Can You Upgrade Your Rental Property Too Much?

Every property has its point of diminishing returns when it comes to value-add. Renters are only willing to pay so much, regardless of how much you've upgraded their unit. Thankfully the build-to-rent industry has a lot of control over how far you take upgrades...

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Spending an extra $5,000 per door? Does that give you another $100-200 a month in rent? Or not?

I think it goes back to "there's only so much a tenant is going to pay in a certain area". But I think that's hard to tell. People get into the value-add apartment business. They're going to get an apartment. And that's in a way a "build-to-rent" project. You're just repositioning it. But how do you tell?

Chase Leavitt

It's area-specific. It's picking the brains in the minds of property managers. Having a good property manager to say, Okay, what are you seeing here? What are the tenants? What are they expecting? What are they used to seeing? What are they wanting to see in these units to get at least up ASAP? And are they willing to pay X amount for this or that?

Sherida Zenger

I also think, though, that sometimes if you have nicer upgrades... if we're all building in the same community, and I fully upgrade my unit, and Steve does half the upgrades and chase doesn't do any upgrades, at the end of the day, rents relatively the same. They're going to pick my unit first.

I think having more upgrades do help get you leased up quicker, right, you have less vacancy, but also there comes that breaking point to the right where I can pay too much for upgrades and then I'm not even breaking even you chase could be making more money on me more money than me with no upgrades. But I think sometimes that comes into play. So knowing when enough is enough, or what's too much,

Steve Olson

will because too much also means more maintenance. 100%. Right, you know, you go really nice and tenants just don't care about that stuff. They don't care about a lot of finished work and carpentry and things are just gonna dent it and break it. I've noticed one that and this may change but we've not been doing tone paint, right? We just whitewash everything because the maintenance between tenant turns is so much higher than painters' time is double.

He's got a mask off all of your finished work or your base in case. And then he's you know, that's a problem. Right? Those unit terms can be absolutely brutal.