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Rental Property Modernization

When travel, do you prefer a hotel with 80's decor or a renovated hotel with modernized theme?

Undoubtedly, most travelers prefer a newly renovated one. This is why we often see hotels spend multi-million dollars on renovation to entice visitors to stay at their properties.

Rental properties are like long term hotels. Giving a choice, renters prefer properties with modernized upgrades such as kitchen with stone countertops, stainless appliances, hardwood floor, travertine floor, earth-tone paint, neutral-color carpet, 2" wood blinds, plantation shutters, modernized faucets and light fixtures.

It is very difficult to rent a property that still has the original 50's to 80's decor. Houses with older decor will normally fetch 10% to 30% less rent comparing to the upgraded ones. Even with a deep discount, it may take an extra few months to secure a suitable renter.

Therefore, adding the lost of rental discount and vacancy rate, it may be more cost effective for landlords to modernize their rental properties if budget allows.

Posted by Caroline Tsou on 10/26/2008 08:24 PM

Comments (4)

landlords

4 Comments on Rental Property Modernization

OCT

2008

Good points, but sometimes it is hard to come up with the money for the repairs

we own a corporate housing company in South Florida The Perfect Place. in the last three years we purchased many of the apartments. This has resulted in a great expense of keeping them looking fresh and updated. We have found the best investment to be a fresh coat of paint a really thorough cleaning and laminate flooring. GET RID OF THE CARPETS. carpets cost to keep replacing and tenants will pay more in rent if the condo has wood flooring

Caroline,

You are absolutely right, but it is not that easy to have the Lanlords agree to do anything. The expence is not samll, and they are not sure it would make financial sense.

You can never guarantee that, and this is a problem.

OCT

2008

Yes, modernization is one of the biggest hidden costs of the landlord business. It is also very difficult to explain and persuade the landlords to put money into the property first in order to make money later.

For example, I just rented a townhome in a very upscale complex. The property was modernized with new earth-tone paint but is still having the old tile kitchen countertop. No hardwood floor or any other fancy flooring. There was a lot of showing of the property and most renters got turn off by the kitchen's old tile countertop. Market is also over saturated with lots of rentals.

The place was rented at about $100 below market rent with an extra one-month vacancy without the kitchen and bathroom countertop upgrades that will cost the landlord about $3000. He plans on upgrading the counters next time when the current tenant moves out.

The monthly rent is $2100. Rental lost of $100 per month on a one year lease plus the $2100 one month vacancy equals to a total lost of $1200+$2100=$3300. If he decides to upgrade the counters next time when tenant moves out, it will cost him additional $3000 for the job making the total lost of $3300 + $3000 = $6300.

Looking at the numbers, if he upgraded the counters this time, his lost is $3000 vs. $3300 lost rent and vacancy lost (or $6300 lost if he upgrades the counter next time).

I see other landlords losing more money on suffering longer vacancy. This case is one of the better cases since it is located in a highly desirable upscale community. Therefore, it is very important for professional landlords to keep up the modernization of the rental properties.

Caroline

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