Charlotte Property Management Weekly: 3 Approaches to Fixing Up a Rental Home

 

We sometimes take over management of homes that have been treated in, diplomatically-speaking, less than desired regard.  It's frustrating for the owners (and the property management company), especially in difficult economic times when cash is scarce.    

 

The purpose of this article is not to talk about the root cause of this destruction (usually poor tenant screening), but rather the options available when faced with a rental home in bad shape.

 

It comes down to 3 potential approaches:

 

1. Total Fix-Up: This is when everything is fixed so the home is in tip-top shape.  New carpet, new paint, new everything!  The upside to this approach is that the home will command top rent and a top tenant, while the downside is that it will demand top dollar to be spent by the owner.  ROI on a 1-year rental with this approach is debatable.

 

1. Partial Fix-Up: This is when the most pressing demands of the house are met.  The house is cleaned well, the walls are touched up with paint, and the carpet is steam-cleaned.  The goal is to make the house look like a good rental, not a show home.  The upside to this approach is that it is much less expensive and will entice a good renter, while the downside is that it will not command top rent and the tenant will usually not be a neat-freak (we love neat freaks!!).

 

1. No Fix-Up: This is when the home goes to market "as is."  Little to nothing is done to fix the home aesthetically and the tenant is asked to "have an open mind" and the property is listed as a "handyman's special."  The upside to this approach is that repair costs are low and the home can be put on the market immediately.  The downside is tough.  Rents have to be lowered considerably, the quality of tenant suffers, and the house will be in even worse shape (think catastrophic) when the tenant moves out (evicted or otherwise).

 

So which is the best approach?  The answer is the universal response in business school to any question- "it depends."  At different times and situations, each approach is appropriate.  Many times this answer is dictated by finances.  I mean, if you have no extra money, you are forced to use approach #3, right?  And if your rental home has gotten to the point that it is absolutely disgusting, you probably have to opt for approach #1 at some point.

 

Generally-speaking, I'm a fan of approach #2.  I try to stretch #2 as long as possible before I'm faced with the decision that the house has to go to approach #1 (or #3).  Once I'm at that point, my preference is approach #1 (if finances allow).         

 

The approach chosen for home fix-ups is a huge component on their ROI.  One size does not fit all (as some are wont to do).  Choose carefully (and profitably!)!

 

Brett Furniss is the President & Owner of BDF Realty ("Charlotte's Most Innovative Property Management & Investment Company"), and Rent-To-Sell Realty ("When You Need a New Solution to Sell Your Home") which  specialize in rent-to-own (lease options) and rent-to-sell homes.  His newest book, A Real Estate Agent's Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)