Is it Worth It to Rehab a Rental Property?

Posted by Teresa on July 19, 2011 under Landlord and Tenant FAQs, Screening and Background Checks | Be the First to Comment

Landlords approach apartment or rental house rehabs differently. Some think that no matter what they do, tenants will damage their rental property, so there is no reason to upgrade or make it look nice.

Other landlords invest in major improvements to their properties in order to charge higher rents and attract higher-income tenants. Still others make small improvements each time a tenant moves out, to slowly but surely increase the appeal and attract the best tenants.

There is no right or wrong approach – just the one that works for you. Here are some pros and cons to each approach:

Leave Your Rental Property as Is and Make No Improvements
Pros:

• You save money.
• You can turn over the rental to a new tenant more quickly.
• You avoid the possible frustration of seeing improvements damaged or ruined by tenants.

Cons:

• You probably won’t be able to increase rents unless vacancy rates decline.
• You could easily find your rental property losing value.
• You may attract only tenants who are okay with living in less-than-attractive housing.

Invest in a Major Rental Rehab
Pros:

• The result is usually worth the effort.
• You can often charge a premium rent to increase your return on investment.
• You can attract more desirable tenants.
• The value of your rental property may increase.

Cons:

• Remodeling can be very expensive.
• There is no guarantee your work will be valued or respected by tenants.
• Your rental property value may not increase, due to current market conditions.

Make a Few Improvements Each Time a Tenant Moves Out
Pros:

• Your investment is spread out over time.
• You may increase the value of your rental property.
• You can gradually improve the quality of tenants your attract.

Cons:

• It can take much longer to see real improvements.
• You may not keep up with the market at a slower pace.
• There is risk in subjecting your property to less desirable tenants for a longer period of time.

Remember, attracting desirable tenants is a worthy goal, but it’s not for every landlord. If you’re fine with minimum investment in your rental property, just beware of starting down the slippery slope to slumlord status!

No matter how nice your rental property is, you can’t be sure that tenants are going to keep it that way. Minimize your risk by conducting tenant credit screening and tenant criminal background checks.

Report Shows Confusing Housing Market

Posted by Teresa on December 3, 2009 under Housing Trends | Be the First to Comment

Zillow, the popular home-price website, also conducts surveys of homeowners, and occasionally publishes the results. Last month, their report showed that there is much confusion over pricing and home values.

In the northeast, home values are rising more than their owners realize. Only 20% of homeowners believed their homes gained value over the past 12 months—but 31% of homes in the region actually did.

To contrast, homeowners in the west are more optimistic—but unrealistic. 28% of homeowners believe their homes gained value, but only 17% actually did!

Nationally, the numbers were 25% of homeowners believing they gained value in their homes and 22% that actually did. 49% believed their homes lost value over the past 12 months—and in reality, a whopping 72% did.

This confusing situation could be why real estate investors and buyers (other than first timers) are holding off on purchasing property—until prices stabilize.The Zillow report also revealed that fewer Americans are underwater in their homes (owing more than it is worth). But, as job recovery remains slow, the 14% of all American mortgages delinquent or already in foreclosure will increase—and  put more vacant homes for sale or for rent in a market that is already saturated with more houses and apartments than demand can support.

It looks like the housing recovery real estate investors and landlords have been awaiting is still eluding them. The US Census Dept. reported that one in seven housing units was vacant in the third quarter—the highest number since the government began reporting the data in 1965. Until employment grows again, the outlook for a healthy housing market is less than stellar.