How much to Rehab Buy and Hold Rental

Question

So I have an accepted offer on what will be my third rental property. But this is the first I've purchased with the explicit plan to keep as a rental.

Background: The first rental was purchased back in 2006 and was intended to be a flip. Completed the rehab with that in mind, couldn't sell it, and converted it to a rental. It's been a solid rental over these last 7 years. 3 tenants over that time, and the most recent has been there 4+ years and I don't expect them to move anytime. 
	
	2nd rental was my own home that I kept as a rental. I did updates/rehabs on that home for myself, and have had the same renter there for 3 years now, and they also want to stay long-term.

This 3rd property is not far from the first one, it's an REO but really is in very solid condition and just needs some cosmetic work. My biggest question is how much do BPs members rehab their long term rentals? Obviously I plan to do some plaster repairs and paint the entire interior. The appliances are ancient and I'll replace those. Also do some updating in the bathroom.

The biggest questions for me is what how far to go in the 1) Kitchen and 2) refinishing the hardwood floors. Neither are what I would consider poor, I'd rate both average. The kitchen cabinets aren't laid out very great and they are dated, but they are solid wood, painted white, and certainly not a total eyesore. The sink and countertops are totally functional, just a bit dated and some loud/odd color (purple) for the countertops.

The hardwoods don't have any damage, but have a decent amount of wear. I refinished them in my 1st rental and they came out nice, but again that was when planning to flip. Not sure if it's really worth it or not.

On the other side, I love the good quality long-term tenants I've managed in my other 2 properties. They treat the homes like their own and even do their own updates and improvements (landscaping, painting, etc...) I'd love to land the same mentality tenant this time around, so maybe it's worth sinking a few extra $k's now? 
	
	Thoughts?

Shawn Holsapple · Answer

Welcome @Rusty Scott !

It's always good to see another Hoosier on BP.

It sounds like the home is older [Pre- 1945]?

I always want to try to eliminate as many service calls as possible for a long term hold.  I replace the HVAC if more than 10 years old and the water heater if more than 5 years old [since we typically have very hard water in Indiana].  If shopped correctly, these items are not too expensive. [I pay about $2500 installed for a new gas furnace and central AC.  About $500 for a new water heater.

I always upgrade the plumbing to PEX if possible as well.  When it comes to flooring, I do hard surfaces everywhere except the bedrooms.  It sounds like the hardwood is an easy update project.  If it's a lower end rental, I would suggest a good quality vinyl flooring in the Kitchen & Baths.  Otherwise, I [pay] to have tile installed.

If there is a basement and it has a sump pump, I always be sure the pump is in good working order and has a battery back up.

I've found that Menards has the best prices on counter tops by far since they own their own wood shop.

Everything else, I just be sure it's safe and clean. Like @George P. mentioned, I've went way overboard in the past only to not be appreciated by the tenants.

I hope that helps.

Aaron Montague · Answer

@Rusty Scott

I agree with "market conditions" analysis from above. Fresh paint is probably the single best renovation item you can do :)

2 tips:

Learn to tile. @Kevin Fletcher  makes an excellent point about protecting with tile. Plus it will save you a fortune in labor.

Buy extra tile and hardwood flooring and store it someplace dry. Occasionally you'll need to replace pieces so having an extra box or two on hand makes life easier.

Kevin Fletcher · Answer

@Rusty Scott I think inexpensive and easy is the way to go but do a good evaluation of things that could be a problem in the future. If there are hard wood floors put extra coats of polyurethane so floors are extra protected. I love tile, I could put it on every surface cause it protects better than anything else. Just evaluate what aspects of the house that are susceptible to wear and tear and then over-engineer to make them stronger.

George P. · Answer

I spend way too much on rehab. . Way too much

Ryan B. · Answer

For the cabinets I would just do another quick coat of white paint and switch out the counter tops and hardware. That would be cheap, easy and make the kitchen look better.

I usually sand the hardwood floors and throw 3 coats of poly on.  Again cheap and easy.

Brant Richardson · Answer

Get on craigslist and see what level of finish your competition is using.

Ryan B. · Answer

Whenever I am tiling I always have the Umpa Lumpa song from Charlie and the Chocolate Factory going through my head.

Dawn Anastasi · Answer

For me, I didn't like to get messy with the mortar and grout.

Aaron Montague · Answer

@Dawn Anastasi

There is something robotic and therapeutic about tiling for me.  I think it might be the repeated pattern or something like that.

Tile zone out?

Dawn Anastasi · Answer

I agree on the paint 100%.

I did learn to tile and did not like it.

How much to Rehab Buy and Hold Rental

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