Dillemma, Renovate or Keep Tenant

[Justin Woodworth]

Dear BP'ers 

I recently am closing on a duplex (end of July) and the side that was previously owner occupied is in decent condition. I plan on just adding new hardware to the cabinets and tearing up the carpet to put vinyl flooring down. Other than that it does not require much work.

On the other side however there is a tenant that has managed to find a way to put drywall anchors into every unforgiving place along with destroying the carpet and trim in most of the house. Now I know you may just say "Justin, drywall and carpet are easy" and I would agree with you. But here is my dilemma.

The tenant recently had his rent bumped up from 1325 to 1480 and is on a MTM lease. After using Rentometer and using comps in the area I believe I can rent out the first side for 1550 (4 bed 2 full bath). I had the idea of getting the renovations done on the first side and then renting it out to new tenants who would not treat the house like they were playing "who can hang the heaviest object from the drywall". Then I would not renew the previous tenants lease, get him out of the building and live on that side while I renovate. If all goes to plan I would move out of the duplex in a year and rent out both sides. 

Any suggestions? Tips? My income from my work is more than enough to cover all the expenses if I was to have a month long vacancy period or some other form of issue. 

Thanks!

[Michael Ealy]

Originally posted by @Justin Woodworth:

Dear BP'ers 

I recently am closing on a duplex (end of July) and the side that was previously owner occupied is in decent condition. I plan on just adding new hardware to the cabinets and tearing up the carpet to put vinyl flooring down. Other than that it does not require much work.

On the other side however there is a tenant that has managed to find a way to put drywall anchors into every unforgiving place along with destroying the carpet and trim in most of the house. Now I know you may just say "Justin, drywall and carpet are easy" and I would agree with you. But here is my dilemma.

The tenant recently had his rent bumped up from 1325 to 1480 and is on a MTM lease. After using Rentometer and using comps in the area I believe I can rent out the first side for 1550 (4 bed 2 full bath). I had the idea of getting the renovations done on the first side and then renting it out to new tenants who would not treat the house like they were playing "who can hang the heaviest object from the drywall". Then I would not renew the previous tenants lease, get him out of the building and live on that side while I renovate. If all goes to plan I would move out of the duplex in a year and rent out both sides. 

Any suggestions? Tips? My income from my work is more than enough to cover all the expenses if I was to have a month long vacancy period or some other form of issue. 

Thanks!

 Justin,

The plan sounds good. Although you need to have MORE than 1 month buffer.

During renovating the unit there could be delays so allocate 1 month for that.

By the time you market and lease the unit, factor in another 1 month for that.

And worst case scenario, what if your current tenant does not move out as quickly as you thought or there are further delays in leasing the unit. 

So in total, you have to have 3 months of vacancy budgeted.