Am I crazy for upgrading with tenants in place?

[Phillip Rosin]

I've already made up my mind that I'm doing this, but I want to get some feedback on whether I'm crazy for doing so. Sorry if this is moot, but I am generally curious and perhaps it will sway my decisions with future properties.

Some Background: I purchased two duplexes and am keeping two of the tenants. They have been here for years (one for over 10 years!) without a lease (month to month) and the prior owners haven't really done anything in that time to keep the units in good condition. The tenants have taken it upon themselves to paint and do general maintenance. The identical duplexes were built in 1998 and have the original super cheap, laminated cabinetry and mostly old, worn out white appliances (one has 3 burners out!). The rents were way below market, at $800.00, and they both have now signed leases for $1,500.00! At that price, I know these units are not up to par but I understand that they did not want to go through the hassle of moving and so decided to stay. We also offered a 15 month lease with $500 of the first 3 months' rent going to the deposit, so they're technically getting 3 months at $1,000.00. I want to keep these tenants as long as I can and believe they will keep their places in good condition, given how well they have treated what they had over the years.

With that said, I originally was not planning on any tenants agreeing to stay and had planned to update all the units after they moved out. However, even though two tenants are staying, I still believe that doing some updates to warrant the new rent is the right thing to do; especially since the other two units will be fully updated and rented for the same or slightly more rent. I also hope this will keep these tenants in place going forward. 

I will be updating their kitchens with new lighting (swap LED for fluorescent), solid construction cabinets, granite counters and stainless appliances. I may also do some small bathroom updates, such as a new vanities (these are very small bathrooms with tiny vanities, so price will be minimal). My property manager will be handling the process and has a good crew they use for all their work. I'm confident they will be able to proceed without any grievances from the tenants as they've been very understanding and reasonable with everything so far. 

I'm wondering if I'm being crazy here in doing these updates now. There is, of course, risk for tenant grievances and I already have the tenants in place with leases. I'm electing to do this now, instead of waiting a year to see if they renew and, if not, then do the upgrades. 

The total cost of the kitchen upgrades works out to around $6-7K per unit, if that makes any difference.  

Thank you for your feedback. Even though it's happening either way, I appreciate knowing if I'm actually doing the right thing here, from a business perspective. Below is an old photo I got off one of the listings and the render from the cabinet supplier (yes they are reversed). 

[Patricia Steiner]

A question for you:

Have you ever lived through a kitchen or bath remodel in your own home while living there?  It's not for the faint of heart - and it's a lot to ask of a tenant. I did have a client who had the tenant's blessing to do it while he lived there (the existing kitchen and bath were very dated) and it took longer than expected, was messier/dirtier than the tenant thought and could tolerate, and in the end was just too much drama.

You may want to consider taking it down a notch or two...maybe change out the lighting, swap out the cabinet doors rather than replace the cabinets, new faucets can really make a difference, and those peal and stick backsplash tiles from places like Wallpop can be transforming.  Jobs that can be done in a few hours or within a day are much more respectful of your tenants.  

It's important to remember not to over-improve; you've got great tenants so leave them alone.  It's their home. They've got living to do. You've got money to make and retain.

Just one opinion...