This may seem like a stupid question but I want to ask it anyway.

Among all Class C tenants and many LL's,....the 'perceived value' of any rental property seems to revolve around the # of bedrooms.

Why is this?

For example: Section 8 (HUD) could care less if a house has Central Heat/Air, however, HUD will pay more rent as the number of bedrooms increases.

Fred (CA)

Roy, buddy! Did you just ask us if the Govt's rules make sense? Crack open a cold one (Coors or whatever) and take a rest. That AL heat must be gettin' to ya!

;-)

Okay, having a little fun. To some degree what you say is true. I have only once participated in Sec 8, so I'm not expert enough to comment. But yes, in general in my town, Class C rentals range as follows:

1 bed = $350 - $500

2 bed = $450 - $650

3 bed = $500 - $800

Within that range you typically get more rent and/or rented more quickly with amenities like central heat and air.

General thoughts on central AC:

Back when I started in 2005, I would put central HVAC in every house I bought that didn't have it, but soon I found that this only increased the rent a pittance. Maybe $20 more .... $240/year. That means it was taking 20 years to break even! No thanks.

Now I will sometimes put in central heat, but AC is always window units. Cheaper and easier to swap out, and if one goes bad, the other 2 units can keep areas of the house cool enough until my handyman can swap out the failed unit.

Here are my calcs. 800-1000 sq ft Class C house requires one 14,000 btu centrally located window AC and one 5000 btu unit for each bed room. Cost for all three window ACs is about $600. Labor to install is about $25/unit. So get AC in the whole house a little under $700.

If the window units last 4 years each, then over 20 years I'll have to replace all three units 5 times. 5 replacements * $700 = $3500 which is about $1000 less than the cost of a new HVAC system. A central HVAC system will not last 20 years at a rental without any maintenance. Odds are it will require a couple of recharges ($100-$150/charge), possibly a replaced condenser fan ($200-$300), and a host of other little odds and ends that add up. Hold onto your hat if you have to replace a line set!

Edit... the cost of $3500 is about $1000 less than the cost to ADD AC to a central heat system. Last time I asked I was quote about $4000 - $4500 to add on AC, which included running duct work. Maybe if I were a DIY AC expert like Lee or gevans it would make more sense, but I'm not.

Class "C" properties rents based on the number of bedrooms:

Year 1 Bedroom 2 Bedrooms 3 Bedrooms

1990 $575 $650 $725

2000 $696 $750 $850

2005 $895 $995 $1100

2010 $995 $1100 $1250

2015 $1100 $1295 $1495

I don't do section 8.

I haven't found that more than 3 bedrooms adds much in rent.

The other things that demand more rent here in my class C areas is a 2nd bathroom especially if one is off the master and a garage so they can store more junk. I can get about 50 more a month here for central heat and air.

We always remove a bedroom, in advertising if not in fact, because otherwise they ALWAYS want to put more people than a house can hold in it. Charging more for a bedroom just means they need more working adults in the place to afford it.

In south TX a majority of D- and C-level tenants fall into 2 basic categories: large families w/lots of kids and some extended family members, and single mothers with multiple kids on some kind of gov program with males that rotate in and out of the "family." When this is your tenant base that 3rd bedroom becomes gold--and a 2nd bath is Platinum! None of my 3rd bdrm homes was storage--they were always filled with people. Sometimes even garages were filled with people!

I do what WMH does. I have a two bedroom house that is 585 sq ft. The second bedroom is 8x9. When the house was built it was called the sewing room. When I advertised it as two bedroom it attracted families. Then they wanted to put bunk beds in which I had to say no to as the ceiling fan would decapitate the upper bunk user. So I only advertise it as a 1 bedroom. People are then happy to see it has a small bonus room.

Have a 825 sq ft house that we had advertised as a three bedroom due to it having a bonus room with a closet in it but was really meant as family room. Again it attracted too large of families. Now when advertised as a two bedroom a four person family or smaller is happy with it. They still use the bonus room as a master bedroom but the smallest bedroom is nice as an office or storage room.

In my poor city "c" tenants love to have all the bedrooms.. I just rented a 6 beds 2 baths(not a single family, just 2nd and 3rd floor) to a single mother with 4 kids and her mother. When I did market research to price my 6 beds, there is none like that in C-D neighborhood.

Its definitely value. I accept section 8 for C properties, so its a no-brainer to yank out double parlor to add a bedroom. I just incorporated a basement with 1st floor to rent out as a 4 bed apt which add extra $200 a month. If I rent basement alone, it is completely illegal, but section 8 don't have that rule when it connects to 1st floor.

99% of my market won't pay me more for upscale finishes. Sure, they'd love HGTV countertops and paint schemes, just like anyone else-- but if I painted the trendiest colors and had the awesomest quartz, my $450/month house is still going to rent for $450/month.

However, my tenants totally understand things like bedrooms and bathrooms. So in my primary territory, my 1-bedrooms rent for $3xx, my 2-bedrooms rent for $4xx, and my 3-bedrooms rent for $5xx. I skew up for amenities they appreciate (2-car garage, dishwasher, multiple full baths) and skew down to compensate for issues that require a bit of flexibility (carport, difficult neighbors, only one bath or one-and-a-half baths). But the biggest thing they understand is bedroom space.

However, I do have a few houses that actually do have upscale finishes. Not mine, but they were put in place by the previous owner. In those situations, even though the house itself may be a bit awkward, I'll price it as my most desirable house as a screening tool. Undesirable people who won't take care of the finishes won't bring themselves to pay that much for a house where the space isn't there, but people who love the house will bring themselves to pay the higher rents in exchange for a place with character. But there's not enough of those people for me to make a habit of this business model! :P

Roy I don't buy foreclosures that are 2bd or less. I think long term value-- 1-2 vs 3BD RM for resale. Having said that I don't buy with the intention of selling. I sell with the intention of holding the note- foreclosing or deed in lieu of foreclosure in year or 2. Since 1986 only one has paid diligently. The best plan for me-- sell a property needing all types of work- new roof-plumbing-HVAC system. Investor dumps 5 to $8K or 10K rehabbing and then wonders why he's not making money. Asks us to take back property and we agree-- now we have a rehab of a house we know and with tenants usually.

Back to my local income issue I've discussed before. There is a max rent I can command for any unit and have ANYONE qualify at 3x the rent minimum. So a larger more expensive home would just mean more vacancies as I search for that rare qualifing tenant...

If the house is tiny, we get the single adult or the couple with no kids or the single parent with one kid (and they all have pets.) They can afford the smaller unit and they fit.