7 Expert Tricks for Rehabbing Rentals

The fix-and-rent (buy and hold) strategy is very much alive. Mortgage rates are low and rents are high, meaning there’s quite a bit of spread to make. But are you doing it wrong?

I’ve lent on hundreds of properties over the years. During that time, you come to realize particular commonalities between successful real estate investors who have large portfolios of rentals. Similarly, you notice aspects of the game that can lead to instant failure and poor returns, if any.

The successful ones often buy properties at significant discounts due to distress, foreclosure, trashing by tenants, large vacancy rates, changing neighborhood demographics, rebuild costs, and so on. Numerous rental investors I know sub-contract and outsource most of the work, focusing solely on the purchasing of the properties. That is where most of the money is made after all. Here are seven tips that I have noticed over the years:

1)     Make It Nicer Than the Rest

This is fairly self-explanatory. If you fix your subject property better than other available rentals, you’ll increase your rents, decrease your vacancy, and probably hold a long-term tenant. There is a huge demand for rental properties. Millennials are not buying as previous generations have. Possibly, it is a result of the Great Depression, changing economic macro factors, and student debt levels. In the end, small tweaks that make your property stand out will be well worth the extra money.

Keep your materials with a long-term perspective. Putting carpet can save you money now, but the costs in the long-run may not be worth it. Beware: when I say to make it nice, that does not mean make it significantly better than any nearby home. Chances are, your returns won’t pan out building the nicest house on the block. We’re talking small improvements here.

2)     Simple Colors Are Better

I cringe when landlords start to use exotic colors. You’re essentially decreasing the size of your potential market. Color matters a lot.

You should stick with standard paint colors, think white. I’ve heard good things from investors on Sherwin Williams’ Navajo White. You can use a different white for trims to give it an extra kick. A benefit of using whites as wall colors is that it doesn’t really go out of style. A certain negative is it gets dirtier faster, but you’ll be repainting every time the tenant leaves anyway.

A huge mistake is to go with multiple colors. This is a logistical nightmare, even for small touchups. Stick with one color and save significant time with minor cosmetics.

By the way, simplicity goes for everything here. Keep your designs classic and timeless.

3)     Choose Your Finish Carefully

A satin finish is probably preferable, as opposed the flat finish counterpart. It’s much easier to wash out a stain, doesn’t seem overly shiny, and using a flat finish will leave you repainting the walls every time there is a smudge. Satin finish will save you significant money over the long run. There’s no reason to spend more on blemishes than you already do.

4)     Pick Appropriate Flooring

You had a bit of a rant early, and I’m going to reiterate it here: stay away from carpet. Period. It’s not aesthetically appealing, it gets dirty particularly quickly, and you’ll be replacing this every time a tenant leaves. Hard floors like ceramic or hardwood are a much better game plan.

Are you trying to be profitable? Then pick standard hardwood floors or ceramic tiles. Don’t do anything particularly fancy. A standard color goes a long way. If you go hardwood, remember to apply two coats of high gloss polyurethane. Your place will look better than carpet, and it will last much longer. By the way, this will increase your rents.

5)     Appliances Are Necessary

Not only do I lend money, but I have a real estate license. I can’t tell you how many times client won’t rent a place because the appliances are old. Get stainless steel appliances with the whole gamut: dishwasher, washer, dryer, and so on. You’ll be increasing your rents while simultaneously keeping your investment looking nice.

6)     Install Central A/C

This is curcial if you’re renting out your place. Good tenants will require this, and trust me, you don’t want to deal with high vacancy and evictions. The alternative is much more expensive on electric bills, and this is a factor for your tenants. Theoretically, that is money they could otherwise pay you.

In addition, this saves you money in the long run. Central heat and air are the way to go. Plus, Window AC units make your place look old, break every couple years, and damage your windows and sills. No need to go this route.

7)     Give the Kitchen and Bathroom Some Uniqueness

I’m not saying go all out. But you can buy granite quite cheaply nowadays for your countertops. This will make your place much more rentable than the competition, and it lasts longer—again, emphasis on long term here. Tile back splashes are fairly inexpensive and can bring some style as well.

Whatever you do, all the successful investors I know never go with plastic faucet knobs. And they keep their bathroom sparkling clean before the renter gets there. Huge plus point during the showings.

In the end, don’t go for the ultra cheap stuff. You will end up paying for it later on. It’s like hiring a bad employee: the costs start to add up exponentially. 

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