Closing on a rental w/ one definite repair needed

[Cody Barrett]

Hello everyone!

So it is a 2 unit duplex, upper/lower 2bed 1 bath.  lower unit is not rented where the upper is.  Great tenant, very clean, and long standing. His bathroom faucet has a leak unless the handle is turned a certain way. After the inspector walked it with me he said it is not major, just take care of it right away.  Pipes are fine.  Just an old vanity/faucet.  So the bathroom is just kind of old.  Needs updating but the area doesn't call for high end updates.  Market is 600-900/month... But the area is nice, just landlords seems to have older amenities. So I don't feel like the upgrades would be super expensive being middle of the road but modern. 

So my question:  Would you simply fix it with a new faucet/vanity and knock out half of the updating with the tenant living there by just doing those 2 things? I don't know how long that stuff takes.  (My first property I have ever owned).. The flooring is fine but the toilet, bathtub, and there is a window I want to replace with all glass that I would like done. Or just replace the faucet and wait to do the bigger stuff when/if he moves out?  He is happy but pays below market rent since he's been there for 6 years and the landlord likes him.   

Thanks everyone,

Cody

[Ralph R.]

@Cody Barrett

Cody you said something that set me to thinking.  why would you do a partial re-hab or upgrade for a tenant/unit that is paying below market rent?  something you may not be aware of is that most duplexes are appraised by income potential as much or more than by cosmetics.  When you raise rent you force appreciation to a degree.  If I were you I would go ahead and do the improvements, but don't omit the part where you raise the rent a little bit.  you need to be getting current rent, and if the guys there another 6 years his rent is gonna be way under market, and your going to have to do work to make the place rent ready anyway.  it looks bad to buy a place and raise the rent right off the bat, and im not saying you should do that.  fix the faucet, and do the rehab or not.  if he has a lease raise the rent a little when it renews.  if he is month to month you can wait a few months then raise the rent a bit.  be careful though if he's a good tenant you don't want to loose him.  I raised rent 25.00 a month once and lost a tenant for it. (The good news is the water bill went down a bunch when they left.)  2 or 3 smaller raises are more likely to keep him around longer. Raising the rent will be easier if you have done the re-hab.  Its really not up to you to lose money because the previous owner "liked" this tenant.  your rentals are a business  and if your are going to be successful you need to treat it as such.  Putting money into an apartment that's not producing full rent doesn't make lots of sense to me.

RR