How to keep tenant and still make major repairs and renovations

Question

I have a house I purchased with a tenant who hasn’t had much of a rent increase in the past 10 years. Nor has there been much in the way of upkeep or renovations in her apartment so it's outdated. Her current rent is at about $125-$150 below the average local market rate. Clearly I want to correct this.

Some major cleaning, painting, repairs, and renovations are necessary in order to make the apartment competitive. The tenant has no lease so I know that I can ask her to move and that would be my solution. Except that I’m toying with the idea of asking her to stay. She’s quiet (at bit messy with cats but nothing out of control), pays her rent on time, and if she were to look for another apartment to rent in the area I don’t see how she would find one that is priced better and comparable to what I offer once I make all the necessary changes.

My options (as I see them) are to start over with a new tenant. Meaning complete cleaning and painting in addition to the repairs and renovations.

Or keep new tenant and offer to upgrade appliances, make necessary repairs, replace windows, and some painting. SOME.

The trick is that I would need her to move out for a certain period of time (perhaps as much as a week) before I begin work. The bathroom floor repair and window replacement alone means she won't have access to the bathroom and her cats would be in the way.

I’m trying to think up of creative solutions to work around this.

I always prefer to keep a good tenant if at all possible.

Any ideas?

Ilidio Cardoso · Answer

I would just raise the rent $75- 100 and do no do repairs/upgrades.  I would let her know that due to the increase in over head bla bla that you have to raise the rent and it will still be under the area market rent.

In my experience most tenants do not want to move and fork over  more money for moving cost etc.  In Massachusetts the move in cost is usually 3 times the rent.  First, last and security, not sure what it is in your state. Either way moving cost money.  Nothing is impossible but doing a remodeling project in an occupied apartment is a hack job at best from my experience as a land lord. (2004-Present).

In my opinion just keep collecting the rent and put the rehab money aside for now.

Hope this idea helps

Marc Winter · Answer

In my experience, a bathroom floor, even stripped down to the joists with new subfloor and floor covering shouldn't take more than a day or 1.5 days.  (Average 5x8 bath).  By the end of day one, you can have the toilet reinstalled and finish up after that.  Painting can be done room by room over time.

Most importantly, let the tenant know that with the improvements you will be raising the rent $xxx/per month.  You might be surprised that the tenant doesn't want the 'upgrades' if it means a rent raise.

BTW, IMHO, replacing vinyl sheet floor covering with ceramic is an upgrade; replacing a rotted bathroom floor, or painting when it's needed are NOT upgrades--they are basic maintenance issues.

Good luck with the cat lady.

Caleb Heimsoth · Answer

@Armando Morales raise rent 50 bucks and do nothing.  You’ll make more money this way.  When the tenant leaves do renovations and up rent the rest of the way.  Never make a good tenant leave

Account Closed · Answer

I have a slightly different take than some, and that is to calculate the cost benefit to decide if certain upgrades make sense. I do this for anything that is a questionable repair. Certainly, the "don't fix it if it aint broke" strategy is always the foundation of everything however, there are also times when it makes financial sense to invest in upgrades. I also subscribe to the "keep a long term tenant right where they are" but again, sometimes that doesn't make sense either. A great question to ask is "how will I feel about this decision 5 years from now?"

People here are talking about the difference between a repair and an upgrade and I think that's a great point to make. How about when a necessary repair is an over-improvement? LOL

Anywhos...add it all up and out. $1500-$1800 a year is a pretty nice chunk of change in my book.

For instance, in the last property I just did, I calculated the cost of swapping out the doors and trim in a unit that were painted and not working very well. While it would have been a substantial cost up-front, it would have made a considerable amount of money in the long term, simply in terms of routine maintenance and return in higher rents. In addition, the property would have been worth a bit more (not too much), and significantly more marketable. The only reason I did not do it, is I ran out of money!!!

So, there are a bunch of variables to factor in, but that's how I would approach the decision.

As far as the tenant being in the unit, that is certainly a hassle and not ideal, but it is also not impossible to deal with. It comes down to coordination with the tenant and the workers.

Good luck!

Theresa Harris · Answer

I'm guessing the house has one bathroom.  Find out if she's going to be out of town for a few days as that would be the best time to do it.  If not, ask if she has a friend she can stay with while you repair the bathroom floor as the bathroom won't be usable.

Are you basing the market value for rent on the current condition or updated condition?  I'd do the repairs that are needed and hold off on the upgrades and painting.  How much will all the upgrades cost and how long would it take to recoup?  You can still increase the rent a bit, but I doubt the amount you'd spend updating plus loss of rent and perhaps a vacancy would balance the increased rents in the short term.

Thomas S. · Answer

Necessary repairs only, no renovations and no replacement of anything that is still working. Your plans to spend money is a waste of money when you already have a paying tennat in place. Yu raise the rent to market an leave the place as is. It will be her option then to stay or go. If she leaves you then do reno work.

Remember you are not in business to spend money you want to make money to do that you leave good paying tenants alone.

If it ain't broke don't fix it.

Matthew Paul · Answer

I would make repairs that are necessary , I wouldnt make renovations that are not . Raise the rent to just a little below market .

Armando Morales · Answer

@Theresa Harris It does has only one bathroom and I would think she'd be open to the idea of a very short temporary in the name of long neglected repairs.

The apartment is entirely outdated so the new rents would reflect updated conditions. It is possible to scale down my initial plans for renovations and make due with repairs and possibly some painting. While I don't have a fixed number for the total cost of upgrades I'd agree with you that it certainly wouldn't be a short term gain. Great insight. Thank you.

Armando Morales · Answer

Account Closed You bring up some valid points. And I feel there are repairs that certainly need to be made but I can also be careful not to overextend myself with unnecessary fixes. Thanks for your input.

Armando Morales · Answer

@Thomas S. I'm glad I asked because the consensus seems to be to keep the tenant in place. Thanks for your input. Greatly appreciated.

How to keep tenant and still make major repairs and renovations

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