What Vacant Rental Home Fix-Ups Should a Landlord Do (or Not Do)?
My wife and I were looking at renovating our primary bathroom so we had someone come in and give us a quote. We weren’t looking for anything overly-extravagant; I’d say it was much more on the practical side of replacing some older bathroom pieces. I thought the proposed work was relatively basic and was more concerned about the inconvenience than the cost. Then the quote came in around $50K.
To me, the quote was a lot; $50K for a practical bathroom renovation is significant. For that, I’m thinking heated tiles, a sweet hot tub, and a roomy, rainwater shower equipped with a state-of-the-art entertainment center.
If we take this out of the “splurge on myself” category (where things like this are sometimes justified on a personal residence- note: not in this case…) and put it into the “rental home investment” category where the numbers need to make actual sense, we could do a quick calculation of making this potential investment:
With a renovated primary bathroom, we’ll say the rent can go up an additional $500.00/month; that seems high to me, but we’ll go with it. At $6K extra rent coming in annually ($500 for 12 months), we’re looking at the payoff time for a $50K bathroom investment to be roughly 8 years (8 years multiplied by $6K = $48K). That’s a long payoff period, especially if a destructive tenant moves in and degrades it quickly.
This type of repair figure, post-COVID, is not crazy though. The question then is how much home fix-up is a justifiable expense for a landlord? That’s a tough question as it is really an answer that has to be made on a case-by-case basis.
But philosophically, my answer would be to spend as little as possible with several caveats if the rental home is a long-term hold:
- Don’t skimp on preventative maintenance
- All home systems need to be functioning per the lease agreement
- The home needs to be desirable to rent near the market rental rate (no major red flags aesthetically)
- The home needs to be very clean and pest-free
This is much more of an art than a science. The issue is that when new things are installed in an older house, it makes the older things look even older. For example, if one room gets fresh paint, the rest of the unpainted rooms scratches look even worse. Replacing one appliance can make the other ones look 10 years older. What not to renovate can be more important than what to renovate.
And different aesthetic issues are going to make the home unrentable to certain people; it helps to be a bit thick-skinned if some potential tenants are critical of certain aspects of the home. New construction and/or complete renovations appeal to everyone! But most owners and tenants are either not willing or able to pay for that.
I want to be clear- a home is always easier to rent and will rent at a higher rate if everything is renovated. If the financials can be made to work, this is the best option by far. It is really nice to offer rental homes that have the best of everything! It makes a property manager’s job much easier!
However, for others, $50K of renovations may not be a viable investment strategy; the numbers are usually tough to justify on a standard rental home. Smart landlords learn to be judicious in what they choose to fix-up (or do not).
Happy Landlording!
Learn MoreSecurity Deposit Dispersion: Should You Treat Long-Term and Short-Term Tenants Differently?
Scenario #1: Melissa has been in your rental home almost as long as you’ve owned it. And it’s been a good ride! It started out as a standard tenant-landlord relationship with formal calls for repairs and rent checks sent solitarily in the envelope. But over the years, Melissa (now “Mel”) has really grown on you and vice-versa.
It started when she had some tough financial times and asked for you to allow some late payments. You assented and wound up having some deep conversations after the initial rental payment was discussed. A few years later, the water pipe blew and ruined many of her things. You promised to make it right; Mel paid her rent diligently and never complained about all the workmen coming in and out of the house for a few weeks. She really could have!
Over the years, Mel started sending some pictures of her kids having major life events in with her rent check every few months. Oh, how you looked forward to seeing what had become of her family. You were so proud of them! But now, with Michael, Jr. graduating at the end of the summer, Mel has told you that she needs to downsize. And that means she’s moving out.
Mel has been a tenant for 12 years. And you have to admit that your stomach has been in knots since that phone call. On one level, you knew this day was inevitable. On another, it’s almost like losing a family member.
Scenario #2: Wally moved into your Uptown Charlotte rental condo right after his internship at Goldman Sachs ended in Manhattan so he could take a job with Bank of America. You knew Wally would never be Mel. This condo was clearly a stepping stone for him to get used to the area and figure out where he wanted to live in Charlotte (or elsewhere in the world).
Wally was very cordial and business-like when you met him to sign the 1-year lease. “You’ll probably never hear from me!” he joked. And he was right. He set up his on-line bill pay and his rent checks showed up on time every month (sans any other correspondence). And, expectedly, about 40 days prior to his lease expiration, you got an e-mail from him giving you his 30-day notice to let you know he was moving out.
Two of your tenants are leaving and you’ll have to do two walk-throughs so you can disburse the security deposits. Personal feelings aside, do you treat these 2 tenants differently from each other?
Tenants should be charged for any damages beyond normal wear and tear. The amount of normal wear and tear for someone who lived in a rental unit for 1-year versus 12 years is substantial.
Fix-up expectations for a 12-year rental:
- Probable repainting of entire home
- Probable carpet replacement
- Professional cleaning
- Replacing miscellaneous worn out items throughout house
Likely charge to tenant: $0.00
If a tenant lives in your property for 12 years, that’s a lot of normal wear and tear. It would be difficult to justify charging them anything (short of them detonating a bomb in your home prior to move-out).
Fix-up expectations for 1-year rental:
- Minor touch-up paint
- Carpet steam-cleaning (hopefully already performed by tenant prior to move-out)
- Professional cleaning
- Any damages beyond light wear and tear
Likely charge to tenant: That depends typically on how dinged up the walls and flooring are and if there are any major items of damage. Tolerance for rental unit abuse is low.
Sorry, Wally, but you need to be really careful to keep things nice if you’re only sticking around a year. But, Mel, you don’t need to worry so much and thanks for staying so long (I’ll miss you!); just because you moved away doesn’t mean you can’t keep in touch!
Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management. BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales (including Rent-To-Sell) for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
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How Much Should I Fix Up My Rental Home for the Next Tenant?
The perfect scenario:
You are lounging on a sunny, deserted beach with your loving wife by your side. You have a cold drink in your hand as you marvel at the solitude and beauty of your surroundings. The only sounds you hear are the waves gently crashing in front of you and the occasional fluttering of a seagull’s wings. The sun subtly warms your skin before a timely breeze arrives to refresh you. You grasp your wife’s hand as she lovingly reciprocates. And you just filled your last rental property with a tenant. Life is perfect.
But, wait… is that your cell phone ringing in your beach bag? Who could be calling you? As you reach for the phone, your wife aggressively removes her hand from yours. “You better not answer that! We haven’t been away together since Eli was born and I’m not going to have our vacation ruined by work calls!” As your eyes refocus to the numbers on the phone, you realize it is the new tenant. “I’ve got to get this,” you mutter as your wife disgustedly begins to turn her beach chair away from you. You feign an enthusiastic greeting of “Hey Herb, what’s up? How’s the place?” as your eyes plead forgiveness to your now emotionally-estranged wife.
Herb begins his 10-minute rant, “This place is a dump! The whole house is filthy! The cabinets and appliances are especially gross and the entire trim needs to be repainted. The landscaping has been completely neglected and the yard is mostly weeds. My wife and I have spent our first 48 hours here on our hands and knees scrubbing and aren’t even close to being done! The air conditioning doesn’t even blow cold air. How could anyone live in this place??”
“Multiple tenants have managed to survive the experience in past 12 years I’ve rented it out,” you want to retort and then think better of it. You turn your head to see your wife disgustedly heading back towards the resort while pounding feverishly on her iPhone, undoubtedly spewing Facebook hate (Subject: You).
Herb is irate and you hear his wife trying to get into the action in the background. Once Herb says his piece, you tell him you’re very sorry, you’ll have someone over to look at the air conditioning, and will send the cleaners back (“No need! If they think the condition they left it in was clean, I don’t care to entertain their second act!”).
So this is bad. You thought you had the rental home in good shape and the tenants are ripping it apart. You look up at the resort and see your wife talking to the pool boy as she uncharacteristically is downing cocktails at 9 AM. This was supposed to be a relaxing, loving vacation and things are going very wrong.
What could have been done to avoid this tenant situation? Honestly, nothing. No matter how clean a house is left, some tenants will say it is filthy. Cleanliness is subjective.
There is a relatively predictable spectrum of responses from tenants after they move-in:
- 10% will be happy with whatever condition the home is in when they move-in
- 10% will be unhappy with whatever condition the home is in when they move-in
- 80% will be happy if the home is reasonably clean and touched-up when they move-in
So if things are reasonably clean, all major systems are working, and the house has been touched up, 90% of tenants will be happy. And everyone likes happy tenants.
And what about the unhappy 10%? It’s not a desirable situation, but there is a silver lining. You will take heat on the front end from them; that is for sure. And you won’t like it. But there are 2 positive takeaways:
- There was nothing you could have done to avoid their unhappiness. If you fixed your home up to such a pristine condition, it would crush the ROI on your investment property. And if you are going to pay to fix it up that much, do it only once and sell it for top dollar. Don’t do it every year. The objective (I’m told) is to make money on investments.
- When the initially unhappy tenants vacate, they will probably leave your home in move-in condition for the next tenant! This allows you to take the pain now to experience joy later.
So, to sum it up:
1. Fix-up your home in a reasonable manner between tenants. This means all systems working, touch-up paint (don’t repaint the house), steam cleaned carpet (don’t replace the flooring), and professional cleaning.
2. Hire a property manager so you don’t have to answer the phone on vacation.
3. Go get your wife!
Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management. BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales (including Rent-To-Sell) for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
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