I just a notice from my NNN tenant. They informed me that they will be doing a periodic remodel since the place has been around for five years. They will be having a couple of 40 yard dumpers there for about 10 weeks in Feb 25. I have only 10 more years of absolute guaranteed income but they also have five 5 year options after that to renew. Don't mind me boo hoo as I tell you they pay six digits annually. Granted this was 7.6% Cap Rate when I bought so it isn't a grand slam but it is a great hands off investment that allows me to grow older and be more hands off.

So question for folks who don't have NNN or NN assets yet, do you place your properties into phase maintenance from time to time? If you do, how often do you do upgrades? I just got keys on a SFH place last week and I plan on putting in a new kitchen. The existing kitchen on this place was installed in 1979 and we have owned this one since 2003 or 2004. This place has long sense been paid off because it is located in an affordable part of the country. If you do these phase maintenance operations how long do you estimate the various systems will last. In this case, some of the doors were damaged but after that length of time - they were well over do. Does anyone have a rough schedule that they use?

The question "Do you do phased maintenance?" could also be phrased this way:

"Do you rip out perfectly good kitchens and bathrooms just to put new ones in that will be old and tired looking in about 5-8 years and probably won't get you enough added rent to make it worth doing?"

I rent class C units, which I define as "clean, safe, and functional." Some of my houses have kitchens twice as old as the one you have from 1979. They still work. People still pay to live there.

It is a well-known fact of the remodel industry that we only recoup about 40 - 80 cents on the dollar in increased value when we spend on remodels. Paint is one of the few things that provides a slim profit margin... usually somewhere around 3 to 5 cents above dollars spent.

Have you figured out my answer yet? *wink

Do upgrades if you like. I don't need to, I don't want to, and I won't spend money that doesn't make an adequate ROI. I define an adequate ROI on an upgrade as one that pays me back every penny spent in 36 months or fewer and afterwards is all gravy. Typically, I do upgrades/updates when the item in question is costing me more to fix than to replace.

A person who rents out A and B class units may have to spend more because their tenant pool requires more than "clean, safe, and functional." Know thy market is always good business.

What metrics do you use to measure whether or not it's profitable for you to do upgrades? Do you care if you make a profit, or is it pride of ownership?

Btw, I'm not trying to bust your chops, Ray. I get why businesses do this: the nature of the beast is they have to remain trendy to attract customers. I see this especially in retail and restaurants.

At this point we do not have phased maintenance.

We do things as needed. Sometimes we add something when a place is empty, like putting a tile backsplash in or wrapping shower walls.

This is just to make it easier for us to clean on the next turn-over if needed. It does add to the look of the place which helps, but making it easier on me is the main point most times.

Swapping out 1x1 vinyl tiles with LVP adds to the looks of the place and keeps me from having to deal with single tiles peeling or cracking.

My baseline in my poor, rural community is clean, safe, and functional. Unless something is an immediate danger, all renovations happen at turnover.

Beyond that-- if a tenant asks for an upgrade, I ask myself, "Is this reasonable?" Sometimes I'll do a goodwill upgrade, like a new screen door, or a slab of granite over a wooden countertop.

"Will this house rent if I don't do (upgrade)?" If it will, I'll delay it. If it won't, I'll focus on it. This might be tenants who damaged carpet, but it is still good carpet with some cleaning, vs tenants who destroyed carpet and now I need to refloor throughout.

"Will this house bring me significantly more money if I do (upgrade)?" If it will, I go through the effort and expense. If not, I leave it as it is, because my tenants don't know how to care for expensive finishes.

DH used to work at a private university. His department had to spend allllll their money, or else they'd lose it. I used to work at a major municipality. Same thing. Budgets were use it or lose it.

We do not do phased maintenance; like many, just when needed. Other than one wall here or there, we haven't fully painted an entire unit. Why? All but one property has picture hanging molding and my tenants use them to hang pictures, thus no holes in the walls. Other than the hall walls outside the units after a moveout, the walls have remained undamaged (knock on wood) at this time.

Since we experienced replacing useful features when we purchased buildings in our early years of LLing, i.e. countertops, floors, carpet, only to have them ruined we have changed our thought process. If someone is willing to pay additional rent for something new, if the return is as Sid mentioned within 3 years, then we'll do it. But not on our dime. Now we are on an as needed train.

As I suspected, I think your answer varies depending upon the region, class of rental property, and desires of the owner.

I do periodic upgrades when I have a vacancy. I've found in my area that I get better quality tenants when I offer a property that is competitive with more modern apartments and homes. That doesn't mean that I don't get lots of lousy applicants in the mix as well, but I usually get some stellar applicants, and a few times have offered me a higher rent rate because they liked the place and location. These tenants are more mature and far less of a pain to deal with than most. That's my payback for the investment on the improvements.

Does anyone here who does upgrades and/or phased maintenance have quantifiable metrics of whether or not they make a better ROI? If so, I'm curious about your method and what your acceptable parameters are.

How often do you replace a roof?

How often do you replace windows?

I understand that most landlords will answer, how long does flooring last - would answer, just one more tenant.

I have some apartments that has they came open, I updated the "easy" stuff to more durable, more eye appealing stuff. Outside, starting to do upgrades since the units were built in 1988. is it going to increase $$ thru rent increases? no. Should I be able to attract better renters? yes. That normally leads to less vacancy. Which helps the bottom line.

The other thing to consider... you update the house. Swap out the old water lines to pex. No more complaints of low water pressure, repair calls for water leaks, etc. What is it worth NOT getting those calls?

I have some apartments that has they came open, I updated the "easy" stuff to more durable, more eye appealing stuff. Outside, starting to do upgrades since the units were built in 1988. is it going to increase $$ thru rent increases? no. Should I be able to attract better renters? yes. That normally leads to less vacancy. Which helps the bottom line.

The other thing to consider... you update the house. Swap out the old water lines to pex. No more complaints of low water pressure, repair calls for water leaks, etc. What is it worth NOT getting those calls?

I developed a software program for a Preventative, Predictive, and Lifecycle maintenance program at a large high-consequence facility about 40 years ago. The life cycle (phased) aspects were the hardest to pin down, so much of that was about generating a list to go check on and then have someone assess whether that roof could make it another 10 years, there are simply too many factors that can affect the life of something by a decade or more on long life items. The preventative and predictive were much more concrete.

About the best I do would be more of what I would call yearly assessments. That is, go by and look at roofs and make a list of the one's for replacement this year and within next 3 years. Same with HVAC systems, wood fences, siding, windows. I also have that list of stuff I've kicked the can down the road on, like a sewer pipe I'm using root killer on until the tenant moves out and then I'll replace.

If I had A class units (which I don't) I might be more prone to plan tile replacement, counter tops, light fixtures, and other aesthetic elements every 10-15 years. But then again, if you do a good job of avoiding trendy you might even be able to kick that can down the road as well.

One example of extremes---

When I'm in Wichita Falls on a Friday, I visit a certain Long John Silver's.

I visited Long John Silver's on a Friday the other week ago--- and they were closed for remodeling. Whomp, whomp.

Then I happened across this article in my feed yesterday----

===

A fast food fixture in Wichita Falls appears headed for a total makeover.

The Long John Silver's restaurant on Kemp Boulevard bears a sign that says, "Temporarily Closed for Remodeling."

A city permit issued Dec. 13 indicates a rebuild.

The new structure would consist of 2,247 square feet and be built at a cost of $1.8 million.

The local restaurant is one of several in the chain in Texas that have been totally rebuilt recently, including in Longview and Victoria.

===

(General note-- the original structure was built in 1979, is 45 years old, and was worth $600k 10 years ago, and is now worth $800k. About half of that is the value of the lot. The current building is about 2400 sq ft, so they plan on losing about 150 sf with the new structure.)

So, if you're a commercial biz, it sometimes makes total sense to raze your existing structure and rebuild it from the ground up, rather than trying to salvage what's there and operate in your current footprint. (Just down the road, they razed an ordinary-sized Denny's that was also probably developed in 1979, to replace it with a teensy little Hawaiian Bros Island Grill.) Not everyone wants to be able to look at your structure and say, "That used to be a Wendy's/Pizza Hut/Taco Bell." Likewise, there's a restaurant in my own town that has a bad reputation for such bad drains as to be almost condemnable.

But if I'm a residential provider, there are relatively few people who are working with the kind of tenant pool where it makes sense to raze the existing structure and rebuild, vs salvage what's there and operate in the current footprint.

It does happen-- especially in neighborhoods of a certain age--- where people bulldoze the preexisting homes and rebuild houses that have the amenities and proportions that we look for with modern-day life. Also especially because those lots are often in highly desirable locations, even if the stuff that's on them is considered trashy or not worth saving.

If you have a electric hot water tank that is 22 years old. It works fine and you are in the middle of a turn over. Hot water tanks typically don't last half that long.

Ray, a friend of mine that does remodel and handyman work says that gold is coming back in style. Why I don't know, but that is what he said.

That is interesting about the electric water heater.

I have had them fail. Some were 20+ and just had one this year that was at a few years. I called it in and I had literally two weeks left on the warranty. I had one in stock and swapped it out already. Then I took the old one back and got a new one, with no warranty.

On the older models I can see the benefit of swapping them out. I have had more than a few give me trouble over the years.

Where do you draw the line at replacement though? Sometimes it is tough to pay the money when you are not sure it is needed right then.

(From the early 90's...)

For our properties we purchased backup water heaters locked up at each property. If one would fail at any time all we would need to do is get the plumber there. We both know what/how to get ready for him until he gets there. So we drain the water heater and move it out of the way. Unbox the new one, etc.

You can drain, unhook and move the old one but are not allowed to hook the new one back up?

I guess I could understand it a little if it was a new install, but a replacement?

6x6, my former stomping grounds were DFW (pop 6.5M) and the Houston Metro area (pop 7.1M). If I invested there, I could do things ideally, by the book.

But instead, I live in an area with a population of less than 20 people per square mile. Cattle outnumbers humans here by at least 2:1. :) Traditionally, there's very little to bring new people into the area who don't already have a family connection here. Anyone who can manage their money owns a house. Everyone who can't--- that's pretty much been the traditional tenant pool, so you do your best to figure out who has the highest chance of success. You might pick 20 winners, and then get one doozy. :)

Everyone also knows everyone socially. There is no privacy. Every tenant knows where I live. I can see at least four of my rentals from various windows in my house. Seven or eight pass by my house on a daily basis on the way to their own. I work at the school sometimes--- all the teachers and most of the kids know me, and if I rent to a relative. I've rented to at least four people who work there at the same time I do. I'm selling one house to someone who was on my kid's Little League team, and who also sold me his mom's house--- so now there's a small feeling of obligation from him offering me that opportunity. Another tenant's daughter was classmates with my other son, and they lived in our former primary residence. But when you have those kinds of social relationships overlapping with your rental biz, it causes you to be less businesslike/more lenient for various reasons, vs if your only contact with that person was strictly business. But on their side, familiarity breeds contempt... I'm not the landlady, I'm so-and-so's mom...

There's also a lot of people in my area who grew up in poverty, but currently make a solid middle-class income. It took me a loooong time to learn the lesson that a middle-class income does not translate into middle-class values.

And sometimes, there's more than a bit of wanting to see people succeed, so you give them chances they might not really deserve. Because of all the poverty in this area, sometimes it's easy to be generous or flexible--- but you don't fully realize how your generosity/flexibility is being abused until it's too late.

I had two awful turnovers in 2023-2024. One was in March 2023-- a long-term tenant who was successful and reliable had a divorced adult son. He wouldn't have qualified under my normal screening, but she promised to run his finances for him. I did it as a favor, and based on her 10? 12? year track record of being a reliable tenant. It was successful for two years until he stole from her, she dropped him like a hot potato, and his world erupted into the chaos that her management had been protecting him from. He showed his true colors, I paid for the lesson to not be so generous with favors to people who have dug their own holes, no matter how much someone promises to be responsible on their behalf.

The other was in October, 2023. Again, they had been successful tenants for about three or four years. Her parents lived across the street from me, she worked at the same school I did, and they were a young couple with young kids and I wanted them to be successful. When their marriage broke up without them telling me-- it turned out she ran off to be with her boyfriend in City A in July-- and he ran off to be with his girlfriend in City B in September-- they didn't give notice on the house, in case they decided to reconcile. They also left their dog behind with no food and no water. The dog did nothing to improve the house during their absence. I found it in time to call animal control to save its life-- it almost certainly would have died if given another 24 hours of neglect. It's now living a happy life with a foster family and is in good health. But those few months after the wife left but before the husband left--- there was definitely some mental illness in play that hadn't surfaced so clearly during my previous interactions with them.

Deanna, thank you for your great explanation that I think plaque more of us than we'd like to admit.

My hubby and I were just talking about signs he noticed a long-term, good tenant was beginning to turn bad. It may happen slowly over several years, or as quickly as the wind blows; it can happen to any of us.

6X6: Sometimes there's only one applicant who's interested and checks all the boxes, you do a one-minute inspection of the interior of their car and it's well kept. Guess who didn't do a current in-home visit?

6x6 to answer your question it is because we rent to humans.

Sometimes they get one over on you. Sometimes they bring in a BF/GF and everything changes. Maybe they dabble in drugs and it all goes downhill. Job loss, illness with self or family member.

Since I have started coming here and learning I do not have the same quality of mistakes as I did before.

Ken, I've lived in Texas since 1990, but for the most part, anything that wasn't within the triangle of DFW/Houston/San Antonio was pretty much terra incognita as far as I was concerned. :) That's where about 2/3rds of our state population is concentrated. Sure, I'd pop over to Corpus Christi or Wichita Falls or Lubbock once in a while... but everything in between was just kind of empty invisible space. :)

I started out living in the Houston/Galveston area, and went to school in Waco. DH and I got married and moved to DFW. Neither of us were able to work in our original field, or keep the employment that had brought us to the area, so we both got random jobs, cashflowed advanced degrees while working full time, paid off our student debt, and saved up for a house.

Life almost took us down to Alpine, TX, when he got a job offer from a firm there. (It's near Big Bend. Brewster County is larger than the state of Connecticut, but whereas Connecticut has about 750 people per square mile, Brewster County has a population density of 1.5 people per square mile.) However, the firm belonged to a married couple who suddenly decided that it was time for a divorce--- so that plan fell through. (Fortunately. It's 200 miles to El Paso and 400 miles to San Antonio, auuughh. Talk about isolated...!)

Shortly after, I got a job offer in City A, and he got a job offer from a firm in City B, an hour away. So we started looking for houses in the small in-between communities that would give us both a decent commute. Real estate availability in our area was tied to oil-and-gas... and because oil-and-gas was doing well, there was almost nothing to choose from. (When oil-and-gas is doing poorly, everyone in the oilfield industry sells their houses and the market is glutted as they go elsewhere. When oil-and-gas is super-expensive, the market gets picked over and anything remotely appropriate is snapped up.) Renting was almost unthinkable, because there were no big commercial multi complexes outside of the major cities--- it was all income-based government housing, with a bad reputation for drugs and bugs.

Option A was a bank building, which was still almost entirely a bank complete with marble teller counters and a walk-in safe, except for a small beauty parlor and apartment that had been joggled into the back office space. The upper floor was still empty, unfinished, unheated warehouse space originally intended for document storage, etc. This was in a little community of 500. The beautician owner was selling because the little community of 500 was too "big-city" for her farmer husband, and he wanted them to go back to their farm in the country.

Option B was a church complex in a small community of about 1500 people. It was a church, complete with pews; a church nursery, complete with Bible storybook wall murals; a youth group space, complete with 6' ceilings and padded walls. When we asked where the grocery store was, they told us we'd passed it on the way in--- they meant the gas station.

Option C was a 1940's 2/1 selling for $120k. It had the plus of being a normal-looking home, but it wouldn't fit our formal dining room furniture, which was a key criteria. It was also a high price for not a lot of house.

Option D was a house where someone's grandmother had passed away 2 years previously, and her house had sat, unsold. She used to let her little songbirds free range in the house, and there was poo in the kitchen drawers. She had an amazing knack for roses. It was in need of a lot of love, but it was a 3/2/2 for $40k. And our town had a grocery store! It was a no-brainer. The $20k SD that we had saved up towards a $100-$150k house in DFW turned into a 50% downpayment. Our mortgage was, like, $90/month, and we couldn't get a real mortgage. We could only get a bank loan, because the amount was too low, and the price seemed scammy.

With our $90/month mortgage, we worked on getting free-and-clear of the house in under two years. We saved up. We started our family. And then we got into rentals.

Knowing there was so little rental housing in the area, it made way more sense to buy houses for $4k, and put in $20k of work to get them clean/safe/functional, then it would have been to buy houses in the nearby urban communities for $100k, and try and manage them from a distance. It's nice that we're able to improve our community while at the same time generating profit. Likewise, with the lack of consistent homebuyer demand in our area, buy-and-hold was a better strategy for us than trying to flip.

If you look at a map of Texas, there's a triangle between Fort Worth, Wichita Falls, and Abilene. I live inside that triangle. It's close enough to run errands in any of those cities, but they're still far enough away that they don't have a significant impact on our economy, housing prices, or rental rates. But each of those communities has schools, hospitals, retail, restaurants, utilities, manufacturing, and more... just on a very small, concentrated scale.

Some of the counties near me have even less population/economy than mine. 4 people per square mile. 2 people per square mile. But the areas that are more urban with a strong economy-- Wichita, Taylor, Tarrant, Parker Counties-- have more potential for returns, but also have a much higher cost of entry. There are also restrictions in play via ordinance-- like, needing to have an emergency contact within half an hour of the premises-- if I was to try and be efficient by having anything bigger than a (tri? quad?). Or needing to attend mandatory annual classes. Ultimately, they're hurdles meant to discourage absentee landlordism.

My backyard is a terrible place to invest. No one should invest in rural areas just because it's cheap. But if someone lives in a cheap area, and intends to be there for the next 20, 30, 40 years--- it's a great opportunity with almost zero competition... until all the urban guys come here because they've been priced out of their own backyards. :)