How much should I renovate a rental property?

Question

I am about to buy a SFH to rent out. It is a bit dated and will need some work to look ready for future tenants. However, I am struggling to understand what work is worth my time and money. Do you guys have any advice on what is too much vs what is too little in terms of renovation?

Adam Martin · Answer

The same rule of don't be the nicest house on the block applies here as well. Homes in certain areas have price ranges and just because you put a lot of money in nice finishings doesn't change the fact you have a 3/2 1500 square foot home or whatever yours may be and that is what your renter is comparing to. Go on Zillow and see what other people are posting and try to be marginally above average. Your best bang for your buck is fresh paint, lvp flooring, and I like SS appliances. They aren't much more but I feel make the kitchen look much nicer. If you are willing to rent to people with dogs it will rent much faster with a fence and you can command more rent since that is a huge convenience. Just remember this isn't a HGTV house so focus on longevity and things people will notice quickly. Also avoid the latest trends since they change so quickly, upgrades that are great today will look dated soon and you don't want to have to demo them out later.

Andrew Syrios · Answer

That is a question that would require a lot more information to properly answer. What I would say is that you don't want to go overboard with rentals (unless it's a luxury rental, which I assume it isn't). Make sure everything works, there's nothing that will cause bigger repairs down the road (i.e. foundation issues) and everything is at least decent. Don't use cheap materials that will only last a year but don't use things like granite slab countertops. A (very) general rule of thumb would be it should be nice enough that you would be willing to live there but not so nice that you would really want to.

George Azita · Answer

We renovate every rental unit 100% so when tenants move out the only thing we need to do is clean, paint and then we can get a new tenant in within a few days.We don't want to do a partial renovation where we have some major repair or partial renovation to do every time a tenant moves. For example, we don't want to renovate the kitchen and then have to renovate a bathroom then next time a tenant moves.When we renovate units we try to renovate them so they last the rest of our natural life. Everything wears out, but when we install 100% wood kitchen cabinets vs. crap and we install cabinets where we can easily change the faces then we don't have to worry about ripping the entire kitchen apart down the road. We always make sure the electric wiring, drains, sewers and water pipes are copper or PEX (polyethylene) so we don't have to do major plumbing repairs down the road.We never install dishwashers and never install garbage disposers in our units and this save everyone a lot of time and money down the road.

Michael Cross · Answer

@Nathan Park My Advice is to start with the end in mind. It sounds like the property is vacant which is fantastic: 1. You can work with your property manager to get a well vetted tenant2. You can assess the cosmetic repairs that need done to make the property competitive.3. You should take stock of the capital expenditures that need to be completed.If you bought the property with a BRRRR in mind and have the bandwidth in your budget i would strongly encourage you to focus on the Plumbing and Electrical portions before you get the property locked into tenant rotations. Does it have an upgraded electrical panel? Knob and tube wiring? is it still copper pipes or old steel pipes? take stock of those problematic items and replace them, especially the ones in the walls that will be a pain to do maintenance on once a tenant is in place.Also think about tenant proofing your property. While you don't want to over improve it, consider durable materials in your choices.If you find an affordable contractor and granite guy, a nice kitchen with granite countertops may enable a bit higher rents in your area.Finally, consider who your tenant will be. A high quality renovated property is very appealing to a lot of applicants. Spending a few thousand more on upgrades that will be durable, attract more tenants, and attract higher quality tenants will pay off in lower turnover and increased tenant reliability with decreased maintenance expenses.

Nathan Gesner · Answer

You need to do enough work to make it competitive on the market. If it is a 3/2 home, compare it to other 3/2 homes and see what others are doing. If you're in a market with dated bathrooms and kitchens, you can probably leave yours dated and just make sure it is clean, safe, and operational. If you're in a market with granite countertops and steel appliances, then you'll have to step up your game to stay competitive.