any LANDLORD out there?? need some advice?

Question

hello all

i am a new landlord. i just bought an apartment. i will be moving into it myself in a couple of years but i will be renting it out in the meantime. it is currently in livable condition.

however, i am thinking of completely updating and renovating the kitchen and bath before i rent it out to a tenant. a friend of mine disagrees with what i want to do and thinks that since the tenant would probably do some damage to the brand new kitchen and bath, i should leave the kitchen and bath as is for the tenant and completely renovate it when i move into it.

my reasoning is i want to take care of all the renovations now before the tenant moves in , so that i don't have to worry about doing any more renovations when i move in. i figure, besides, IF the tenant DOES do some damage to the apartment, i can always hold back some of the security deposit to cover the expense of repairing the damage.

who is right? me or my friend.

thank you

Answer 1

There are pros and cons on both sides:

1. Do it now -
You'll be able to charge a higher rent with the renovations in place.
You'll have fewer complaints from your tenants after doing the renovations.
Contractors are not very busy now (with the real estate market in a slump) so you'll be able to get the work done cheaper.

2. Do it later
The apartment will be brand new when you (the most important tenant) are ready to move in.
You'll have the use of the money that you don't spend now until you need to spend it (presumably gaining interest).
You'll have more time to plan how you want to renovate, to find good contractors and to choose your fixtures and appliances.


In the balance, I think it just comes down to how much more rent you can get if you renovate now. If there is a big enough difference, do it now and you can use the extra rent money in 2 years, when you are ready to move in, to "spruce up" again if necessary.

Answer 2

You both have a point. It's pretty much down to what YOU want to do. At least with doing the renovations now there won't be much for you to do when you retake possession. And you will be able to save a few tax $$$ by depreciating the renovations along with the rest of the property while it's being rented out, as well as charge a bit more rent for a better property.

(Make SURE that you take that depreciation deduction, by the way! You MUST "recapture" it when you sell the place whether you took it or not so it's in your best interest to take it while you can. Once you move back in, you can no longer depreciate the property on your taxes.)

Answer 3

(Partially) Upgrading the kitchen/ bath now is the best idea from a management standpoint. You can raise the rent for one, your resident will have more pride in the property and take care of it better and you could raise the security deposit if it is not already at the legal limit. Make sure, above all that you have a good lease from the Apt. Association in your county. Remember that great credit does not always = great tenant. Make sure you charge an application fee and pet rent (better to not allow pets though, you will regret that)- these things,although you may not feel right about it, let them know that you are a professional, not just winging it. If you can, be sure the new resident either doesn't know you are the sole owner or knows that you are not the only decision maker in the property upgrades for future reference. Never accept an excuse in place of the rent not being on time, no grace period is required, rent is due on the 1st..not the 2nd, 3rd, or 10th. Oh, back to the question! Also, you will have different taste in two years, I would upgrade but not completely re-do until you move in. Hope that helps!

Answer 4

You are correct. First off, the chances are good that before you can rent you'll need to repair or upgrade anyway. Secondly, you can increase the rent prior to the lessee moving in based on your upgrades, which can also be a tax deduction. Lastly, and don't count on a renter causing damage, do minor upgrades towards what you ultimately want so that when you're ready to take over you're renovations will be minor to the initial change.

When upgrading do so with the final idea incomplete. You wish to be the one to enjoy that renovation. Do so with some of it in mind - those things that are easy but noticeable and permanent. Then change things like the shower and toilet. (Sink should have been done already - cheapest.). If damage has been done then the repairs for you won't be as much and will be covered by the deposit.

Answer 5

I would do the renovations now. You will probably be able to command more per month with these updates. Just like houses on the market, bathrooms and kitchens sell the house.

Besides you are on the right track with regard to recovering damages if you have a big enough security deposit and don't forget to check their credit as well as any references.

Answer 6

OMG, never remodel before u rent if it's already livable because being in the field of rental property; 95% of the time you have to replace many things that do get damaged. Most people who rent, rent for a reason. They don't own anything worth appreciating and trust me, if they don't appreciate having nice things (maybe from their upbringing), they won't take great care of yours. We had tenants for a year's lease that had great referals and references but when they moved out, we had to rip out all the cupboards, flooring, new fridge and stove because they were infested w/ cockroach eggs. I mean these things were all over the walls when we removed the cupboards, fridge and stove. NOT that this will happen, but don't spend the money to remodel/renovate/restore until you are ready to move in yourself as you could end up doing it twice. Hopefully not, but could and that can be costly and frustrating.

Answer 7

although you friend has a point... you win this one hands down. you can hold the deposit to fix any damages, and you can always rent an apartment that is newly renovated for a little more every month. so it comes out in your favor in the long run. :)

Answer 8

Your friend. It is so tempting to put in nice carpet and nice fixtures but in the end tenants simply don't care because they are not owners. Make it nice so that you can maximize your rental potential but do the work after they leave and before you move in.

Answer 9

Your logic is correct. You also can write off the renovation on your taxes while it is a rental.

Regards