Lessons from a Small Landlord

Want an upgrade to your rental? Start thinking like a landlord

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Most tenants are afraid to ask their landlord for upgrades, as these tend to lead to rent increases.  While this is true, you shouldn’t get too stressed, as living in a crappy apartment that you have to move out of often costs even more than living in a well-maintained apartment.

When a tenant asks me to upgrade his apartment, there are two basic questions that I ask myself:

  • Do I need to do this?
  • Can I charge more rent for it?

This gives me five possible answers to the tenant ranging from “right away sir” to “over my dead body."  Here’s how I decide:

1. Yes, and I'm happy to pay out of pocket:

Not all landlords are skinflints.  If something needs to be done, or it seems like a good idea, I’ll generally pay for it out of pocket-- this is just good tenant relations.   In general, I’ll pay for necessary repairs or replacements that make my apartments nicer than the cheapest generic rental units-- I’ll spend the extra $100 on an "owner grade" stove, use high quality paints, buy windows that seal well, etc.

  • Investments in energy efficiency that aren’t economically efficient, but improve the tenants’ lives. I insulated my hot water pipes, and installed a water circulator on a timer.  The result is that tenants get hot water instantly, and I can run the hot water heater at a slightly lower temperature, prolonging its life.
  • Low-cost improvements that make the tenants happy:  new toilet seats, shower bars, hotel-style clotheslines.
  • Long-term infrastructure upgrades, like new gas, Ethernet, water, and sewer lines, central a/c, etc., as part of a larger project. Over the long term, these are necessary to keep my property positioned in the solid middle of the market.

2. Yes, but your rent will go up:

These are the kinds of improvements that upgrade an apartment to a higher quality.  I’ll do these upgrades if the tenant promises to contribute, and if I think that the upgrade can be justified in terms of increased rent if the current tenant leaves.  

This also applies to virtually everything in a rent regulated apartment: Since rents increase slower than costs, I try to make up some of that through periodic apartment upgrades performed with the tenant's consent.

These types of upgrades include:

  • High speed internet access
  • Bulk vegetable purchases through a Community Shared Agriculture membership
  • Upgraded bathroom vanities
  • Ceiling fans
  • Upgraded lighting
  • Dishwashers, granite countertops, and high-end kitchen appliances
  • Anything better than the absolute cheapest used appliance in a rent regulated apartment
  • Any voluntary construction in a rent regulated apartment. What you see is what you get, and if you want better, you have to pay for it.

3. You pay for it:

There are some upgrades that I won’t fund, either because I don’t feel like dealing with the installation, or the property is portable, or because the upgrade appeals only to the current tenant:

  • Chandeliers and other custom lighting
  • Custom built-ins in the closet
  • Additional electric outlets
  • Custom faucets or other non-necessary kitchen or bathroom upgrades
  • Room dividers
  • Window treatments

4. No way:

Some things aren’t worth having at any price, either because they are dangerous, or because they’d annoy me, or because they aren’t in my long-term interest.

  • Custom paint jobs in dark colors
  • Washing machines over living spaces (wet over dry)
  • Waterbeds
  • Cut-outs for a/c units, or anything else that goes through the wall
  • Basically anything in a rent regulated apartment that the tenant won’t pay for.

5. Pay for your it yourself, and avoid an increase in rent:

Every tenant worries that if he invests his money and allows his landlord upgrade the apartment, the landlord will turn around and jack the rent up.  

To prevent this, a deal like the following may make sense if you trust your landlord:  A $6,000 project, funded by the tenant, might be amortized over 60 months, so the tenant will get a $100 credit every month regardless of whether he still lives there. This way even if the tenant moves, he’ll still get reimbursed, either through lower rent or through a check delivered to his new landlord.

Conclusion:

If there’s some upgrade that you want, talk to your landlord.  Unless it is unrealistic, extremely expensive, prohibited, or otherwise unusually difficult, many small landlords will be happy to oblige.


Lessons from a Small Landlord is a bi-weekly column penned by a real-life NYC landlord whose pseudonym is Craig Roche.
 
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