Rental Repair: When Does It Make Sense?

One of the big questions facing landlords is when to make repairs and what kind to make.  Let me share a recent example.

I accepted a new client in November who wanted to rent his home while he moved out of area.  Like many folks, his home was worth less than what he owed but it wasn't so upside-down to warrant just walking away from the property.  He estimated that he could liquidate the home in about 5 years if he rented it and he could still maintain his good credit in the meantime.  Rents would be slightly less than the mortgage payment but that would beat paying for two homes or sacrifice his good credit.

One of the issues I thought might be an issue was that my client had pets previously.  As they were moving out of the home the carpets were freshly cleaned.  However, I could still tell that pets had been there.  After not receiving any applications for a while we reduced the rent price by $100.  Ultimately, several tenants applied and I was able to approve an application.  The tenants also noticed the pet odor and asked if the carpets could be cleaned again.  We agreed to clean them and have it treated for the odor.  The tenants moved in.

Depending on the kind of pets someone has, carpet odor can be a simple fix or require a complete do-over.  In this case, the carpet cleaning didn't work.  The odor actually got worse and now the tenants were very unhappy.  They had signed a year lease but now were contemplating leaving the premises.

A bid to replace the carpet came in at $1,500.  We received a similar bid for the laminate flooring.  Rents are $1095 a month.  There were a couple scenarios that could have played out:

A.  One option would be to tell the tenants: "You signed the lease.  You knew what this was before you moved in. We aren't fixing anything."  This option would definitely have created some stress for all parties involved.  If the tenants balked and broke their lease, the owner would keep the deposit.  But, we would have more vacancy and still have a house that would not meet the market's needs because of the odor issue.

B.  Another option would be: "We want you to enjoy your stay here.  Let's see what we can do to fix the problem."  This option would involve figuring out a way to fix the problem and do it affordably.

Option A is the slumlord business model.  Option B is the professional business model.  We went for Option B and negotiated a year extension of the lease with the tenants if we would agree to pay for the installation of new flooring.  The tenants agreed to tear out the old carpet and treat the floors with Clorox and Kilz.  I estimated that the floor repair would be paid for by a reduction in vacancy when the tenants signed on for another year.  The scenario is win-win.

Don't ever be afraid to make sensible improvements to your property.  Vacancy, tenant quality, and rents all improve when you put a little money back in to your investment.