise the rent.