@Ian Zuber congrats on taking the plunge. Pittsburgh is an awesome city (I lived there, and am familiar with most of the neighborhoods).
You ask a good question, but there's no clear-cut answer (that's often the case in REI).
I definitely recommend taking some time to closely analyze and consider the rent market in your neighborhood, what type of tenant your property is currently attracting, and what type of tenant your property could attract after some upgrades. For instance, a C-grade property near a university will probably attract college students--most of whom will be young, and will have little or no experience renting a property. College kids are known to cause lots of property damage, and generally make managing the property a lot more difficult. Now, if you could take that hypothetical C-grade property and update it to make it a B+ or an A-, you might start attracting doctoral residents or visiting professors--these types of tenants will usually be much more reliable, cause less damage, and they have the money to pay for a higher grade property. My tenants are primarily in their late 20s through their 30s with high-skill careers (doctors, lawyers, engineers, nurses, etc.)--these tenants are fantastic because they're responsible, they have experience renting places, they never cause property damage or lease violations, they're professional and good communicators, and they have the income to pay for a high-grade property. A medical resident at the local hospital has put in a LOT of work and effort to get where they are, and they're unlikely to risk ruining their credit over silly late rent payments or property damage.
Having said that, if you upgrade that hypothetical C-grade property to an A-, but it's in an area where nobody has the money to pay the higher rent, or there aren't people interested in renting a higher grade property, then that's going to cost you (this is the classic case of over-improving a property--which a very common mistake by beginning real estate investors). In other words, it's difficult to sell a Rolls-Royce in a neighborhood where everyone is driving a Honda.
So, in a nutshell, it all comes down to knowing your market and knowing your customer (anyone running a successful business will tell you that knowing the customers is critical).
In terms of actual improvements to make to a property--again, it all depends on a million factors like the tenant pool, the grade of properties in the neighborhood, the cost of the improvements, your cash on hand, your goals, etc., etc., but here are a few things to consider:
-New paint is one of the cheapest, fastest, and easiest ways to improve a property and get a bit higher rent. Especially if the existing paint and colors look dated, dirty, ugly, new paint can work wonders and can completely transform the vibe of a property. Google around to find info on what types of colors to go with (usually, neutral, bright colors work well).
-New carpet / flooring is usually the next step--it's usually a bit more expensive than paint, but it can greatly improve the attractiveness (and durability) of the property. Again, especially if the existing flooring is ugly/in bad shape, then you'll probably get a lot of bang for your buck by improving the floors. If you have hardwood floors that are in rough shape, get a quote for re-finishing them.
-Upgrading the lighting. This can be as simple as getting some better floor lamps, or as in-depth as upgrading the entire electrical system of the house (so again, you want to be mindful of not over-improving a property). ...but, good lighting can transform an ugly, un-inviting room into a really nice space.
-Depending on the layout of the property, adding a bedroom or adding a bathroom can greatly increase rent (if you think this is possible at your property, read up on the topic--there's plenty of info in the forums, on youtube, etc.)
-Sprucing up the kitchen or bathrooms can go a long way--painting old ugly cabinets, upgrading the countertops, replacing old beat-up appliances, etc.
-Think outside the box and consider what types of amenities tenants might like. Do your tenants have bicycles? If so, adding a shed for bike storage might get you a bit more in rent (and have the added bonus of keeping tenants from dragging their bikes through your house--which tends to cause damage). In some markets, coin-op laundry facilities are common in rentals--but in some markets and properties, a coin-op laundry would be a huge turn-off to potential tenants (so again, it all comes back to knowing the customers and your market).
-Talk to local real estate agents and landlords/property managers, and ask them what types of improvements they've seen that really increased the value of the property and/or the rent.
-Ask tenants (or potential tenants) what types of things they like and don't like about your property, and places they've rented in the past. This will help you understand what tenants value (and what they're willing and not willing to pay more rent for). ...of course, some tenants will suggest things that just aren't feasible or advisable from an investment standpoint (most tenants would love an in-ground pool or a hot tub, but in most cases, that would be a bad investment).
-It's not just about adding value--it's also about lowering expenses. I once bought a property that had a landscaper. At the time, I was young and had a lot of energy and time, but not much money. So, I started doing the landscaping myself--that saved me a decent chunk of cash. Analyze what your expenses are, and look for opportunities to reduce those expenses. Caveat: this does NOT mean "cutting corners" or doing something dangerous just to save a buck. An unlicensed electrician might be cheaper, but cheaper usually means lower quality. "Low quality" and "electrical work" are two phrases you never want to see together. Cheap electrical work puts your tenants' lives at risk, which isn't worth any amount of saved money. So, you gotta know where to cut costs, but also understand when and where to spend the big bucks for quality work.
Of course, there are some improvements/repairs that you have to make, even though they won't increase your rent a dime. Old knob & tube electrical systems? That stuff is dangerous and a huge liability, so it's gotta go--it'll cost a good chunk of money, and probably won't increase your rent at all, but it has to be done. That's the cost of doing business.
Those are a few ideas off the top of my head.
Good luck out there!
