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 or offices for lease: 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 apartment, 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.