I tell all my investor clients to keep all their rentals in updated, like-new, condition. This is because your place looks better which attracts more applicants which allows you to choose a better tenant who will stay longer and pay you higher rent.
Unfortunately, I didn't follow my own advice and it's ended up costing me $9,000
My Daniel Island Condo
I have a condo on Daniel Island that I've owned since it was new. It's a great floor plan in a nice development in central location on Daniel Island and I've only had 4 tenants in those thirteen years. Five years ago, a long term tenant moved out.
It was my first time in the condo in years and I saw that the carpet was old, it had tired looking laminate counters, the lighting was outdated and it needed renovation. It's what I would have told any client "Renovate this place right now". But I was a bit lazy (and very busy doing my realtor job), so I stuck an ad up and quickly found a bachelor tenant who wasn't too fussy. That tenant has been there ever since.
Time To Sell
Now I've decided to sell the condo and I went to meet my tenant last week. I was embarrassed at the state of the place. I pride myself in keeping my rentals in excellent updated condition and I had let this place go. It's the first and only time I've let it happen to a property that I own.
In order to get the highest sales price for it, I now am doing the renovation that I should have done five years ago.
It's a small condo, so it's only going to cost me $15k to do a full renovation. If I had renovated it five years ago, it would have cost the same $15k but I could have charged an extra $150 per month in rent for it as an updated condo.
5 years = 60 months x $150 = $9,000.
So I would have recouped $9,000 of a $15,000 renovation or 60% of the cost.
Lesson Learned
You'll have to do the renovation at some point, so do it as soon as it's needed and you can charge a higher rent to recoup some of the cost of the renovations.
If I had done it five years, yes I would probably need to repaint or do some minor touch ups after years, but that's cheaply and easily done.
Deferring cost, not avoiding Cost
This is the key, you're going to sell your investment at some point and when you sell it, you'll need to update it then anyway to get top dollar. By not renovating an outdated place, you're not avoiding the cost, you're just deferring the renovation until you sell and you're reducing your rental income during that period.
On the bright side, I get to do my favorite thing, which is renovate something. Check back in a few weeks to follow the progress of the renovation.
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