The First Steps
Whether you renovate your home into an owner-occupied dwelling or purchase a starter with two or three units, you must start at city hall. Once you've found out what the zoning regulations and local building codes require, you'll get a clear idea of what you must do, what you want to do, and what you shouldn't do because it's not cost effective. Assigning each possible project to one of those three categories will help you figure out your priorities. (See Chapter 5 for more on zoning and building codes.)
Must-Dos
Using your building as permitted by local zoning and making sure the structure complies with local building codes tops the list. Building codes were enacted to ensure the health and safety of occupants. Each municipality has its own codes, but they generally pertain to state guidelines for habitability. (See Chapter 5.)
A landlord is obligated to provide tenants with a safe, habitable dwelling. That means that as a landlord, you must repair things that break or don't work properly, maintain the property — keep it up to standards — at all times, respond quickly to emergencies, and keep the dwelling free of rodents and insect infestations.
If you are converting your home into an owner-occupied dwelling, you will have to follow the local building and zoning codes when you renovate or add an apartment. If you purchased a fixer-upper, you will have to meet codes that may have been ignored by previous owners.
Want-to-Dos
Want-to-dos are the tasks you do to make your property appealing to tenants. They include cleaning the exterior and inside of buildings, applying fresh paint, cleaning bathrooms, kitchens, and appliances. Perhaps the unit will look better to prospects if you put in a new carpet.
Spruce up the outside, too. Planting low-maintenance evergreens, bushes, and flowers at the entrance is always a plus.
Maintenance contributes to the economic viability of your dwelling. The better it looks, the more easily you will find good tenants. A clean and attractive exterior and grounds send the message that the apartment will be clean and attractive, too, because the landlord cares about the property and the tenants living there.
Always do the work and repairs required by the state and local government. Keep records of what was repaired and when. Then if someone gets injured on your property, you'll have a better defense if a liability claim is filed.
Shouldn't-Dos
What you should not do are costly, unnoticeable renovations. They won't pay for themselves because you can't charge enough rent to cover the cost of the project or improvement. For instance, you don't want to purchase top-of-the-line appliances when less expensive models will be just as efficient, or relocate walls for the sake of gaining a few extra square feet in a room.
Although tenants will appreciate low-cost, high-impact improvements — such as a new countertop or hardware on kitchen cabinets — they don't care if a kitchen or bath is totally remodeled. They basically want hot and cold water running through the faucets in a sink or tub that looks clean. Likewise a landlord does not have to tear down a wall to make a room larger or put in a new door to change the traffic pattern. Improvements like these may make the property look and function better, but they are not required by law and might not pay for themselves in the rent you collect.
When you go into landlording, decide what color you want to use in the apartment. Most tenants prefer white or off-white walls. They're neutral and whites are easily touched up when the wall gets dirty. Some landlords store leftover latex paint in a big can and keep adding to it until there's enough to paint another room or hallway.
Even new carpeting can be too extravagant if you purchase high-quality wool. Carpets stain and hold moisture and odors, and tenants often don't care what happens to them. If flooring is an issue and needs to be replaced, consider putting in hardwood floors in the living areas and carpeting only the bedrooms. Initially, a wood floor will be more expensive than a new carpet, but you'll never have to replace the floor. In the end, it's more cost effective for a rental unit. In addition, bare wood floors are very much in vogue today.
It simply doesn't make sense to spend too much on appliances and carpets in a rental unit, especially when you can't recover the cost in what you charge for rent. Most experienced landlords will tell you not to waste your money.
