Four Best Rental Upgrades

As finances allow, I try to improve my rental units, adding value where I can. Here are the four best places to put your money, if you’re looking to “up your game:”

  1. Flooring: if you’ve done carpet in your main traffic areas, upgrade to ceramic tile or a sturdy laminate. I prefer ceramic because it’s more durable, if it’s installed correctly. Most of my tenants still prefer carpet in bedrooms (it’s warmer), but I like tile in living areas, kitchens and baths.
  2. Kitchens: if your cabinetry is well built, but just dated, prep it and give it a face lift with some semi-gloss white paint and new hardware/drawer pulls. Cheap but effective! Also, the big box stores sell granite look-alike patterns for replacement counter tops. Nice look, easy on the bank account.
  3. Bathrooms: I’ve been replacing my flimsy tub surrounds with porcelain tile. Longer lasting, nicer looking, and easy to clean. And for $250 or less, you can replace your tired-looking bath vanity and counter top.
  4. Exterior: I probably should’ve put this as number one! If the outside of your unit looks like crap, the better applicants may just drive on by. I’ve been working on sprucing up my exteriors. Installing new windows, washing vinyl siding, planting perennials and some shrubs, painting window trim, etc.

If you improve your rental, you can demand higher rent, and you’ll also attract tenants who are looking for those upgrades. So, you’re getting higher rent, tenants are getting a nicely appointed apartment … everybody’s happy!

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Rents Are Up …

Across the nation, rent prices took their highest jump (over the past year) since before the recession that started easing up somewhere around 2009. According to a recent Wall Street Journal report, they went up 4.6% last year, to an average of $1,179/month. But — good news for renters — apartment construction is way up, so this may create an oversupply in some urban areas, and those rent prices may even out a bit.

And as you might imagine, given the above statistic, homeownership is down. As of the third quarter of 2015, it was at 63.7% — a 30-year low.  The percentage of first-time buyers is also at a 30-year low.

So, what accounts for the shift? I think there are a couple major factors at work here:

  • The collapse of the housing market in 2008 scared the crap out of everyone. Many potential homeowners are still scared, and expect this may happen again. They imagine buying a home, having the market tank, and finding they owe more than the home is worth.
  • People are much more transient now than ever before. They change jobs frequently, and are transferred with their work more often. They don’t want to be “tied down” by homeownership when they know there’s a good chance they’ll be moving in a year or two.

Personally, I still feel real estate is a good investment. I don’t believe we’ll see another 2008 debacle, and owning real estate — whether you live in it or use it as a rental property — is a great addition to other assets in a balanced portfolio.

 

Cheap and Effective

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I often use Easy Off oven cleaner (fume free) to clean porcelain or fiberglass tubs and showers. I can spray it on and come back the next day to finish up the job. But I’ve also found this product works extremely well, in less time.

The Works can be found pretty much anywhere … Walmart, dollar stores, Menards and other big box stores, etc. The secret is to spray it on and let it sit for five or ten minutes before you clean it off. Make sure you totally coat the surface.

As you can see from the picture above, this tub had a mother load of dirt, soap scum and hard water build-up on it. I was actually able to get most of it off with just a terry cloth rag! For the worst areas, I did use my Scotch Brite dark green scrubber, but didn’t have to use much “elbow grease” at all.

I’m definitely adding The Works to my bag of tricks … I’d suggest you add it to yours as well … less time at work means more time to play.   🙂

Onward and upward!

Another Nice Upgrade

 

IMG_3416FullSizeRenderMost of my rental properties are 100 years old. The major operating systems (heat, wiring, etc.) have been updated, of course. And with some of them, I replaced cabinetry along with the initial rehab. This duplex had older wooden cabinets that had a few good years left in them. I had ceramic flooring and a new bath installed last year, and after a recent move-out it was time to update the kitchen.

I used stock, pre-finished oak cabinets from my local big box store, and one of the formica “grant lookalike” countertops they keep in stock. I think they look fabulous, and this place should rent quickly.

My investment goal 20 years ago was to buy and hold, for income and long-term investment. And with each improvement I make beyond the initial rehab, Im:

  • Making my rental more attractive to potential tenants, thus drawing a better quality renter.
  • Improving the value of the home itself, thus making it a more attractive purchase to a buyer, when it comes time to jump into my exit strategy.

So, every improvement I make, I keep these points in mind. Is it adding value in the eyes of my next tenant? Is it adding value down the road, when I decide to sell? If so, then go for it!

Another Facelift

This is a duplex I bought in the late 90s … it was aluminum siding — still is — but was looking a little tired, to say the least. I recently sold it on a land contract to a wonderful family, who started making improvements immediately. FSCN0518IMG_2874

Take a look at this exterior before and after! They’re not quite done, but they’ve replaced some windows, made it into a single family home by opening up the downstairs living area, replaced the front door, and repaired and painted the siding and brick front porch. They also tore out the old shrubbery and put in new plants. They put a big vegetable garden in back.

This home is over 100 years old, but is built better than many of our newer homes today.

These people wouldn’t have been able to purchase a home the traditional way, as they have no credit and the banks have tightened the purse strings so much.

They gave me a large down payment and I didn’t charge them much for the home … they’ll own it within the next couple of years. They’re enjoying the pride of home ownership, and I’m so happy to have helped them achieve this dream … we’ll definitely maintain a relationship going forward. 🙂

Kitchen Update

This old kitchen had metal cabinets and an old, heavy porcelain counter and sink. The cabinets were starting to rust through … they were probably over 50 years old. They weren’t closing very well, I’d owned this rental for 15 years, and it was just time to do the update.

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Before and after: notice my pink tool caddy on the counter (LOL) — initially, I had decided I could probably make this last through one more tenant, then I abandoned the idea and ordered the new counter top, sink and cabinets. The counter was a pre-cut granite-look formica from my local Lowe’s store, and the cabinets were also one of their pre-finished, in-stock styles. I picked up the stainless steel sink at a surplus store — it was it great shape. Materials ended up being somewhere around $1100 total. Not bad, right?

As in real estate sales, the kitchen and baths are the prime rooms that “make the sale.” Doing this update made the duplex a lot easier to rent, and I was able to ask a higher price. A win-win situation for me and the tenants as well.

Every time a tenant moves out, I look for updates that could improve the unit — fresh paint, new flooring, light fixtures, or a mini-facelift like the one above can improve the return on your investment and attract quality tenants. Combine that with quality property management, and everyone’s happy!  🙂

 

 

 

Indy Rental Market Staying Strong

Indianapolis touts one of the most stable real estate markets in the country, in both sales and rental markets. While many of our nation’s cities suffered a 30-50% decline, our real estate market dipped a modest 7% throughout the last recession.

Our rental prices have soared 11+% over the past year. Indeed, real estate is a solid choice in rounding out an investment portfolio. Buying and holding for income and appreciation has been my goal from the start … flipping has always been a popular topic of conversation but is no guarantee of immediate or long-term return.

I like Larry Arth’s explanation of the value in real estate investment. He wholesales properties in several locations, and Indianapolis is one of his favorites. Here’s his take on the concept, as stated in Personal Real Estate Investor Magazine:

“IDEAL is the acronym for the 5 wealth building principles

I (INCOME) positive cash flow

D (DEDUCTIONS) interest, depreciation, repairs, all expense are tax deductible

E (EQUITY) as tenants pay down the mortgage the principle builds up is equity for you

A (APPRECIATION) annual property value growth

L (LEVERAGE) O.P.M. (other people’s money) you gain all the above from borrowed money

There is no other investment available that can fulfill all 5 of these wealth building principles. Most investments will return 1 or 2 of these wealth building principles and only real estate has the ability to return all 5.”

Nice!  🙂

 

 

Don’t Throw it Out!

When one of my tenants moved out of my Indianapolis rental property — it was a bad scenario — he left a filthy apartment behind, including a grease-caked stove top. My handyman suggested I throw it out, but I knew I could save it. Here’s what it looked like half-way through the clean-up:

IMG_2197[1]My handyman was astounded! LOL

Here’s what I used to produce this miracle result: the day I went in there (after the eviction and after the judge had ordered my tenant out) I sprayed the entire stove top with Easy Off (fume free) over cleaner. I also sprayed the outside of the refrigerator with it.

I then proceeded on to some other tasks … painting, small repairs, etc. I didn’t touch the stove again that day.

When I returned the following morning, I sprayed the entire stove top with my trusted Krud Kutter and got to work. I used a flexible, 2″ putty knife. All of that crusted-on grease came right off … no scrubbing! Afterwards, I used a Scotch Brite (dark green) scrub pad to get the remainder and voila!

I get my used appliances cheaply, about $160 for a stove like this. But why spend that money when you don’t have to?

Investing in real estate is an income-producing journey. If I can put more money in my pocket by contributing a little sweat equity, I’ll do it!

Onward and upward …. 🙂

Fakers and Frauds

How do you spot a fake or a liar?  I’ve had hundreds of people submit rental applications over the years and some of the crap they try to pass off as “truth” is incredible!

So, how to prevent this?  Here are a few tips:

  • Have them show you a photo ID and check the address against the address they put on your application.  Also, make sure the name matches, of course.
  • Have them bring a paycheck stub or proof of income. And then, take a good, hard look at it.  Are there shadowy areas on the paper?  Typos?  Different fonts?  These items can indicate photo-copying and tampering.  Requiring this piece of supporting evidence of income will exclude many scammers.
  • Make sure there’s a spot on the app that asks for names/ages of people to live in the property.  And try to have all of them meet you there before you commit to a rental agreement.  If they’re not willing to do this, I’d be suspicious.
  • Check out the company that employs them; do a Google search.  Addresses and numbers should match what’s written on the app, and on the paycheck stub.
  • Although I don’t do credit checks for my lower income properties, I use National Tenant Network (NTN) for my credit/background checks on all of my middle/higher-end  properties I own or manage for others.   I cover the cost by charging my applicants $35 as a fee for applying.
  • Charging an application fee weeds out people who aren’t serious about renting from you.
  • In addition to the above list, I always try to drive by the place they currently live.  Is it a dump?  Is there trash in the yard and on the porch?  Does it look filthy?  Is the home in decent repair?  I find it funny that, quite often, people say they want to move because they have a slumlord who doesn’t fix things, etc.  Really?  You chose to move into that dump in the first place, right?  Doesn’t make sense …

If you add the above items to your checklist, you’ll be more likely to weed out the frauds and scammers.

Good luck, and happy hunting!  🙂

 

 

Finding Good Contractors

I do a lot of the work on my rental properties, but there are certain things I don’t know how to do, or just don’t want to do on my own.  So, how does a homeowner find good, honest contractors?

  • Networking — I’ve found some wonderful people through other investors.  I’d much rather use someone my friends have been happy with than take a chance on a complete stranger.
  • Angie’s List — I used to think this website included mostly higher-priced contractors, but I’ve actually found a couple of high quality people through Angie’s List, and their prices were reasonable.

I’ve had a few bad experiences after hiring workers who approached me, offering a good deal.  For example:   Someone offered to paint the trim on my big four-plex several years ago, and the price was fantastic.  He gave me references and of course, I checked those references.  He got glowing reviews so I went with him.  He asked for 1/2 the money up front, which is fairly common, and began work the next day.  And after that first day, I never saw him again!  Another hard lesson learned … His “references” were most likely friends or family members.

So over the years, I learned to rely on friends and other investors/landlords when looking for new contractors.  That system usually works well every time.  And if an unknown offers you a deal that seems too good to be true, don’t be tempted to grab it … you’re probably being scammed!