Some real estate investors choose to focus on fix & flip deals, while others would rather rehab and rent a property. This second group frequently asks me how to rehab a house for renting. What steps should they take, and where should they focus their efforts?
When rehabbing a house for rental, investors want to find the sweet spot between cost, longevity, and appeal. Materials shouldn’t be too expensive, but they need to be durable enough to deal with the wear and tear of renters in the property. And homes need to look nice enough to attract tenants.
In the following article, I’ll dive into some more considerations about rehabbing a house to become a rental property. Specifically, I’ll cover these topics:
- Overall Rehab Philosophy with Rental Properties
- Finding Rental Appliances during a Rehab
- Rental Property Flooring Rehabs
- The Importance of Rental Kitchens and Bathrooms
- Dealing with Terrible Smells when Rehabbing a Rental
- Final Thoughts on Rental Property Style
Overall Rehab Philosophy with Rental Properties
When it comes to rehabbing a rental property, I take a different approach than with a fix & flip house. And how I address a particular property largely depends on the market. If renters in a certain area expect a given style and amenity level, you’d hurt your rental prospects not meeting those levels.
Having said that, here’s my general philosophy when it comes to rehabbing a rental: quality of materials matters more than quality of work. With quality of work, I don’t need to pay a master carpenter to create intricate woodwork throughout the rental property. The benefits just don’t outweigh the costs. But, I do want to make sure all of the materials my contractors use will stand up to the wear and tear inherent to a rental property—hence, quality of materials.
In a rental, you don’t want appliances and other materials that’ll fall apart quickly. For example, when I redo rental property walls, I make sure to use a very heavy texture. That way, if a tenant scuffs it up, it’ll still look good when I repaint it. Bottom line, you want to find the perfect balance between longevity and cost. In other words, you need to stay within your budget while making sure you won’t need to replace items every year. As a landlord, you want to do as few repairs as possible. And by purchasing higher quality materials up front, you’ll save on back end repairs.
With respect to style, your property doesn’t need to be something out of an interior design magazine photoshoot. But the style needs to A) generally fit the standards of the market, and B) appeal to potential tenants. You may get a great deal on high-quality materials, but if your rental looks like something out of the 1970s, you’ll struggle to lease it.
Those are just my general thoughts on rehabbing a rental. In the next few sections, I’ll outline specific strategies I use for different parts of a rental house rehab.
Finding Rental Appliances during a Rehab
Home appliances can be expensive. And in many rehabs, you’ll need to replace all of them. When you purchase a distressed property, many of the previous owner’s appliances have stopped working or been removed. The costs to replace these items add up quickly.
Enter Lowe’s “scratch and dent” program. If a new refrigerator has a scratch on the side of it, does it do a worse job keeping food cool? Absolutely not! But, when you purchase new appliances from places like Lowe’s and other big box stores, you can save tons of money. These stores know that a scratched or dented appliance A) still works, but B) can’t be sold for face value. As a result, quality control departments set these items aside to sell at a steep discount.
Savings on these slightly damaged items will vary from store to store. The discount will also depend on how significantly damaged the appliance is. But, as a rule of thumb, you can expect to save between 25% to 40% on most items. And on items with more visible and significant damage, you may even save up to 75% off the manufacturer’s suggested retail price.
However, you need to remember: the appliances in these discount programs still function like new. They just have some aesthetic issues. The savings on these appliances generally outweighs any scratches or dents they have.
Rental Property Flooring Rehabs
Flooring represents another major rehab expense—especially in particularly beat up properties. Usually, you’ll need to do something to repair floors. And depending on what type of floor you need to fix, I recommend a couple different approaches.
For hard surfaces (that is, not carpet), I always purchase scratch-resistant flooring. Even the best tenants will give a rental property’s floors a run for their money. By installing scratch-resistant floors, you may pay a little more, but you save a ton of money on replacements and repairs down the line.
Related to this, I often see rental properties with tiles. Replacing tile costs a ton of money. Instead, I typically refinish it (you can do this with a bathtub, too). This makes it look like new without paying for new tiles. However, a note of caution here: make sure to use a professional for any refinishing you do. If you take the amateur hack job approach, you’ll do more harm than good—paying for supplies but needing to hire a professional to fix these efforts anyway.
With carpets, I always recommend commercial-grade. These are far stronger than standard residential carpets, so they last far longer. And, they tend to have shorter fibers, making them easier to clean. During the installation, commercial-grade carpets also don’t require as nice of a pad underneath them. Once again, you may pay slightly more up front, but you save that in the long run with fewer repairs and easier cleaning.
The Importance of Rental Kitchens and Bathrooms
When it comes to kitchens and bathrooms, rental properties parallel any rehabs. Simply put, buyers and renters look primarily at these spaces when assessing a property. As such, you’ll need to make sure they both function well and look decent. For a rental, you can make these spaces look good without completely breaking the bank.
I’ve already covered appliances, so I’ll talk about the two other major bathroom and kitchen items here: cabinets and countertops. With cabinets, you don’t always need to completely replace them. Instead, I often just replace the doors but leave the cabinet boxes. This can make them look nicer and improve functionality while potentially saving you around three quarters of the cost of a full replacement. Alternatively, if the cabinet doors function well but just look old, I’ll repaint them. This gives the space a much newer and cleaner look.
Countertops can be another major expense. Rather than fully replace the bathroom and kitchen counters, I’ll typically refinish them. Even if a counter has some burns or stains, a solid refinishing will make it look like new—at a fraction of the cost.
Dealing with Terrible Smells when Rehabbing a Rental
Last but not least, smells matter in a rental property. That is, if a rehab property still has some lingering bad odors, you’ll need to do something about them before finding a tenant. If odors have sunk into carpets, you’ll likely need to tear those out and replace them.
But whether you need to do this or not, use an ozonator. This great piece of gear changes the ions in an area, and it can do absolute wonders getting rid of nasty smells. Typically, I’ll let these run for a day or two prior to installing new carpets or painting a rental property.
Final Thoughts on Rental Property Style
When you rehab a rental property, you don’t need to pay for master craftsmanship. But, you do want to make sure to use materials that will last. Balance cost, longevity, and style, and you’ll have yourself a great rental property!