Raising The Rent: Our Numbers

You'd think that if I was proud of my decision to remodel the kitchen, I would have posted more info. on it. The fact is, I don't know if it was the best decision.

Our past tenants were so great, paid the rent on the first of each month, really took care of the place, were great neighbors, etc. I felt that we wanted to keep the highest possible quality of tenant, and to attract better tenants I felt it'd be a good idea to fix the weakest part of the home, which was the kitchen.

The kitchen is one of the most important parts of a home when women look at a home to buy, and I figured it'd probably be pretty important when looking at a rental home. Our plan was to do a very economical remodel of the kitchen, and to do the work ourselves.

What the remodel consisted of: Pulled down old cupboards, replaced sink, put in new dishwasher, put in new stove, new refrigerator.

What the remodel cost: We were out February $550 (which we would have lost anyways) and March $550 and April rent $550. $1600 for cupboards and materials, $900 for new appliances. Grand Total: $4150. Extremely cheap by remodel standards.

What was the increase in rent? $50.00, or $600 per year. That's just about 15% return on the money, but in reality, it's a loss, because when you think about it, it cost as much as the property would make us in a year and a half. It did make it easier to get rented, once we placed an ad in the paper we were able to find good tenants and have a signed rental agreement in just a week.

What I learned? Don't forget that the purpose of income property is to generate income. The purpose of income property isn't to have the best tenants. By forgetting that the purpose of my rental property was to make money, and instead focussing on the goal of best possible tenants, I spent 18 months of profits on a remodel. If I could have had a lower quality tenant that would have been fine with the kitchen, I'd get less rent, but I'd be ahead. Hurray for me, I'm learning rental math.