As a
rental property owner, I am always looking for ways to maximize the rental
income and keep my units marketable without having to do any major renovations.
I am always keeping my eye out for potential properties that I can buy, and
easily rent out that will cover the mortgage and a little more.
That being
said, one of the biggest mistakes that I see other landlords and rental
property owners make is that they are reluctant to or just flat out won’t put
any money into their properties because they don’t think they will see a return
for that investment. When I tell some of my counterparts that I put new
kitchens and bathrooms into all of my rental units they think I am nuts. To
quote one of my friends who has some properties, “Why would you spend $4,000 on
an apartment that is just going to get destroyed by the next people that rent
it?”. To answer his question, I thought I would write this article.
First,
let’s think about the mathematics behind it. Granted each market or city is
going to have a different result, but for where I live in the Philadelphia area
this holds true. By doing a little research and finding comparable apartments
in your market, you can find out what the magic number is. What are the three
features that are going to stick out about any apartment? The condition of the
rugs, the bathrooms, and the kitchens. If any of these items look worn or beat
up, it is going to be harder to rent and you won’t be able to get as much for
it… that is just a fact of life. So let’s say you spend $3,000 to upgrade the
kitchen and bathroom(s). Yes, it is possible to spend that little on upgrades
and I will show you how later on. Assuming the rest of your unit/building is in
good condition, that $3,000 investment can produce an extra $200 a month in
rent for me per unit. At $200 a month, you made your investment back in just
over a year and you are now making more money per unit. Think about it. If a
prospective renter is looking at two apartments: one with a dated kitchen and
one with a modern kitchen and bathroom, which one is he/she going to choose?
Not only that, but a nicer apartment is going to command a higher rent which in
turn brings in a higher income renter who is less likely to abuse and destroy
the apartment.
For
some of you, I am sure that $3,000 to renovate a kitchen and bathroom(s)
probably made you chuckle. If you are still shopping at the big box stores for
your supplies, then you have a reason to laugh. To update both the kitchen and
the bathroom in an apartment using their cabinets could easily cost you double
if not triple. After doing a lot of research, I found a source for cabinets
that saves me at least 30-40% per apartment. I started buying my cabinets
on-line. If you do a search for RTA Kitchen Cabinets, you will find my secret.
Not only are they cheaper, but they are also made of stronger materials and
easier to assemble and install. By buying cabinets on-line, direct from the
importer/manufacturer you can get them much cheaper because they don’t have the
high overhead cost of a retail store. I have been using them for years now in
my apartments, and you wouldn’t be able to tell the difference if you put them
side-by-side with store bought or store ordered cabinets. The biggest benefit
is that you don’t have to wait 6-7 weeks for cabinets like you do if you go to
Home Depot or Lowes. These are delivered straight to your office or property in
around 2 weeks.
So
the next time you are trying to figure out why you empty units, or the guy
across the street is renting his units for hundreds more, take a look at your
kitchens and bathrooms. I simple upgrade will not only get you a quick return
on your investment, but it will also continue to generate more revenue for
years to come.
If
you enjoyed this article, please go to www.NicciAndLee.com for more wealth
creation strategies and techniques. Learn from those who have been there and
done it at www.NicciAndLee.com
