Transforming Your Old NJ Home into Modern Rental Units: Avoid These Top 3 Mistakes

Renovating an old home to create modern rental units is a fantastic move that can yield financial rewards and help to keep family assets without uprooting your own family

Recently we worked with a client who inherited her family home in Paterson, NJ. The client had already moved out of the area herself but didn't want to sell the property or let it fall into disrepair. After considering a few options she decided that renovating the property and renting the property was the best bet

Renovating and renting allowed this new homeowner to do a few things:

• Keep a home with a long-standing family history in the family

• Continue to live away from the home while still getting the benefits of owning a second property

• Turn the property into an additional stream of income

Many people in this situation make the same decision, keep the home and rent it out.

Unfortunately, some people make these decisions without taking the time and effort to fully transform the home into a rental property and miss out on so many of the advantages. Some do so badly that they eventually lose their home.

It's crucial not to make mistakes during this transformation process. Missteps can not only inflate your budget but also delay the project and compromise the quality of the final product. As a seasoned home contractor, I have seen it all.

But with the right guidance and tools, you can steer clear of common pitfalls.

Let's dive into the three most common mistakes and how you can avoid them to maximize your old NJ home.

Mistake 1: Underestimating Costs and Budgeting Poorly.

Yes, we all know home projects can go beyond the anticipated cost but one of the biggest mistakes I've seen homeowners make is underestimating the costs involved in transforming their old homes into modern rental units. Due to the age of these homes, it’s not uncommon to have hidden structural issues and unforeseen upgrade expenses (like rewiring the homes, old plumbing, etc.). The costs can quickly add up if you're not careful.

How to Avoid This: First and foremost, create a detailed budget that accounts for both expected and unexpected expenses. When we start projects on older homes we do extensive checks of all of the home's major infrastructure to account for age, volume of use, and other factors that may cause unexpected costs. We also use systems to help calculate costs, track spending, and adjust as needed. These checks and tools have been a lifesaver for many of my clients. For example, one client initially estimated their renovation would cost $50,000; however, with the help of our software, they realized they'd need closer to $70,000, allowing them to secure additional funding upfront and avoid mid-project financial stress.

It always helps to set aside at least 10-15% of your total budget for contingencies. You never know what kind of hidden damage or extra work might crop up once you start tearing down walls.

Mistake 2: Neglecting Proper Permits and Regulations

The second major mistake is neglecting the necessary permits and regulations. Skipping this step can lead to fines, delays, and even legal issues, which can be a nightmare for any homeowner. Many towns have different rules for renovating owner-occupied single-family homes vs. Multi-unit rental properties. And as you already know every city, town, and village in Jersey has their own set of rules. It can be a lot to keep track of but one miss could cost you months of delays and thousands in project costs.

I’ve even once had to remove a structure on a project we took over because the original contractor did not account for changes to city building regulations

How to Avoid This: To avoid these issues we review all town regulations and building code for all types of properties and obtain the proper permits to ensure your project is done correctly and passes inspection without a hitch. Hiring a knowledgeable contractor like us who understands local code requirements can make a world of difference.

Mistake 3: Ignoring Market Demand and Tenant Preferences

The third mistake homeowners often make is ignoring what the market demands and what potential tenants prefer. You might think that a luxury bathroom will attract tenants, but if your rental property is in a college town, students may prioritize affordable rent over high-end finishes. Understanding what upgrades will get you the most bang for your buck and most durable for rental usage has been a lifesaver for many clients.

How to Avoid It: We help avoid this we are well versed in the overall populations and rental availability in many Northern New Jersey towns. This knowledge helps us, to help you to make the best decisions for amenities to add to your property. For instance, a client in Princeton found that young professionals preferred modern kitchens and in-unit laundry. By aligning their renovation plans with these preferences, they were able to attract quality tenants quickly and command higher rent.

Conduct thorough market research to understand what changes and updates are coming to your city to determine what type of renters may be moving to the area. For example, we know that Clifton, NJ has been approving the building of new multi-unit properties and improving walkways and roads around the train station in hopes of attracting more commuters to the area. Many of these commuters will most likely be looking for rentals so this is a great time to ensure your rental has a lot commuter commuter-friendly amenities like the in-unity laundry mentioned above or stainless steel appliances that are common in NYC rentals.

These are just some of the pitfalls we see homeowners making when they decide to transform their old NJ home into modern rental units can be incredibly rewarding, but it's essential to avoid these mistakes that can derail your project. By steering clear of these mistakes, you can ensure a smoother renovation process, attract quality tenants, and maximize your return on investment. As you can see from the examples working with a contractor who is familiar with not just doing the home repairs but all the areas of the home is located and local government can be invaluable to the success of your project.

Ready to transform your old NJ home into a modern rental unit without the headaches? Contact us at 973-930-5349 to get an estimate on your renovations today.