How a Leaky Pipe Made Me Rethink My Approach to Renovations

Most of my value-add renovations around the Boston area are conceptually straightforward. We usually target kitchen and bathroom renovations, and if the job is a little more extensive we’ll start tackling items like updating mechanicals, some more intensive board/plaster and door work as well. My motto in the past when finalizing the scope of work has been if it’s not broken, let’s not get crazy and prioritize tackling the projects that can directly help us push rents.

Now I don’t think it’s a bad thesis, but in one of my recent renovations I learned a lesson about pushing off non-cosmetic work. The building was a smaller multifamily in Boston, and we were doing a ~$60K/unit renovation that includes new kitchens and baths, an addition of a bathroom in each unit, door and trim work, and some floor work. The only mechanical updates we were supposed to do was the plumbing and electrical in the kitchens and baths that we were working on, but otherwise my idea was to stay away from major upgrades as it could really blow up our budget.

As we were going through the initial rough work, I remember having my GC call me and talk to me about potentially tackling one of the main plumbing stacks in the building; he told me didn’t think it was in bad condition, but it could be an issue down the line. I thought to cut cost we shouldn’t open a new can of worms, so we proceeded with the project and ended up completing the work (and final product, I will say, did it come out really good!).

What happened with this plumbing stack that I decided not to deal with? You guessed it, within a few days of the first tenant moving into the building there was a major leak in this stack! Now for context, this building is an early 1900s build with cast iron as the material for the main stack, so for the trained professional, it’s probably not a huge surprise. Either way, once we found out about the leak, the only way we could resolve the issue was by ripping up apart the walls around our brand new bathrooms and kitchens and trying to figure out where the leak was coming from and how to replace the leaky parts of the stack. Having spent months on this renovation, this was a painful pill to swallow.

So how has that changed my thinking on how I tackle renovation scopes today? I still believe that the SOW should represent your business strategy with the building at the end of the day; if you’re in and out of a project, then it could make sense to skimp on investing capex dollars that don’t necessarily increase the rent roll/NOI of the building. However, if the strategy with the building is to hold onto it longer term (say 5-10 years), then you may want to consider really investing into the building, even if it means spending money on items that won’t produce direct ROI today. It’s clear now that those dollar savings will be realized over the course of the hold period, saving a lot of headaches and maintenance bills.

So, if you’re an operator, what’s the takeaway? Make sure your SOW for your renovations is aligned with your business strategy for the building, and if you’re going to hold onto an asset over a longer duration, don’t be afraid to invest dollars into items that may not necessarily produce extra dollars for you in the short term!