After purchasing a rental property, one of our biggest decisions is how deep do we go on the rehab? Our level of rental rehab is certainly below what a flipper would do. I want to get the property the updates it needs – with a focus on those that increase the rents. Adding washer dryer connections, replacing broken toilets, refreshing the paint are typical rehab expenses that I would invest in on a new rental acquisition.
The pic below shows a kitchen area after I had the tile re-grouted. I don’t have a good before picture, but the grout lines were almost black and would not get very clean. The tile is outdated, but not functionally obsolete and still in good condition. The regrout made it look clean and this is what I am for in my rentals. Even more importantly – the regrout took 2 hours vs at least 2 days for a full remove and replace. Keeping your vacancy time to a minimum is critical to be a successful landlord. Oh…and the cost — $40. (Some guy stopped by the house looking for work as I was doing the rehab)
We recently made a few updates to our primary home. We are planning to downsize eventually and are slowly making updates over time. Owning and managing rental properties on the side really helps when we want to make renovations on our primary home. We try to use some of the same contractors, do some of the work ourselves, and are overall more knowledgeable about how much rehab costs should be.
I started realizing that many of the contractors we use regularly for our rentals don’t do the level of rehab needed for our primary. We are usually just patching, re-painting, bit of caulk here, and lots of cleaning, etc. The remodel on our primary is essentially preparations to sell to a retail purchaser. Here are before and after pics of the bar area of our primary. This area was really dated and is just off the entry area after you enter the home so it needed the update. The rest of our time and funds are going into the master bath.
We used a small local vendor for the granite and install. One of my handymen and I did the electrical and plumbing and I watched a youtube video and did the backsplash myself.
Our local city municipal power company was offering their annual “Tree Power – Tree Giveaway” on Saturday, Nov 2. I am sure they get some attractive tax credits or something for being green and planting trees. The annual give away is popular and the line started very early in the morning. We got there at 7am and had to get in a 30-40 minute line. They had it organized well where you waited in your car and slowly moved toward the nursery center to load up your tree.
We were able to get 2 trees as we had our primary and one rental located in this particular city. We ended up putting both trees at the same property (Property 1). The front yard at this property has nothing there as we had to remove an old tree that was diseased and died years ago.
I did not realize this was actually the time to plan trees. Here is a snip it I found on ask.com or somewhere on google:
“Many homeowners think Spring when planting trees. But gardening experts consider Fall the best time to add trees to the landscape. Trees planted now get a headstart on establishing roots before summer returns.
Tree roots (and those of other plants) grow when the temperature is roughly above 40 degrees. In mild winters, roots gain the strength they need to deal with summer. And, because their roots have been growing all fall and winter, trees planted now burst with growth when Spring arrives.”
I feel good trees really add value to a property. We went with Cedar Elm trees as they looked like they grew quicker, were drought tolerant, and have many other good qualities that should make for good trees.
Val and I planted the trees ourselves as we had great weather and I knew the soil would be easy digging as we have had lots of rain lately. The planting went smoothly and I used the specific instructions that they provided. I will attach a .pdf of the flyer they provided as there are some good instructions here on planting young trees.
Does it seems like more and more people are getting into the rental game? I quit looking on the open market as everything is selling for far more than we were paying a couple of years ago. Inventory is down dramatically and I see new investors really paying up for properties.
There has been lots of media hype on rental property investments. Between all the media, the Warren Buffett interview on CNBC, the hedge funds and investment outfits that are buying up rentals – every mom and pop outfit out there seems to be buying homes and turning them into rentals.
Hard to say what impact this will have at this point, but I have a feeling it may create some buying opportunities down the road for the true landlords. After these new investors realize it’s not just mailbox money – they may throw in the towel. Some will quickly determine they have bitten off more than they can chew, others will realize they are not cut out to be a landlord, or just tire of it after a year or so.
I have run into one such landlord already, but unfortunately he wanted what he put into them and that was not going to work. I will file his contact info and call him later.
We are so glad we bought when we did. It is great to see the values really starting to come up. We don’t see any new deals near what we paid a couple of years ago.
I assume everyone has seen the video below. It is certainly in my favorites – I watch it a few times each month.
FYI – this clip is from Feb 12, 2012.
We try to not to make improvements to our rentals that don’t yield more dollars in the monthly rent rate. However, some improvements are just necessary maintenance that needs to be done and to help keep good tenants. Our tenant in Property 6 is one of our best tenants. She complained a few months ago about the lawn in the front yard. It was dying out even with the sprinkler system and lawn in place. This was our old primary home and we also had trouble maintaining the St. Augustine grass in the heavily shaded front yard.
There are two large trees in the front yard which really add to the character of the home. The solution was trimming these trees and resoding with a shade friendly cultivar of St Augustine called Palmetto. The result looks good and the tenant is happy. Total cost was $350.
While this maintenance does not allow for higher rent, it does show we take pride in maintaining our rentals. It sets expectations for the tenants to help maintain the home. We had this done over a month ago and the grass is coming in nicely. Tenants are happy – hopefully it helps retention. Even if she moves next month, we still need grass in the front yard to market to the next tenants. Effectively, this is an expense you will eventually have so you might as well incur it now and you have a better chance of keeping it occupied.
Below are some before and after pics.
My tenants in Property 2 reached out to me regarding their upcoming lease renewal. To be honest, I typically don’t actively renew leases when the initial move-in lease expires. I just allow them to continue to pay the same amount on a month to month basis. The lease language explains the rate should go up for a “month to month” lease period, but I never enforce this and just continue to accept the initial rent rate. This could allow me to ask them to move with minimal notice if something goes awry.
However when tenants are asking me about renewing their lease, I jump at the chance. My younger tenants tend to stick to their lease term as many have moved from a tightly managed apartment complex and still think the lease is worth more than the paper it is written on. In reality for me putting a judgement against them for not living out the term of their lease is not going to be worth it.
My tenants lease was due next month, so I told them we can discuss it when I pick up rent. I like to meet my tenants face to face and really understand what they want to do. They said they wanted to renew, but asked if they could sign a 6 months vs a 12 month lease. This is normally not a problem. However a six month lease would be expiring in February. This is not a good time of year for a vacancy. I explained this to them and told them I could do an 8 month lease that would expire on April 30. I told them they don’t want to move in February and I don’t want a vacancy then either. They agreed and signed an extension through April of next year.
For this renewal, I just overwrote the new expiration date and term on the first page of the initial lease. I had them initial near the overwrite and re-sign the signature page of the lease with a brief statement about the new term. I made copies and mailed it to the house.
Driving by one of my rentals last week and caught a For Lease sign in the front window of a beat down property. The place looked terrible with the yard really over grown. The phone number led to an answering machine for some Real Estate sounding company. This is obviously a property managerment company and a really bad one at that.
I hope that they already have it leased and are just waiting for the move-in date, but either way the yard should never look like this. My biggest issue with property managers is the compensation model just does not lend itself to them getting your property leased out efficiently. They get their upfront fee for leaseing it out eventually. They will lose the 8-10% or whatever per month mgmt fee if it takes them several months. But really this is not enormous money and once they get it leased out, then they start that fee again.
Their urgency at answering the phone, showing the property, and general personal touch is just not there. I left a message inquiring about the property but never heard back from them. The outside of the home was rough and I assume the inside might be more of the same. To be honest though, I am almost glad these kind of places are out there – It really differentiates my place.