By startingpoint August 25, 2014

Rehabbing to Rent

The scenario of rehabbing to rent is different in many ways, you must have the mindset for a flip and still try to get all of the repairs made as quickly as possible. As opposed to flipping, you will want to do your rehab differently. You must have the mindset that it will be a rental; you don’t want to make it nice enough that anyone would be happy to live there (that would cost way too much!) 

With a rental, tenants are not as respectful of the property as a homeowner would be. So, its likely things will need to be replaced after a number of years; why make it really nice and high end? If something breaks down or gets ruined, you have to pay for it. Try to choose durable, yet inexpensive to replace materials. This is why rehab materials are different for rentals than for retail. You must understand that the person who will rent this property has no incentive, besides a small deposit, to maintain everything and keep it like new. Sure once in a while you will find a tenant that really cares, but on average it’s just another place to live for the renter that they don’t have any ownership in.

What to choose for a rental over a retail property:

  • Vinyl over ceramic
  • Bottom line appliances and fixtures
  • Carpet over hardwood. Hardwoods will need to be redone, especially if they have a pet. If you are refinishing the floors every time you get a new tenant you could wear down the hardwood. With carpet, you just replace it.
  • Particle board counters over granite
  • Nothing over storm doors
  • No molding over crown molding

My advice to you is to dumb down the unit: Take out as many moving parts that can break and keep it simple. Consider simplifying the kitchen, bathroom and lights. Some people even take out garbage disposals because they can break when too much is forced down the drain and it gets clogged.  Take out ceiling fans and put cheap fixtures in.  Make it so that it will cost less than $500 of clean up and paint in between tenants. You don’t need high end thermal windows, or a top of the line high efficiency furnace, or 3x’s the amount of insulation recommended, etc. It’s up to you how much you want to take out but just remember that unless you have a property management company you are the one that is going to be getting the calls to come fix things when they break!

Most of what was previously mentioned pertains to lower end rentals (less than $100k ARV). However, if you are going into high end neighborhoods, you may have to add a few amenities. In these cases, try to keep it as simple as you can. You may want to consider using a “middle of the road” product when updating. For example, instead of carpet you may want to consider a faux hardwood vinyl floor that will have an expensive looking finished product, but is much cheaper than installing actual hardwood.

“Landlords grow rich in their sleep without working, risking or economizing.”

-John Stuart Mill, English philosopher and economist

For more information about rehabbing rental properties, visit our Facebook, Twitter, Pinterest, and Google+. Contact Starting Point Real Estate today for more St. Louis Real Estate investment solutions.