Do rental upgrades warrant more rent?

Question

My newbie question:

What kinds of rental upgrades, if any, could I (or should I) do to warrant charging more rent on my AZ 3 bed, 2 bath rental home? (this home wasn't purchased as an investment property originally). Although I have already refinanced and am charging full market rent, I still just break even every month....no positive cash flow.

Ex. backyard landscaping? stainless steel appliances? granite counter tops? New light fixtures?

Does any of this type of renovation allow for more rent being charged, or is it just strictly go off market rents? Maybe the upgrades just allow for more desirability, but not necessarily more rent?

Thanks!

Holly

Doss Mann · Answer

What does your competition/market have? It all comes down to this and who the tenants are for this market. Landscaping and flower beds = WORK .. I just finished 3 hours of this in my backyard. Tenants don't want to pay more to do work and receive notices when they don't and then you get to pay even more to rehab the landscaping when they move out. Provide lawn maintenance and find a crew at a discount and then charge $20 over. Make this part of the lease and not optional. Do you allow pets? Charge a Pet Fee instead of a deposit and monthly Pet Rent. This costs you nothing out of pocket. How much do you think you could actually charge more for stainless appliances? $25 $50 a month? If it costs $2500 for a stainless fridge, stove and microwave how long will it take to see that profit? Tenants can go to Rent A Center and get appliances with zero down and get to keep them. I currently don't provide a Fridge, Microwave, or laundry units for several reasons. 1. the market does not demand it. If I was renting furnished executive homes or downtown lofts maybe. 2. I have seen too many gasoline and oil rags ruin washers, overloaded washers wear out belts and motors , and anything and everything finds its way into the dryer when it becomes wet. I am into real estate not the appliance rental business. 3. 1 weekend out of town by the tenants and the power goes out and a freezer full of deer meat and fish leaks everywhere. That smell doesn't come out of the fridge, or kitchen for a long time. 4. Microwaves don't have a Shoes and Socks or Metal button 5. Appliances create more opportunity for things to go wrong that you have to fix.

Mike Giudici · Answer

To the right renter, upgrades can lead to higher rents. It's important to keep an eye on what other rentals have in your market. There is a point where upgrades and extras won't command higher rent due to the other rents in the market.

Al Williamson · Answer

@Holly Baldwin you've received some good tips already. Let me echo what Account Closed said - be relentless about cutting your current expenses. 1. Check your insurance policy to make sure you're getting every deduction you're qualified for. 2. Check your City garbage, sewer, and water bill - see if you can be a break by recycling or reducing your service (and composting). 3. If you're hiring a gardener, see if you can cooperate with neighbors to negotiate a group discount. The discount might help you defray this cost. Just a few ideas to get you started. Start with the idea that all expenses can be unfixed and reduced. Don't accept the status quo. Best to you.

Paul Timmins · Answer

Holly Analyze your expenses every dollar lowered is in your wallet. If your tenants qualify under Affordable Housing income guidelines they might qualify for energy improvements to your property like more insulation, new doors windows etc. Paul

Holly Baldwin · Answer

Thank you so much everyone! I love how all your answers give me a new perspective and a new way of thinking that I haven't done before. I appreciate all of you for taking time to answer my questions and give me things to think about! I can apply a few of them right away and I hope to see a difference soon! Thanks again!

Tom Goans · Answer

@Holly Baldwin, There are far more considerations to properly answer your question or respond to your examples. Understanding the target market is key to your success and answering your question.

Steve Babiak · Answer

Some already existing similar threads: http://www.biggerpockets.com/forums/52/topics/97179 http://www.biggerpockets.com/forums/52/topics/66798-rental-upgrades

Mike Hurney · Answer

@Holly Baldwin I agree with @Doss Mann Competition, what do they have? (and timing too) When I permanently installed window units in Kansas City apts. during the Summer it was worth $50/month.