Opinions on Rental Property Needed. Thank you!

[Lex Luthor]

We close on our first rental property (in AZ) next week. The only thing we are waiting on is some paperwork from the HOA. The details are that this is an REO 3BR/2.5BA 1300 sq ft, two story home, built in 2006 that we purchased for $51k (original 2006 sales price was $175k). We are putting 20% down and with tax, ins, and hoa the payment will be about $425. We believe it will rent for between $800 to $850 based on current listings and actual rented properties.

I would like some advice on a couple items.

First, I want to make this house nice enough that it will rent easily, but not so nice that I’m killing my ROI. These are the “extra” items we are considering to make it “nice enough”.

1. Tile? – The bottom floor is carpet and linoleum and is about 650 sq ft. The carpet on the bottom floor HAS to be replaced. We can replace the bad carpet with new carpet for about $400 including installation costs (the padding doesn’t need to be replaced, just the carpet itself). We have also considered tile, but installation costs are high. For a licensed/bonded/insured professional it would be about $4 per sq ft to have someone remove the current flooring and install tile, plus about $0.75 to $1.00 per sq ft in tile costs….for a cost of something like $3,000+ for tile. We have also looked at hiring someone who is not licensed/bonded/insured and it would be just under $2,000 for tile. The benefit of tile being that we wouldn’t have to replace the carpet in this high traffic area with every new renter.

2. Landscape the Yard? – The house has a very very small yard that is just dirt. It is only about 12 feet deep. I was thinking of putting down some pavers and a few plants and some rock …maybe $250 to $500.

3. Blinds? – Right now the house has mini-blinds, two of which need to be replaced for a very small cost. Personally, I hate mini-blinds, but this isn’t for me. And to be honest, if I was a renter this is probably my last concern. However, most comparable listings seem to have wood or faux wood blinds. I think it would be about $600 to do faux wood blinds, but I don’t really want to….are mini-blinds a deterrent?

4. Tub enclosure? - Twice in the last couple months I have had someone visit my home and not pull the shower curtain into the tub and water has gotten all over the floor. The person/s seemed to be completely unaware that they forgot to pull the curtain into the shower. Both times I discovered the problem because the bath mat was soaked when I went to give my daughter a bath. I have seen several listings with tub enclosures and am considering it to protect the property from person/s like I mentioned. This would be $600 to $750 for the materials, and I do not yet know what installation costs would be. Both showers are on the second floor.

5. Ceiling fans? – We will be buying 4 ceiling fans. One for the large area down stairs and 3 for the bedrooms. Should we get ones with a nice nickel/wood finish for a total of about $275, or the cheaper basic white ones for a total of about $125?

6. Paint color? – The bottom floor HAS to be re-painted, let’s just say someone really liked pink. I’d prefer a tan/beige paint over white. But the upstairs is still the white color the builder sold it with. Because I’m a little lazy, I’d like to just paint the downstairs a tan/beige color and then not paint the upstairs….think it matters if I don’t paint the upstairs the same color?

Second, how much liability insurance do you recommend? The quote we have now is for $300k, is that enough? What’s standard?

Lastly, where should I list this property for rent? What source/s are the most effective? A real estate agent? Website/s? Newspaper/s? Craigslist? Any advice in this particular area would be greatly appreciated.

Other items I should think about?

Thank you everyone.

[Deleted]

Yes, Lex is the one who did the timeline of the strategic default. I am certain that we are all curious as to how you got a loan this quickly.

I will answer two of your questions . . . first, the one about the faux wood blinds. I have these in my house, and they cost about $25-35 each at Home Depot's or Lowe's. Are you doing something custom to bring the total up to $600? Check around.

Ceiling fans . . . what is the place renting for? If you got a nicer one, I'd put it in the living area. I'd put the cheaper white ones in the bedroom areas. Mine are all Hunter and Bay Harbour (one of the big box's brands), and I still have white ones in the bedrooms. These are definitely "yesterday's style," by the way, but you know what will rent best because you have visited other rentals in the area.

[phil5185]

I would do carpet and paint. The other upgrades won't add much to your rentablity or rental income. But you might want to do some of those things when you are ready to sell.

[2kids10horses]

I agree with Phil. I put in the cheapo miniblinds. I do usually put in ceiling fans, but only if there is something wrong with the existing fixtures. Then I put in the fans. Maybe put in fan in the living room and Master Bedroom.

Bonded/licenced etc for tile? I can see using someone like that for electrical work, or even plumbing. But tile? Geez.

I do all my own tile work. As you noted, the labor is the most expensive part of tiling. Since I do it myself, I save a bunch. I'd only tile a bathroom, if the vinyl is ruined. The living space? Nope. Go with the carpet.

Paint. Choose a standard color that you will always be able to get. Paint all your rentals the same color. If the upstairs doesn't need painting, don't.

Landscaping: Maybe. Tenants don't do yardwork. Do whatever will keep it looking nice with minimal maintenance.

Don't enclose the shower. Provide a rod.

Provide working smoke detectors.

Provide a fire extinguisher.

Install clean air filters.

Make sure railings and decks are sturdy.

Make sure steps are functional and do not have trip hazards.

Put out a "for rent" sign in the yard, and put out pointer signs from main roads to direct renters to your house.

Advertize on Craigs list.

You can put a push button lockbox on the door with a key. THat way, prospective tenants can call you, and if you trust them after talking with them, they can show the house to themselves.

Put rental applications and pen on the kitchen counter. They can fill it out and put it in a drawer, or fill it out later and fax it or scan it and email it to you.

Have a PO Box for them to send rent to.

[Deleted]

I'm also curious about the loan situation...

If you're planning on keeping the house for a while I think you're idea about tiling high traffic areas (like entryways and hallways) has some merit. Just make sure you buy something that is non-slip if it gets wet and is "rustic" or "distressed" so that when someone drops something heavy on it you can blend in the ding. I bought some inexpensive ceramic "antiqued" looking tile from Home Depot for our kitchen and it still looks great 11 years later. House has been rented for 8 years with 3 little kids. If you're going to go with a desert type landscape (even if it's only for the front) and allow pets this is the route I would take because AZ's dust never really seems to come out of carpet.

Window coverings. Costco is your friend. I went with block out pleated shades. They are inexpensive and you can vacuum them. The ones in my AZ house still look good after 5 years. Go with a neutral color like tan.

Paint-Go get yourself a gal of Behr's Swiss Coffee at Home Depot. The paint will go on sale over Memorial Day so pick up a 5 gal bucket when it goes on sale. Just make sure you keep buying THE SAME color of Swiss coffee as every manufacturer makes a version of Swiss Coffee. Behr makes something like 15! I use 1812 because I can remember the number. You don't have to repaint the upstairs but from now on everything gets painted the same color because every time a tenant moves out you will need to spot paint and it's unlikely you can recover the cost. Painters tell me flat is the easiest to spot paint over. I leave a 1 gal bucket for the tenant to use in the event of any "oops". Make sure you pick up a semi gloss for baseboards and wood work too. BTW I love their kitchen and bath paint which has a built in mildewcide.

Landscape-you need to know your market. As much as I hate what I have to say it needs to be said. If your market is families you will need to have a patch of grass in part of the yard. Also nothing with thorns. The front can be desert landscape. Make sure the tenant pays for water or there will be no incentive to conserve.

I like Susana's suggestions for the fans.

Yes I think doing a tub surround is a good idea. Otherwise you will wind up with a dry rot problem in the subfloor.

For your price range Craig's list will be fine. But do get copies of the AZ Association of Realtor's lease form and use them. It's one of the best leasing documents I've seen as it does an excellent job of spelling out who is responsible for what, right down to light bulbs and furnance filters!

You're local so I assume you know a handyman and an A/C guy? Make sure you pay for an annual A/C service.

For more tips check out SVT's thread on "Out of State Rental Properties". Someone asked me for my tips on tenant screening which you might find helpfull.

Good luck!

[whoisjohngalt]

Yes, Lex is the one who did the timeline of the strategic default.

I can just see the next book title "Strategic default - how to walk out on your obligations and get away with it"

Lena

[phil5185]

from now on everything gets painted the same color.

Swiss Coffee, me too. Seems like they come up with a new name for 'off-white' about every decade, LOL.
We use the semi-gloss thruout (not just in kitchen and bathrooms). That way you can walk the house with a damp cloth and wipe off the row oflLittle fingerprints that is about 3 feet from the floor.

[qofcc]

1. Tile? – if it's just the carpet that needs to be replaced and not the linoleum, then just replace the carpet with more carpet. When the linoleum needs to be replaced, replace it, plus the high traffic areas with a more durable material (tile, wood, etc.)

2. Landscape the Yard? You obviously don't want a dirt yard, so a few bushes and some rock or mulch (whatever is typical of the other houses in the neighborhood) would be nice. Pavers if you need a path to the doorway. Let your tenants know they can add more shrubs or small plants if they want.

3. Blinds? any place I ever rented had ugly blinds or shades that I promptly took down and stored in the closet until I moved out and I hung up my own curtains or nice shades. Don't worry about the bare windows unless your tenant specifically requests replacement blinds.

4. Tub enclosure? I wouldn't waste the money on an enclosure. Chances are that they didn't forget to pull the curtain, the curtain just didn't seal properly. Install a brand new cloth shower curtain liner with magnets (about $10-20)

5. Ceiling fans? cheap ones for the bedrooms, whatever finish looks right with the decor in the room for the LR

6. Paint color? no need to paint the upstairs to match the downstairs, but consider scrubable paint in a neutral color you would like to use in all of your rentals.

[Deleted]

"you can walk the house with a damp cloth and wipe off the row oflLittle fingerprints that is about 3 feet from the floor"

LOL, I wish I could blame kids for why our walls at home are so dirty...

[achelois]

"if you're planning on keeping the house for a while"

Lol.

[Lex Luthor]

Thank you all very much for your inputs, I really need some opinions other than mine and SO's.

The target demographic for this house will be younger singles/couples/families.

The carpet is actually through the main walking area from the front door/garage to the kitchen and from the kitchen/living area to the staircase, so it is in the highest traffic areas. For those that think replacing the carpet for $400 is the better choice, can you elaborate on the "whys" for me a bit? I need help thinking this one through. If every 3-5 years I have to replace the carpet again and maybe the padding too (which is about the same price as the carpet itself)....wouldn't it just be better to spend $2k on tile now and not have to spend $ on that each time? Not to mention that if/when the linoleum gets damaged, I would have to replace that too. Does it have to do with deposits covering major damage to the carpet/linoleum?

There are no existing light fixtures and I think I have a consensus on this one. So, we'll put a nicer fan downstairs and the cheapy $25 ones in the bedrooms.

I actually have a little can of Swiss Coffee to touch up my current house, so I'm familiar with that "color".

The tub issue where the water was all over the floor was definitely not the result of simply forgetting to seal the front/back sides of the curtain to the shower wall. When that kind of issue occurs it's generally only the front/back portions of the floor that get wet. The 5ft bath mat was completely soaked from front to back and everything in between. Plus the curtain was out of the shower when I checked (which it usually is since my kid takes baths). The persons responsible are people I would rent to; they have good credit, are very frugal and generally "responsible" people....but clearly protecting the floor from water damage is not exactly something at the top of their mind. And as bonnap noted, I really don't want a future dry rot issue in the subfloor.

So, yes on the Yard. I don't think I'll do grass. Mostly because the house is very near to the green belt and playground area. Plus the Yard is quite small and due to "expansive soil" there are CC&R restrictions on how close plants (read water) can/should be to the walls.

And thank you all for the extra tid-bits of info, we definitely need the help/advice.

Regarding the loan questions. The house we short-sold and had delinquent payments on was in my name only, therefore only my credit has a mark on it. This house was purchased with a loan with only my SO's credit and income. Every broker/lender we asked said they could lend to us using SO's info only "no problem" since just about everyone has bad credit now (their words, not ours). About 2 years ago, we only had one broker who thought, but were not certain, they could do that. I expect that in another year and a half I can secure a loan myself.

[qofcc]

The carpet is actually through the main walking area from the front door/garage to the kitchen and from the kitchen/living area to the staircase, so it is in the highest traffic areas. For those that think replacing the carpet for $400 is the better choice, can you elaborate on the "whys" for me a bit? I need help thinking this one through. If every 3-5 years I have to replace the carpet again and maybe the padding too (which is about the same price as the carpet itself)....wouldn't it just be better to spend $2k on tile now and not have to spend $ on that each time? Not to mention that if/when the linoleum gets damaged, I would have to replace that too. Does it have to do with deposits covering major damage to the carpet/linoleum?

It originally sounded like you needed to replace the entire downstairs carpet (including the living room). You're talking about just carpet in the hallways? And this would be $400 for carpet or $2K for tile?? Yes, you should probably replace with something more durable, but is it going to look weird to have linoleum, carpet and tile all together? It's hard to picture the layout.

[8 Bit WWBG]

I had wondered where the "my strategic default timeline" poster had gone. I guess that was indeed you.

I'm starting to learn that things I'd do to my own home make zero sense on a rental. On the one hand, going with a more durable option that you don't have to replace seems smart. But at the same time, you are talking about a lot of up front investments, when you need to be concerned about cash flow.

[Lex Luthor]

It originally sounded like you needed to replace the entire downstairs carpet (including the living room). You're talking about just carpet in the hallways? And this would be $400 for carpet or $2K for tile?? Yes, you should probably replace with something more durable, but is it going to look weird to have linoleum, carpet and tile all together? It's hard to picture the layout.

Sorry, let me try to clarify. This is for the downstairs only. The entryway, half bath, and kitchen are linoleum. The kitchen/dining/living area is one large open space, and there are no hallways or walkways. Between the entryway and the kitchen/staircase area is a large ~400 sq ft open area that is carpet which will cost $400 to initially replace. The $2k is the cost to replace all the carpet and linoleum with tile in the entire downstairs area, including the entryway, half bath, and kitchen.

[Lex Luthor]

I had wondered where the "my strategic default timeline" poster had gone. I guess that was indeed you.

Yes, that's me.

...but at the same time, you are talking about a lot of up front investments, when you need to be concerned about cash flow.

Exactly. Which is why I need opinions on what I should and should not spend additional $$ on.

[thyme4change]

For those that think replacing the carpet for $400 is the better choice, can you elaborate on the "whys" for me a bit? I need help thinking this one through. If every 3-5 years I have to replace the carpet again and maybe the padding too (which is about the same price as the carpet itself)....wouldn't it just be better to spend $2k on tile now and not have to spend $ on that each time? Not to mention that if/when the linoleum gets damaged, I would have to replace that too. Does it have to do with deposits covering major damage to the carpet/linoleum?

Tile is not great in living rooms. It will show as "cold" - possibly dated, depending on what type of tile you use. I'm all for tile in kitchens, bathrooms, even hallways. But if I were a renter and there tile on the floor on the tv room, I would have to buy an area rug. That would turn me off.

Also, $2000/$400 = 5, every 5 years = 25 years. So, you would put out $2k now instead of $400 every 5 years. Mathematically, your return is better on the carpet. Even at every 3 years you are good for 15 years. Carpet is cheap and easy.

[phil5185]

Also, $2000/$400 = 5, every 5 years = 25 years. So, you would put out $2k now instead of $400 every 5 years. Mathematically, your return is better on the carpet. Even at every 3 years you are good for 15 years. Carpet is cheap and easy.

And you may be underestimating the durability of carpet, I have some that have lasted 20 yrs. (directed to OP)
You will feel worse when someone breaks up your $2000 tile than when someone tracks in motorcycle oil on a $400 carpet (both happen). We use solarium for kitch/ba and carpet elsewhere.
But in general, don't spend a lot for 'nice' things in hopes of never having to replace them again. Tenants all have their own lives/hobbies and they don't normally revolve around 'keeping it nice'. (Save 'nice' for the final cleanup when you sell it, ie, for your buyers).
Your tenant may be a hunter (knobby boots), a Lineman (knobby boots and climbing spurs), a horse person (riding boots complete w/ horse manure), a motorcycle mechanic (grease on boots, washes an engine in your shower), and so on. In your home, you leave your heavy footwear at the entry of your house - but that is not a priority in your tenant's day (doesn't make them a bad person, it's just the way it is). So expect it - each tenant is an adventure - after 35 yrs with 4 houses, just when you think you've seen it all, something new happens.