preparing house for rental

[Samantha Elgin]

I am new to real estate but have known since i bought my house 5 years ago that someday I would want to turn it into a rental. As the years have passed my passion to invest in real estate has really grown and I am excited to get started. As I work towards getting a second property I want to start preparing my current house to be a rental. I know its important to check out nearby houses but I was just curious on a general basis what you guys think the most important upgrades are for a house. My house is in an average neighborhood, its 2 bedroom, 1 bath, an added on laundry room, a shed and the house is about 840 square feet. Kitchen is tiny and could be expanded by knocking down the wall between the kitchen and living room. Cabinets are grimy and would probably need to be replaced, not just painted. Bathroom isnt bad just a little outdated. Laminet flooring has some scuffs but not too bad. There is no dishwasher, it doesnt bother me but Im not sure if that would be something worth adding. I have also thought a garage could really increase the value. Thats kind of the breakdown of what could be done, just wanted to pick your brains. Thanks! 

[Domenick T.]

@Samantha Elgin How much you should invest and what kind of upgrades you should make is all going to depend on your market and your exit strategy. Take some time looking at your local listings to see your competition. If they all have DW's, updated kitchens, etc., then you need to understand what a rental without those amenities is going for. The difference will determine your potential ROI.

Try to get a sense of what renters in your market value and then prioritize your make-ready list accordingly.  Look for High Value, Low Investment upgrades (e.g., fresh paint).  Avoid Low Value, High Investment projects unless necessary (e.g., new furnace).  

I'm guessing your kitchen is a High Value, High Investment item that you should evaluate like a business investment.  How much more can you charge? Will it lower your vacancy rate or turnover rate?  

If you plan to sell in a couple of years, then it might make sense to upgrade the kitchen for the resale value (which will quickly degrade as over time as a rental).  The DW might be a must-have amenity in your market though.

I hope that helps!