To update or not to update....then rent it

[Melissa Villegas]

Hello, 

This is my first experience purchasing a property for long-term rental.  A little backstory: my uncle is selling my grandparents house to me for what we believe to be a pretty good deal.  However, it needs updates. The bones are good.  No AC, roof, foundation issues. The inside hasn't really been touched. Popcorn ceilings, brown wood cabinets, flooring, paneling, dated paint and wallpaper.  Purchase price: $257k, 2759 sq. ft, 4 bed, 3 bath, 2 car garage, in ground pool,  centrally located to entertainment and 30 minutes from 2 major downtown locations.  The DFW metroplex is a hot market right now, just like everywhere :)

Preliminary research shows that I can likely rent it for $2500. I realize this doesn't meet the 2% rule but comps show that an updated house will go for about $450k.  

My question is: should I do some minor updates hoping that I can charge higher rent, ultimately updating and selling it later? Or, rent as is, hold the house for a bit, then do major updates and try to sell in a year? 

Any advice is greatly appreciated!!!!!

[Colleen F.]

@Melissa Villegas  I am taking that to mean no AC issues.  Can you rent a property in the current condition for $2500 ?  I would test your popcorn ceilings for asbestos (so if you want to update them later you know).  I would then remove wallpaper and paint. Depending on the paneling type you can often paint that too and it will brighten up the rooms.  Check and see if you have GFCI and 3 prong outlets and look for any other essential updates. Then rent.  So basically you want to freshen it up if you want to rent it.  If your ultimate plan is to sell it would be good to get a scope on the updates that will add to the sale price, I would not redo kitchens and baths for a rental unless it isn't functional the way it is.  Expect to command a little less rent for a dated property then completely updated.