How much rehab do I need for a rental?

[Svetlana Kleinhenz]

Hi, fellow investors! Please help me to understand how much rehab do I need for my new property.

Formally, the house is move-in ready: everything is functioning. But it was built in fifties, and the inspection report says that all the major systems like HVAC, plumbing and wiring are at the end of their life. They might collapse any day, or might work for a few years – nobody knows.

Also, the appliances work well, but they are old and ugly looking. Bathroom and kitchen cabinets are ugly, too.

My first reaction was to plan the major renovation: full bathroom and kitchen remodelling, replacing HVAC, plumbing and electrical. But my business partner thinks that we should list it for rent as it is, and save reserves for future big replacements.

What does your experience says: will renovation help me to make more money on rent? Or it’s only the location what matters if the house is functional? Do renovated houses make substantially more rent, comparing to not renovated at the same location?