Upgrading a dated home…Is it worth it on a rental property?

Question

Hello BP community. This is my first "real" topic that I'm posting and I want to hear your take. So, we bought this home in June and we thought this would be the home where we'd raise our family for a few years. Unfortunately, my job thought differently and we'll be moving out of state next summer. We are debating on whether to sell it (if we have enough equity) or rent it out (which is what I'm leaning towards because we'd love to come back here in 4-6 years). I'll start that as a new topic when the time gets closer.

Now, back to my original question…Is it worth upgrading a dated home on a rental property?

Our home is 4 bed/3 bath, approx. 2600 sq ft, 3 car garage, in a desirable neighborhood. However, the home was built in 1987 and it shows. I'm pretty sure the bathrooms have never been upgraded (linoleum is in good shape, just looks dated). The kitchen floors and counters are tile with some ugly, dirty grout. The white kitchen sink has some small nicks. The kitchen cabinets are nothing to praise about. The only things in the kitchen that were upgraded were the appliances (stainless steel). The 2 fireplaces are definitely dated (surrounded by tile with no mantle). Even the light switch and electrical outlet plates are all almond color. The laminate and carpet in the home is in good shape, though.

We have put some work in the house. We removed the popcorn ceiling and spray textured it, but you can see the imperfections ( I don't look up too often so it doesn't bother me). We upgraded the dining & breakfast nook lights and ceiling fans. We also painted the kids' rooms, but it might be too "loud" as a rental unit because one room has "Victoria Secret" pink stripes with a ceiling fan definitely for a little girl's room and the other room we painted teal and it has a modern looking black ceiling fan.

A property manager said in today's rental market we SHOULD be able to get $2400/month (which would cover most of our mortgage/tax/insurance) just based on the location and size of our home.

Would you make some updates and if so what would they be? Thanks for reading my ramble.  = )

Colleen F. · Answer

Based on what you said I would do the following updates if you will be renting. Paint neutral colors right before showing (no reason to let the kids stop enjoying since you aren't moving until summer).  Replace only seriously dated vinyl with clean and neutral. Redo counters see what the local kitchens for rent have but dirty grout is more an issue then the dated aspect, makes the house look unkempt.  Cabinets sturdy and good leave them. You already have the SS appliances. It would seem to me it is more about presenting something neutral and clean to get you a good renter.  Put something nice in when you come back.  Of course if you decide to sell look at what is on the market there the upgrades will get you a better price.

Joe Villeneuve · Answer

Eric Mauricio "A property manager said in today's rental market we SHOULD be able to get $2400/month (which would cover most of our mortgage/tax/insurance) just based on the location and size of our home."

I'm I to assume that this means you have a negative cash flow right now?  If so, the real question isn't "should I spend money on upgrades"...unless it would allow you to increase the rent to get you back into positive cash flow.

Joe VilleneuveREcapSystemA2REIC

Don Crandell · Answer

My suggestion is a simple one, go out and act like potential renters tour a few homes around the same age as yours and renting for about the same price. Keep your search to around 1/2 to 1 mile away.

Compare your house to your competitions houses and only upgrade that which falls short of your competitions.  Spend as little as possible.

Steve Babiak · Answer

I would first look at what the nearby similar rentals have to determine any updates. You have to compare favorably with those rental competitors that the tenant prospects will be looking at when they look at yours. If the competition is all out of date and they manage to get tenants to move in, then tenants will accept that some things are OK to be out of date.

I have a rental unit that was built in 1960 and still has the original kitchen and pink bath, although the kitchen floor was replaced (too worn). Some prospects remarked about the kitchen cabinets (wood look that some wanted to have painted), but there was plenty of demand and other nearby rentals were a mix of updated and out of date - so no trouble getting a good tenant. Clean, freshly painted walls and ceilings, dry basement, off street parking, good school district, low crime so relatively safe neighborhood - those were the things tenants seemed to want most.

Bryan N. · Answer

Eric Mauricio

I'm closing on a property in a couple weeks and am debating the same thing.  It's rentable as is, but I'm considering spending a couple thousand to update the kitchen (looks 1986) and put in nicer flooring (replace carpet upstairs/laminate or allure downstairs) in hopes of attracting a better quality tenant.  It will bring in $1,250 a month probably as is.  Maybe $25 more a month if updated a little bit.  But, I'm thinking the updating will hopefully attract and retain a higher quality tenant and less time on market for vacancy.

Clay Smith · Answer

I have been using imported cabinets from China at $100 a box.  I also use in stock laminate from Lowes/Depot and $120.  Found these guys on Craigslist.  Warehouse cabinets in a box unassembled. I do pulls and deep sinks. I do this to increase appraise value and increase rent. This allows me to create more equity and leave less in the property.

• sink $120 (min depth 8")
• Cabinets X 10 ($1000)
• Toe kick ($20) and filler strip ($15)
• 10 ft Laminate ($120)
• Knobs and pulls ($60)
• Faucet ($60)
• Laminate end splashes $(30)
• Build up block kit ($10)
• Caulk ($3)
• P-trap ($10)
• Sink sealant & putty ($10)
• Drain kit ($10)
• Water supply lines x2 ($15)
• Lowes Frigidaire Range and Fridge ($1000)

With about 20hr labor I pay 3k a kitchen. Well worth the equity I add on a cash out refi.  Flooring is generally stock vinyl $.89 Sq stick tile.

I tell you this because it is important to knowing how much any kitchen you budget generally should cost you. If buying big box cabinets figure 150 a box.  I never buy high end cabinets, they depreciate too quickly.

Pat L. · Answer

I usually update the higher end SFH rentals (Spending the majority on the kitchens/bathrooms) making it ready for a quick sale if the rental scenario becomes tedious.

We have had several offers on a ranch I did several years ago (some from a tenants' guests) but the current tenant is OCD so the place is spotless & she is committed to 3 more years until her son finishes high school.

I just completely upgraded the kitchen & bathroom in a vacant unit in another property we just bought. We gained an extra $250/month above the previous rents & it was 'rented' several weeks before it was completed.

But we pay cash ....

Ursula B. · Answer

Check out your competition and see what homes in the area look like and are renting for.  In my personal experience, kitchens and baths are most important to renters.  I'd suggest updating those two areas, replacing the carpet if needed and paint.

Dawn Anastasi · Answer

i would definitely paint other than that try renting as is.

James Wise · Answer

I'd advertise it without updating it 1st. If you don't get a tenant then I'd think about an update or price reduction.

Upgrading a dated home…Is it worth it on a rental property?

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