Spend $$ on updates or list for rent and see what happens?

Question

This is our first property we are not buying to live in. We have another investment property that we had as our primary home for years, fixed up and did lots nice projects that we knew improved the home but we also enjoyed ourselves.

Fast forward to now we are looking at this investment property that has 1 big safety fix and is in good shape other than that. It's tempting to update some of the finishes to the level we like (tile in the bathrooms vs linoleum, newer dining room fixture, tile backsplash vs laminate, replace countertops with something a little nicer than the flaking laminate...etc)

What do you find gets you the biggest buck with minimal $$ when it comes to renting. I am trying to compare the home to others for rent in the area and there aren't a ton on the market that line up with age/bed/bath etc

Better to focus on low cost cosmetic fixes or spend a little on nicer finishes? And is this something you worry with after trying to rent first?

We are in a different part of Atlanta so don't know this landsape as well and in our past experience we've rented things we've lived in so knew the ins and outs of the area.

Charles Carillo · Answer

@Charlotte Hames

It depends on the target tenant that would be living in the property. This is a lot harder when there are minimal comps. Maybe expand your area to see what comparable properties are renting for in other areas and then looking at their finishes. If you are renting a C+/B- vs. B+ there might be black appliances vs. stainless steel. The goal is to make sure any money you spend on the unit can be recouped in 36-48 months through increase rent. You might find that most units in your area are not updated that much or others that have $2k-$3k invested in them are renting for $150-$200 more per month. You can then make your decision from there.

Jingru Sui · Answer

I did new paint and flooring for my Woodstock house and make it look so much better. If you want to do more i would say start from the kitchen. Maybe SS appliances & new cabinet. Then bathroom.

Josue Vargas · Answer

@Charlotte Hames

Is the property potential rental income is similar to the competition, and is in good to Ok condition, I would deep clean it and fix whatever is broken.  I would not do major updates.  Get the cash flow for the first tenant and then, if necessary, do the updates.

If other comparable properties are in better shape, then do similar updates but consider this: the cash you spend even before renting it may put your cash on the hole for a while.  Even worse, after tenant moves out, you still need to do repair and stuff.

Sara C. · Answer

@Charlotte Hames what part of Atlanta? I may know the area. I would also look at other rentals in the area —even if the bed/bath count doesn't align for a comp—and just see what finish level is typical in general and gets the highest rents.

Marc Winter · Answer

@Charles Carillo is correct--we need to know more about the immediate community and area.  So much depends on the price range and class of neighborhood.

We normally would go for clean, neat, safe and 'tenant proof' on our finishes.

I'd let the market decide on pricing.  Run an ad with photos of the existing interior and exterior, along with your asking price saying "will be available on xxx date."

If you are not getting the response you need to be able to pick and choose the best candidate, you'll know the asking is too high.  Overwhelming response = price is too low.

Joe Cassandra · Answer

Hey Charlotte,

We live in Woodstock so I know the area well (and selling one of our rentals here right now).

I'm guessing your house is around Bells Ferry, right off 92 or up off East Cherokee maybe?

Those I would just slap some granite in the kitchen and paint the place (and make sure the flooring is okay...carpet is fine). Inserts in shower are fine. I wouldn't start tiling showers.

Should be able to fetch 1300-1600.

I assume that based on your C-class rating. Schools are all great here so can't go wrong there.

Suzette T. · Answer

First I would ask a local realtor. They spend time in neighborhoods and really get to know areas and prospective buyers/tenants for the areas.

Our latest rental had a tenant ready before we were! We painted the areas that needed it and took out carpet that was 30+ years old and ours flooring in that room. Fixed necessary issues and let that baby rent!

We envisioned more updates for the rental however the market for the particular area was hot so we trusted that process!

Sara C. · Answer

@Charlotte Hames I don't know Woodstock super well, but my hunch is high-end finishes are not necessary there. Clean and well maintained will likely attract a good tenant. You could always upgrade later if the neighborhood starts to change.

Charlotte H. · Answer

@Sara C. The home is in Woodstock, GA area. It's a C+ property. Neighborhood is all the similar C+/B- Level. 1980s homes well kept with updates. Schools are ranked well in the area too. There are some nice B/A neighborhoods close by too.

Spend $$ on updates or list for rent and see what happens?

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