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Investing in Expensive Renovations for Rental Apartments


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2013 Jul 13, 5:26pm   2,983 views  11 comments

by soeren   ➕follow (0)   💰tip   ignore  

http://finance.yahoo.com/news/investing-expensive-renovations-rental-apartments-233000708.html

Designer Kendall Wilkinson recently completed an ambitious renovation on a 3,000-square-foot penthouse in San Francisco's Nob Hill. She gutted the apartment, adding a den and putting in leather walls, marble floors, new molding, a high-end kitchen with features by designer Christopher Peacock and Waterworks fixtures. She also designed a closet with custom built-ins, turned a bedroom into a library and made three bedrooms into two bathrooms. Her clients spent about $1 million on the upgrade. But when their lease is up, they will be leaving most of these improvements behind. In competitive real-estate markets, some luxury renters are making a...

#investing

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1   curious2   2013 Jul 13, 5:28pm  

soeren says

improvements

These don't sound like improvements.

2   soeren   2013 Jul 13, 5:32pm  

I don't get it. Why would you pour ten$ of thousand$ into a place you're renting? And going to leave eventually anyway. AFAIK, the tenant won't even get a tax write-off for his/her investment.

3   myob   2013 Jul 14, 2:53am  

Because rental or not, it's still the place you call home, and you may want to make it a nicer home. It sounds like the person in that article is quite wealthy and the money wasn't a consideration.

4   SkyPirate   2013 Jul 15, 4:04am  

Very wealthy. For them, this sort of spending is discretionary. You drop $200 on an Xbox, they drop $200,000 on renovating their apartment.

5   finehoe   2013 Jul 17, 11:28pm  

I have a friend who lives in Manhattan, and the people across the hall from her did this. They put a new kitchen & bathroom in their rental, plus painting and refinishing the floors. In their case, it is a rent-controlled apartment and I think they'll probably be there for a long time, so maybe it's worth it.

6   New Renter   2013 Jul 18, 1:47am  

Tim Aurora says

My renter painted the house to his liking ( with my permission) when he moved in and painte them back to the original color once he moved out after 18 months.

I got free painting out of that

And you refunded his full deposit?

7   drew_eckhardt   2013 Jul 18, 6:45am  

soeren says

I don't get it. Why would you pour ten$ of thousand$ into a place you're renting? And going to leave eventually anyway. AFAIK, the tenant won't even get a tax write-off for his/her investment.

Total cost of housing versus other alternatives and being able to enjoy your living conditions

With the landlord's approval my wife had the horrid carpet removed from our last rental, original hard wood floors refinished, and new vinyl installed in the kitchen. I hung new window coverings in every room.

$2000 / 36 months = $55 / month.

$1400 rent + $55 in improvements = $1455.

Nice apartments on the same street were renting for $1800 - $2000 but didn't allow pets, and the mortgage+taxes on place we'd own would have been $4000 / month or about $3000/month with the tax deductions.

With that sort of price spread we could have done a lot more and still come out ahead.

We did something similar with our 1200 square foot $90K mobile home and put in $90/yard carpet. It's awesome - like walking on the wet sand at the ocean's edge. While we'd never get the money back out

$9000 / 48 months (we can't see not staying another 2 years) = $187/month which is like 2-3 dinners out and inconsequential.

$1687/month net cost on housing is a lot less than renting a 1950s 3/2 ranch ($2300/month), nice 2-bedroom apartment in the neighborhood with common walls ($3000), or buying a $650K town house.

Where rent gets expensive you can spend a lot more without making a large change in proportion to the total. One renter in the article spent $50K making a place suit his tastes and $30K undoing it which isn't much when one month's rent is $30K. Where you pay $10K/month in rent but buying a property would be $20K you can spend $100K and break even in the first year.

8   varmint   2013 Jul 19, 3:15am  

30k/mo rent is pretty lulz-worthy

10   finehoe   2013 Jul 19, 5:30am  

^^Does the tiger come with it?

11   New Renter   2013 Jul 19, 8:14am  

finehoe says

^^Does the tiger come with it?

Yes, when you're late with the rent.

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