AMA - How Much To Improve A Rental Property?

Joseph asks:

“My wife and I are getting ready to move into rental properties and we are at a sticking point of what a rental should be like inside. I’m okay with things being clean, unbroken, & liveable; she is more of the opinion of caring about the person renting and providing them something new or like new, as she wants to care about them as a person. We are stalled in moving forward as we can not agree. 

How say you? What is the right amount of quality and care for a rental vs. your own home. Is there a difference?”

Thank you Joseph for a great question. In order to answer the question, I think it would be helpful to reframe the question. I’ll start by saying that you’re both right. But ultimately the finer points of what to upgrade versus what to repair will depend on the answer to the following questions. 

A very important question to answer whenever you are looking to market any product is: Who is your target customer ? Who is your ideal client?

In virtually every industry there are products positioned at different segments of the market at different price points.

For example you would not expect the same amenities at eight Fairmont hotel compared with Motel 6. Everything about those two product offers is different. 

The Motel 6 is going to be right off the exit from the freeway. The Fairmont hotel will be an amazing location, will have striking architecture, and will offer luxury services that are simply not of interest to a trucker looking for a place to crash for the night. 

They are also priced very differently. The motel 6 might be $60 a night and the Fairmont could be over $300. 

While a beautiful plush terry cloth robe is lovely for just about anyone, you won’t get a higher nightly rate at Motel 6 if you put a terry cloth robe in every room. In fact, it would be out of place. But if there wasn’t a terry cloth robe for each guest in the closet at the Fairmont, you would be disappointed. It would be conspicuous by its absence. 

It all comes down to knowing your target client and positioning your product to that target client. 

So back to your situation with a rental property. Who is going to be your target client?

Are you targeting young families, students, senior citizens who are on their own, army veterans with disabilities, young professionals, tenants with rent subsidies, or workers at a nearby hospital or factory?

All of these ideal clients will be looking for a different product with different amenities. 

Some may want interesting spaces to showcase their collection of trophies. Others will want a space to hang a 60 inch TV. Some may want cloth drapes, versus aluminum blinds. You may want two sinks in the bathroom instead of one. You may want a standing shower versus a tub/ shower combination. All of these decisions start with knowing your target client. 

Look in the local market and see where the shortage is. There almost always is a shortage. For example, we noticed that in Philadelphia, there was a shortage of parking. Whenever possible, we build our new apartment buildings with ground level structured parking and we elevate the building on top of the parking. Dedicated parking is so rare in Philadelphia that it would take decades for enough parking to be built to satisfy the demand. We are hugely confident that we will almost never experience vacancy in a building with parking. Even if the market went through a huge downturn, a building with parking would be in high demand. 

Figure out what will differentiate your product in the market and more specifically speak directly to your target client.