After you have purchased an investment property, have you ever encountered this dilemma?
Shall I replace this part? Shall I keep it as-is until it breaks?
Granted, chances you have already spent so much in acquiring the property, so you may be reluctant in spending any extra dime in renovating the place (or at least, delay until the cash flow starts coming in).
For some fixes, you can reasonably delay the fix until quite some time.
For other fixes, to give you a better sleep at night, you should always ensure the operations of these items. Don’t even think about ignoring these. Just do it.
Here are the top 5 things you should seriously consider replacing or upgrading whenever you acquire a new investment property, regardless of their condition.
The Top 5 Items to Replace or Upgrade in Every Rental Property You Buy
Why is a toilet on top of the list? Because a toilet can be one of the largest money drains in your property!
You may be surprised how large of a water bill a leaking toilet can cause. As an example, one of my toilet leakages went undetected for two months, and the corresponding water bill was $3,500! As a comparison, normally we pay around $150 a month for water, or $300 for two months. That’s more than 10 times the normal usage.
The main reason that a toilet is a must-fix item is because leaking toilets can run 24 hours a day. A leaking faucet or a leaking shower diverter will result in only a small water issue when you don’t turn them on. A leaking toilet, on the other hand, is continuous.
While the potential damage can be immense, the action to be taken is surprisingly easy.
We are not even talking about replacing the toilet (although for long term holds, it’s not a bad idea either). We are talking about just “gutting” the toilet by replacing the toilet system inside.
Would you do the same?
Even if the lock is fully functional, you should always change the locks. You don’t know who possessed the keys before. Instead of coming up with any justifications to convince yourself why it is okay to use the old ones, just change them.
Money saving tip: If you have multiple properties, you can always recycle locks from time to time. Say you just took out the old locks from 123 Main Street. You can always reuse the same old set of locks at 456 Main Street next time when you have a tenant turnover.
Let’s play locks musical chairs!
3. Light Bulbs (Including Security Lights)
For common areas such as hallway, using long lasting, energy saving light bulbs will reduce your electricity bill. More importantly, new light bulbs reduce the number of easily avoidable “Would you please change the light bulb” phone calls.
In fact, a lot of times, I would go one step further by changing the bulbs in my tenants’ apartments.
Once you change the bulbs, it will be some time before you have to change them again. Each energy-saving light bulb lasts for 9 years (double-life bulbs last for 18 years). These days, as LED technology becomes more mature and costs start to become more affordable ($3 per bulb at Home Depot), we might potentially move in this direction. If you have any experience with LED lights, please share!
4. GFCI Electric Outlets
These are special electric outlets that can shut off automatically when electricity runs through unintended paths (e.g. body, water). Such outlets run a little bit more expensive ($10 a piece vs. less than $1 a piece for normal ones), but they are well worth it in certain places for safety reasons. In fact, they may be required by law for places near water, such as kitchen countertop, bathroom, washer and dryer.
I didn’t bother to check the law, because whether or not it is required by law, for everyone’s safety, you should strongly consider replacing these outlets at appropriate places. You only need a few GFCI outlets per apartment.
5. Fire Extinguishers and Smoke Alarms
Another safety item.
Install a whole new set of smoke alarms and fire extinguishers, and you won’t have to worry about them for the next several years (as long as your tenants don’t tamper with them). Of course, if you use the battery operated alarms, you will have to change batteries for the alarms every year. As a hint, don’t count on your tenants changing batteries themselves. Instead of viewing replacing batteries as a chore, think of it as a good chance for you (or your property manager) to “inspect” the property as well.
All the suggestions above revolve around several major items: water, fire, electricity and safety.
You may think some of the specific items are overkill and/or certain things are missing. Feel free to tweak this checklist to better suit your needs.
The intention is to plan ahead and do the small little things to minimize headaches down the road! Your tenants will appreciate them.
For the benefit of your tenants and for the protection of your business, consider changing all the aforementioned items for your next property.