To Fix Or Not To Fix?
My partner and i have a disagreement, who is right.
while looking at a investment property to buy and hold we noticed that everything was old cabints, bath ect. (1960-1980) The current landlord rents for 400per month. the rents in the neighborhood go as high as 670. so i mentiond if we replace or reface the kitchen cabinets and caulk the windows and little things like that that we can justify an increase in rent. he says no, they are use to living in these conditions and that he would just raise the rents to $500 then go up slowly without any repair.
what do you guys think
amynewbie
First I would ask how your vacancy rate is? If they are keeping full and you quickly find a new tenant when one leave then I would agree with your partner, just gradually increase.
However, if cimpetition is making your units harder to fill when a vacancy arises, then you may want to put some money into bath / kitchen, curb appeal, etc to make it more appealing to rent.
with just that information to go off of i would say just raise the rent as it is now (if you can). otherwise figure out how much your going to put into the property and how long it will take to get that money back out with a higher rent.
I would ask the renter "if they want the old stuff updated? If they say NO I give them notice and update anyway for a higher rent. On the other hand if they say yes to the updates. I would review your plan for the updates with them and charge them the increase. Either way your still in control of your property and you can justify your eviction or increase based on thier answer.
You need to maintain your investment.
Which means putting wise money into it............ticket items which will not only maintain its good condition but things that can justify why you are increasing the rent.
In a nearby city where I live, there are thousands of rental properties of which many of them are considered slum properties. These properties are held by your typical slum investor....... in they are only looking at profit and not looking after their investment.
If they would clean up there properties, maintain them as well as making them more appealing then they could yield not only bigger bucks and better clients.
This not only makes the neighborhood nicer, it means that your investment will appraise for more.....which is what you want when you resale.
From 1961 - 1965 I lived in an area of Cincinnati, Ohio know as Mt. Adams. I was a small child but I remember it vividly. It was a very poor area, mostly southerners that moved north to find work. Rent was about $50.00 per month if that.
Two young college grads got up with investors and started buying these delapidated buildings and fixing them up. Rent increased drastically and we eventually moved to another poor neigborhood ( Eastwood village which would eventually be bulldozed over for other investors that were doing the same thing). In the mean time Mt. Adams became a very wealth part of downtown. I believe Solutions Kid is in Cincy and can vouch for this area today.
At anyrate, the bottom line is that REI, is just that........INVESTING.
Investing does just mean to buy cheap property and do nothing with it other then raise ones rent. Site improvements should be made that can be justified with the increase of rent as allowed.
Note: Any left wing, tax loving liberal could easily point to this story and say that this is why the government needs to be involved in low income house. Actually its just the opposite, this is why GovCo should not be involved in low income house........because GovCo makes the conditions exist so that people can become trapped and enslaved to their economic situation. Subsequently generation after generation become use to it. There dreams and goals are no longer something that they wish to strife for.......GovCo gives them free (our taxes)money to live off of.
The good book says we will always have the poor with us............but that doesnt mean they have to be satisfied with it nor should we take advantage of it as investors. I would rather help raise a poor mans income so that
1) it gives him a goal in life
2)it affords him the nicer things in life,
3)it allows the investor to make more money by renting or selling to him a better property,
4) it prevents a certain political party from using class envy as a way to get votes,
5)and it helps the economy as a whole.
Bottom line is to make investments into your property that help stimulate not only your wallet but the community as well.
NC_Yank
That was good information and a good example to set. Glad to see not everybody is trying to squeeze every penny they can out of the poor. That other stuff posted about, raise the rents until people move out just about made me puke.
There is a philosophical difference between spending money to attract a higher-paying buyer, and spending money chasing higher-paying tenants.
I'm all in favor of the first, and deeply distrustful of the later. It requires the most thought, takes the longest to recoup your investment, and has the most unexpected consequences, e.g. tenants may care little for the $1200 you spend re-facing cabinets.... higher rents may bring higher vacancy rates and/or longer spans between leases...etc.
thank you all for the responses. i guess everyone has their own opinion, and should just do what each individual can sleep with at night.
great advise on everyones part, i still think we should improve some; after all it is our own investment property. further more i dont want to be a slum landlord.
i have live in apartments that i froze my butt off and the landlord did nothing. i even went as far as sealing all the windows and window frames with caulk to no availe. so i wouldnt want one of my tenants to go thru what i went thru. i have been in their situation.
i will do just enough to keep them happy and enough not to brake my bank.
thanks again to all
amynewbie