Do you improve rental properties?

Question

Is it common or recommended to make improvements on a rental property while it's rented?I was thinking about adding a garage, while I know it has an ROI from the increased value of the property - is it wise to do that while it's rented?

Pt 2 - if I built an in law suite above the garage and rented that out, is that common and would that be worth doing or influence your opinion These are upgraded I’m going to make, it’s just timing that I’m wondering about as it relates to the best return of my money

Fred Cannon · Answer

@James I use to think it's rental property why upgrade Now I think I want this to look as nice as possible because I want better tenants, more rental income, more write offs, more resale, etc. so many advantages to improving rental property. It takes a lot of showing to rent an outdated property and only a couple of showings to rent an updated one. When I show a vacate property I can honestly say " most likely this place will be under contract by the end of the day, "

Nathan Gesner · Answer

You normally make changes like that between tenants. If you add a garage with an apartment upstairs, that changes the nature of the lease with the existing renters because they originally agreed to rent the property without someone else living there. That could be problematic.My recommendation is that you speak with the current renters to see if they would accept it. The work could take months and then they'll have a neighbor.

Adam Martin · Answer

It depends on the property but at each vacancy I like to do something that is either deferred maintenance or a light rehab. I try to spend somewhere between 500-1500 to make the place nicer. I will usually paint but as an example on one of my houses I always have painted, and I had updated the garage door on the last turn. I doubt I got any additional rent from it but it was rotting and there was a gap at the bottom that rotted out so it was about time. My current tenants plan on moving out in the spring, they said that last spring so who knows, but I plan on updating the kitchen and bathroom flooring. The linoleum in both is chipping and stained in the bathroom. One of the toilets has the porcelain in the bowel that has worn off so while it is up replacing the floor that will most likely be replaced as well. These updates should help me push up the rents and it rent faster. In another the ceiling lighting is pretty dated so I will most likely be upgrading that as well. Each house has a 60 day notice to term the m2m lease so that gives me some time to find deals. My thought is gradual updates are easier on the budget than keeping it as is for years and then having a large reno I need to do to get it back on track and should increase rents along the way. That said I only do it when vacant unless something is urgent. I wouldn't do anything cosmetic while they are there unless maybe it was at a resigning and it correlated to an increased rent. I just see issues with them working with the contractors and may not be as understanding in the end as they started off with delays.

JD Martin · Answer

We rehab everything when first bought for the most part. Things that didn't get done happen between tenants. There are exceptions, but usually they are things that don't disturb the tenants so they tend to be outside (adding a deck, perhaps, or doing landscaping work). They also have to either make financial sense (a short payback period, for example) or are in so dire need of doing that they detract from the property. I love restoring old houses but there's plenty of things I think would be awesome to do to my houses that I never do because there's no return. I was in one of my rehabs today and thinking how I would like to redo the kitchen layout, but there wouldn't be any return and the only one who would care about it is me. So it will stay in its current layout (but getting all new cabinets and some new plumbing).

Bjorn Ahlblad · Answer

@James Mcsweeney that is what it is all about ROI. We do paint and flooring and fixtures, maybe appliances, as needed between tenants. We also look at the building, landscape, painting, general clean up. Improving common areas, and anything to do with safety, railings, slippery surfaces etc. The point is to raise rents and force appreciation of the property. Buy in the best neighborhood you can, know how to underwrite, and thoroughly screen great tenants and you will make money land lording!

Theresa Harris · Answer

If the place is rented, I'd leave it alone so as not to disturb the tenants. If it is something like a shed or garage, talk to them. Landscaping, painting the outside are maintenance things and should be done when needed. for the second part of your question, if a tenant rented the place, to add a garage and take away some of their space (parking, adding a neighbour) changed the nature of the property. I am with Nathan on that-wait til it turns over, then rent the house letting the new tenant know that you will be building a garage with a rental unit above it.

Kevin Hunter · Answer

@James Mcsweeney, I don't execute big upgrades like that while it is rented because it will absolutely disturb, and quite possible inconvenience the tenants. What I would suggest is that you hire your contractor or architect to complete the survey, draw up the plans, provide the estimate, and then schedule it for the day the tenants move out. This way it doesn't cost you too much vacancy time while it is being built. Just another option for you. Good luck!!

Al Davis · Answer

Don't think I would do it while it's actively being rented due to the unforeseen complications with your lease agreement, although once you do make your improvements focus on quality, which will allow you to ask a higher rental rate and will as a by product help with your screening process and hopefully attract a better tenant which should ultimately increase your ROI.

Zachary Ray · Answer

You would make changes when it is not occupied. Maintain and keep them in good conditions. If stuff breaks you would repair. If your looking to sell then upgrading would be the idea just prior to that.

James Mcsweeney · Answer

@Theresa Harris That’s a good data point thank you. Actually, that’s probably the right answer.