Rehab/remodel budgeting advice?

[Daniel Wang]

I am closing on my first investment property in a couple of weeks. It's a 4-plex. One of the four units is currently vacant and I was thinking of remodeling it in order to raise the rent. The current three leases have been below market for years and I will need this fourth one to balance my cash flow a little bit.

My question is what is an appropriate budget for a project like this because you can get the cheapest carpets in the world or put in nice decent quality flooring all around. When researching rents near the area I noticed a strong correlation between property condition and rent. But I also observed that most properties near mine, aren't in the greatest shape and thus rent for less ($200 less per month) comparing to similar properties in other neighborhoods in the same city. I am not sure if it's because the neighborhood isn't great (full of 4-plexes) so the rents can't go up hence the landlords don't bother throwing money into rehab, or it's the other way around - that because landlords don't invest in rehabbing their properties are less attractive to renters and hence rent for less.

What is biggerpocket's advice? I can afford better materials and designs but am hesitant to put in the money and time if they are not going to have a good return for me.

[Nathan Gesner]

Luxury vinyl plan everywhere because it will wear better, won't hold odors, is easier to clean, etc. If you're in a colder climate, consider carpet for the bedrooms only.

Question: why are you keeping renters that are well below market? Your business plan should include getting ALL units up to market rate. If they are 10% below market and good renters, that may be acceptable. If they are more than 10% below market or they are questionable renters, I highly recommend you get them out and do what it takes to turn the units around and get market-rate renters in there.