Author Topic: Advice please  (Read 428 times)

elvis

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Advice please
« on: February 10, 2018, 09:57:06 AM »
I have a somewhat unusual rental situation. I purchased a home in a historic neighborhood that came with a second home on the same lot. This smaller home was appraised at $0, and essentially came with the house at no cost. It has separate utilities and address. The second home has been a rental for the past 100 years (literally), and is in pretty worn shape. It currently rents for $450. Given the neighborhood, I could rent it  for $800-900, but would need to spend roughly $50,000 to rehab the property. I'm new to rentals, and am wondering how to think through this issue--whether it's worth fixing up or leaving as is. Aesthetics are involved here, too--the house is in my backyard. Thanks for your input.

accolay

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Re: Advice please
« Reply #1 on: February 11, 2018, 02:59:20 AM »
I got nothing. Posting to follow. Just wondering what you mean by "pretty worn"? What kind of work does it need?

former player

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Re: Advice please
« Reply #2 on: February 11, 2018, 04:40:30 AM »
Would the house you bought have cost less without this secondary rental?  If so, then it's not really $0, whatever the appraisal says.  On the other hand, if you would have bought the main house at the price you paid even without the rental, I suppose it might as well be $0.

Without putting a price on what you paid, the rental more than meets the 1% rule whether you rehab or not.  I'd be looking at the following things -

1.  What work is needed to keep the rental in sound structural condition?  This is mostly about making sure that plumbing and electrics are in sound condition inside and the outside has a sound roof, clean and functioning gutters, paint or other protective coating on windows and outside walls as necessary and that wildlife and plantlife is not invading.  As a minimum you need to do all this in any case.

2.  What do you think of the current tenant?  Do you want them to stay?  Are you prepared to give them notice, or to just keep upping the rent until they leave of their own accord?  Would they move out for renovations and then move back at the higher rent?

3.  You have a historic home in a historic neighbourhood.  To what extent are you proposing to renovate what is there or to replace/update?  Are there any legal restrictions on what you can do?  Would updating destroy current charm and value, or look out of place?

It sounds to me like a nice problem to have, on the whole.

chasesfish

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Re: Advice please
« Reply #3 on: February 11, 2018, 05:56:03 AM »
This is pretty cool!  We have a number of these in our neighborhood, primarily apartments build on top of the detached garage.  The city outlawed building new ones.   I was trying to help my assistant at work find exactly that.  These places are VERY attractive and you'll usually end up with great tenants, especially after you renovate.  You get to provide a rental at a little less than the big units and the tenant gets a lot of privacy.

I think its a no-brainer to fix it up, either when the tenant moves out or if the tenant irritates you just give a 30-60 day notice for them to leave and say its because you are renovating the unit.  I'd be far more nervous about hiring out $50,000 of work, which seems high unless there are structural issues.  I'd consider hiring a structural engineer to check out the project then an architect to design the interior and manage the contractor.




Rich on Money

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Re: Advice please
« Reply #4 on: February 16, 2018, 03:29:00 AM »
If you can spend $50,000 to enable a rent stream of $800 a month, you do it.