By Scott Nachatilo
I recently met a new property management customer at a house he had just closed on. It was a nice 3-bed brick home in a good neighborhood.
The only problem with the property is that it was dated. It hadn’t been remodeled since the 1970s. So the question is, how far does one need to go in updating a property like this?
My answer was 95% should be paint and carpet. Sure, you could go hog-wild tearing out kitchens and bathrooms and installing all new granite. But to what end?
At the end of the day, you might end up sinking $10,000 or more into cosmetics and new fixtures by the time you finish going through one large kitchen and two bathrooms. Do you really need to replace all those, or is “good” good enough?
The real question is, what is the return on investment for that $10,000 you just spent replacing items that just look a bit dated?
First of all, the house is definitely rentable with those dated fixtures. I’d say you might get a 10% premium on rent (maybe), so a $1,000 per month rental might become $1,100 per month. If it ends up getting you an extra $100 per month, it would take 10 years to get back the investment. Not exactly a thrilling ROI the way I’m seeing it.
So rip up the old carpet, take down the tacky wall paper and paint and coat those wooden cabinets with Old English until they shine like the morning sun.
Leave the fixtures in place unless they just absolutely have to go, or you are confident you can get them to pay out in 5 years or less.
p.s. If you have any questions about property management, feel free to give me a call at 405.232.5800.