Robert S. Griswold - Property Management Kit For Dummies

Conserve energy by turning off the water heater, furnace, and air conditioning units at the breaker and setting the refrigerator/freezer to low. Your turnover work should also include cleaning or replacing all filters — air (furnace and A/C) and water (refrigerator and some water heaters). This simple, low-cost item greatly improves energy efficiency and lowers the wear on the equipment. Keep records indicating the date when the filters were changed (you can write in permanent marker right on the filter), and be sure to remind your tenants when they should be changed again.Tenants are becoming increasingly aware of the importance of conservation and energy efficiency. If you install water-saving fixtures, pilotless ignition gas stoves and water heaters or tankless water heaters, weatherproofing, insulated windows and doors, and energy-efficient appliances, you’ll have a competitive advantage in the rental marketplace. Be sure to emphasize your green efforts in promoting your rental property.

Check the pool/spa/water features. If your property has a pool, spa, or any water features, have a professional evaluate its condition and provide a written report documenting their findings, including the state of the equipment and the water quality. Poor water quality can create serious health issues, so always test all water systems to minimize the risk to people and animals. This evaluation establishes a baseline that can head off any tenant complaints down the road.

Perform maintenance that will minimize the likelihood of pests. Caulk all cracks around the windows, foundations, drains, pipes, and any other items that penetrate the building envelope and may allow pests to enter the unit. Almost every rental property needs pest control at some point. Occasional sightings of cockroaches or ants in search of water or food are commonplace, and consumer products are available to handle these limited situations. But use professional exterminators to treat more significant problems, and talk to your exterminator about establishing a regular schedule for follow-ups to make sure that your unit stays reasonably pest-free.The increase in bedbug infestations over the past 20 years can be a real problem for landlords, so you should seriously consider ordering a preoccupancy inspection or certification to ensure that the property is bedbug-free when your tenant takes occupancy. An inspection for bedbugs and other pests before your tenant moves in provides a baseline, showing that bedbugs weren’t present at that time. That doesn’t mean you shouldn’t aggressively respond to eradicate any future infestations, but effective pest control to minimize issues requires the full cooperation of the tenant, the landlord, and the pest-management professional. For more info about bedbugs, flip to Chapter 19.

Almost every rental unit has the potential for renovation or upgrades, giving you the opportunity to create real value in your units. The trick is evaluating the cost of the renovation or upgrade versus the rent increase you can get out of a particular improvement before you start renovating. You need to be sure that you’ll get your money back from your investment. The following sections help you figure out how much to renovate, what features prospective renters like to see, and what you need to do to stay within the law.

When you’re considering making renovations and upgrades, you need to understand what they can and can’t do for you. Many times, renovations and property upgrades result in increased net income and higher property value. At other times, however, the benefits may not justify the investment.

To consider the payback of a proposed improvement, calculate the total installed cost of the upgrade, and divide that number by the monthly increase in rental income. If you install a dishwasher for $400 and consequently increase your monthly rent by $25, the payback is 16 months. Whether 16 months is an acceptable payback and worth the initial investment of $400 is something that you have to determine. Just remember that you’re not only increasing your monthly gross income, but also generating increased property value as a result of higher net income. The higher net income makes your property worth more to a buyer when you look to sell it.

Every real estate investor has different expectations, but generally, any payback of less than 24 months is good, especially when you look at the increase in property value that accompanies increased net income. See Real Estate Investing For Dummies, 4th Edition (John Wiley & Sons, Inc.), which I co-wrote with Eric Tyson, for more discussion of ways to increase the value of your rental property.

Not everyone appreciates or values the same features in a rental unit as you. This property is a rental property, and as the saying goes, “Beauty is in the eye of the beholder.” The features and amenities that appeal to you may not be worth the extra investment from the perspective of your target tenant market. Although you prefer expensive travertine floor tiles in your own home, for example, you may find that more-durable flooring products can tolerate the heavier wear and tear of rental units much better. Although cleanliness has universal appeal, features such as ceiling fans and microwaves may appeal more to some prospective tenants than to others.

Some tenants value certain improvements more than others do. So the main question is this: What features and improvements do most prospective renters want (which in turn can bring you more money in terms of higher rent)? You can’t come up with an exact answer to what amount of increased rent a particular upgrade will generate. A new granite countertop in the kitchen or new light fixtures in the dining room will have a different effect on each prospective tenant; some people are willing to pay more for those amenities, and others aren’t.

Are you feeling a bit confused about the features that prospective renters want? Never fear! The following tips can guide you:

Keep in mind what features and strengths your prospective renters will find in competitive rental units. Look for outmoded or outdated features in your own unit. Perhaps most of your competitors offer dishwashers, but you don’t have one in your unit. You may want to install a dishwasher so that you remain competitive. But don’t forget that you’ll lose cabinet space, so you need to evaluate all aspects of the potential upgrade, not just the cost. Or maybe your unit has a very old dining-room light fixture that you can easily replace with a modern light fixture or a ceiling fan with a light kit. Another simple upgrade is replacing your old electrical switches and outlets for a more modern look. Installing new hardware or refinishing the face of the kitchen cabinets are other low-cost upgrades. Many older cabinets are of good quality, and only the doors and hardware need a facelift. Pay particular attention to those items that are quick, easy, and inexpensive to replace but can improve the overall look of your unit.

When upgrading or replacing your current appliances, always compare energy-efficiency ratings, and standardize the brand and model wherever possible. One advantage of upgrading your appliances is energy efficiency. Though your tenant may be the one paying the rent, remember that green sells, and you can easily demonstrate that your unit will cost your tenant less each month in utilities with new energy-efficient appliances.The advice to standardize the brands and models of appliances in your rental units is particularly true for certain appliances; you can easily replace modular components to give the appliances a new look and extended life. Stoves, ranges, ovens, refrigerators, and washers and dryers fit into this category. When appliances such as microwaves, dishwashers, and garbage disposals fail, it’s more cost-effective to replace the units. So for this latter category of appliances, you want to take advantage of appliance vendors who have certain models on closeout or special pricing while staying with the same color scheme or finish. Bonus: Tenants generally don’t pay much attention to the brand of the garbage disposal, so you may as well take advantage of any specials. Buying a discontinued brand or model of a stove, however, may save you money up front but cost you much more in the long run, when you’re unable to find replacement parts.