How do you determine quality of a rental?

Question

I'll describe my situation as opposed to asking a question, and please chime in:

To start, I work my W2 as a Quality Control Analytical chemist.  My attention to detail, while sometime lacking in the chemistry setting, is quite thorough when it comes to real estate.

We are renovating our first unit after the inherited tenants moved out.  It involves painting everything, replacing carpet with vinyl plank, new counter in kitchen, basically whole new bathroom.  Throughout the process there has been a continual clashing between my partner and I in the level of finish we should go for.  While our materials are par for the rental we have, the attention to detail is lacking on his part.

Painted a whole doorknob white, siliconed a drywall corner (cant be painted), non-varied flooring planks running down a hallway, etc.

His argument: It's a rental, only you are noticing these things, you aren't going to live here, who cares.  I just want to spend as little time and money on this.

My argument: I don't want to do any of this work again, I don't want to answer with "me" to "Who would do that?", and I want to be proud to put my name behind this.  I can't sell a subpar product for a premium price.

Please chime in with constructive thoughts.  I am not one to pick a fight in the middle of a project, but it is getting to that point.  I am just looking for some intelligent talking points to go with, so I can present a solid argument.

Cameron Searle · Answer

As a side note the only ship that won't sail is a partnership.

Kyle Eckert · Answer

@Max Householder I agree 100% with everything you are saying.  After this project I will attempt to set some quality guidelines for our finishes.  We are also going to outsource a few of the items which took most of our time and energy, so we can concentrate on the important finishes.

@Linda D. I never thought about concentrating on the things people look at.  A very "duh" approach once you mentioned it, which is probably the best part of these forums.  The kitchen wasnt horribly finished as it was, so we added a nice laminate countertop and left the rest as was.  It also needs a microwave and a dishwasher, which I can upgrade to stainless once I can find a deal on them.

Max Householder · Answer

There's a big difference between choosing the level/grade of materials and choosing whether or not to do quality work.

Which way you go should depend largely on your competition for the level of tenant you're after. Dogtown is a great area to live, I lived on Tamm for a year when I first moved to the city, but it's not high end per se, I'd call it functional for the most part, so you should be able to get away with cheaper-ish materials and average finishes. That said, IMO there is zero excuse for doing poor quality work whether you're laying Italian marble or cheap vinyl.

It's really not hard to make low-end materials look nice and fresh for long enough to satisfy a new tenant. Personally, I wouldn't want to rent out a unit that I wouldn't live in myself and if the workmanship was that shoddy, I would be concerned about what other corners are/will be cut. As far as tenant quality, someone who'll put up with living in a crappy-looking apartment is probably going to be a crappy tenant.

I don't know the nature of your partnership, but it sounds like you have diverging views on how to operate this property. If you can't get them to see things your way and get on board 100%, I would look for another partner on the next one.

Max Householder · Answer

As far as the tack to take with your partner, every successful real estate investor I've heard on any REI podcast, and I've listened to hundreds and hundreds of REI podcast episodes at this point, they see their tenants as a key part of their business, almost like a partnership or a valued employee, which really they are, they're the engine of your success. Without good tenants you're going to struggle. I have never, ever, ever heard an investor talk about their growing portfolio of 100s of units valued at $10s of millions and say yeah, we just throw a sloppy coat of paint on everything and slap down a floor, screw it, they're just rentals you don't have to live there. The conclusion I've drawn from all those interviews is that it's impossible to be a successful landlord with a negative attitude like that toward tenants. Just my 0.02

Linda S. · Answer

@Kyle Eckert,

Sounds like your head is in the right place, and not  remodeled got $585, so without knowing anything else, $700-$750 sounds very competitive!

My suggestion, would be to include stainless steel appliances,  and do a back splash in the kitchen, it will cost a few hundred more, but it will have the "wow" impact you need to get it rented quickly!      Focus on what people look at, and then figure out how to go as cheap as possible where it doesn't matter.

Kyle Eckert · Answer

@Linda D. Thanks for the insight.  We are in a Dogtown, a "good" neighborhood in St. Louis city.  I live here.  My idea was to finish it a bit above average for rentals, and aim for the 65-75% of possible rents.

Maybe I didnt explain my thought process enough to get it across.  Totally possible.

Regardless, it doesn't help that my partner has it in his head that we are going to get $900/month because he had a friend pay that.  Previous tenant was paying $585, and I am hoping to get $725, or $700 if they take care of the yard.

Linda S. · Answer

@Kyle Eckert,

You need to determine what type of tenant you're going after.     Everything you mentioned to me sounds atrocious, and no offense but flat out stupid-- door knobs are $8,  and you can get 30-minute mud for drywall that's another $8, the caulk thing is horrible!  I say this, because I accidentally use silicone caulk once, it looks HORRIBLE.

How do you plan on pricing them?    Rental Price needs to match the quality of house, and quality of area.    We do a lot of the renovations ourselves.. and we aren't pros, especially our first couple.. but they're priced them lower/correctly, and we put $$ into making them look/feel nice,  and they get rented quickly!     So they If they're cheaper, people will look past it, but if it's a stronger and competitive market, and you're going for a premium, good luck-- it will sit!     Maybe explain to your partner, if you cut corners, you're cutting rent potential.

Kyle Eckert · Answer

@Michael Baldinger @Sai Toll @Cameron Searle @Brian Pulaski

What I am hearing is resonating with the my take on things.  I just needed to hear that, as everyone I am working with is saying I am over analyzing it.

After we finish this project and get a tenant in there, we will have a sit down.  I am going to call it a "Pain Audit."  We can identify the parts of this project we hated, and find a solution.  I plan to outsource painting and flooring on the next one, along with setting quality standards for anything we personally do the work on.

I may set quality standards with all contractors as well, we can see how that goes over.

How do you determine quality of a rental?

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