I have a little theory to share about rental properties and what tenants are expecting and how it can help you the landlord or future income property owner. It used to be, that rental properties showed and rented themselves and needed very few upgrades. Up until around three or four years ago, I never showed a rental property that I owned or managed. Current tenants would talk to their friends about the units, people would stop by on their own to see a place, or they would simply call to arrange a time to sign a lease for next year. It was great. That is not how it is now, and I honestly think that it may be a good thing. Tenants are becoming smarter, have access to more resources, and they are demanding more. While this may not be ideal for many owners, as the out of pocket costs initially will hurt to make some serious upgrades, it will be better for them in the long run. Let me explain.
To be known for having high end rentals and being a fair landlord is worth its weight in gold. Someone like that will have many inquiries into their rentals, be able to rent out a place with a much higher than average rent, and will have much less turnover. I would say that is every landlords dream. But the secret to this success is not that hard to come by, but it seems that few owners or management companies know what needs to be done. Simply put, have nicer places and keep them upgraded. Now I am not talking about plasma TVs in every room (though one new student housing development in my area proposed almost this very thing), but simply nicer than the average. Are the countertops over thirty years old and remind some of the awful colors which should not be re-introduced to our nation's youth? Is the carpet over ten years old? Are the appliances newer? How does the paint look and are the colors neutral or modern? These are simple and not overly expensive fixes. I know that many landlords want to grab every penny out of their places, but it simply is not cost effective.
Preventative maintenance is something that every landlord should proscribe to. Get a new roof before it leaks. Replace a water heater before it goes bad. It is what you do now, so that it does not cost you in the future. But do many landlords replace an appliance before it breaks? Do you redo a kitchen, ever? Why not? Because it is not needed you say. But this does not seem to totally make sense as an upgrade in a place can bring in higher rents. I just took over some properties a few years ago and had the owner agree that a general upgrade would pay for itself and my services within a few years time. The owner was willing to do some small upgrades first, to see if it really made a difference in rental amounts we could ask for. We started with new carpet in a few units along with adding ceramic tile and new countertops in one unit. We advertized that this unit was going to have the new tile, countertops, paint, and carpet. We asked about $100 more a month for this unit and we got it. We have actually been able to slowly increase the rent on that specific apartment since then so the time it took to pay off the upgrades has already come and gone. I think it paid for itself in less than a year. We have since replaced a kitchen in another unit which transformed the entire rental, as more than ½ a person could now be in the kitchen. We instantaneously were able to ask $200 more per month for this place and the tenants just signed a four year lease. With this specific owner, we have gradually upgraded the units and are far from being done, but what we have already done is close to being paid off, and more importantly, these units have gotten to be known as high end units known around the area. They have been 100% rented since we started the upgrades, and we even have a waiting list for those wanting the possibility of renting them.
Will this happen to every owner who upgrades? Probably not, but it is important to realize that tenants are demanding more in their rentals and if they do not have simple upgrades, will not rent your units. Who knew that a simple dishwasher was a make or break item for tons of renters? Why not upgrade appliances to energy efficient appliances and be able to tell this to incoming tenants. This will save you or them the money to run them, but it is also a great little marketing technique.
In my market (Ann Arbor/Canton/Saline/Ypsilanti, MI), there are many new developments which are being built which will change the dynamic of rental properties in our area. As I mentioned above, plasma TVs rooms, gyms, etc. While many tenants are not looking for these items, they are out there and available. I am not saying that you need to put TVs in every room, but don't be so far behind with a 1960's kitchen that you will not have a prayer of getting the tenant. There are many rentals in my area, and I know my niche. Know your niche and keep up with what your tenants want. If everyone is asking for a dishwasher, look into putting one in. If you see a look of horror when numerous prospective tenants enter a bathroom, ask them what they would like to be changed. Take it into consideration because these are your customers, and while the customer may not always be right, they often have great ideas.
Remember that you need to keep in touch with what a future tenant needs, not just what kind of tenant you can get with what you have currently. It will help out in the long run your tenants will thank you where it counts, your pocketbook. David A. McNamara - Tree Town Realty www.DAMcNamara.com Email: David@TreeTownRealty.com
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