Welcome to the 5 Minute Prime Podcast. Quick actionable tips to master personal finance and real estate investing. In just five minutes a day, we'll help you build wealth and achieve financial freedom. Hey Prime Investors, Martin Maxwell here. Welcome back to the 5 Minute Prime Podcast. Your tenant handed the keys back on Tuesday. The unit's clean, nothing's broken, and it is dated. Original oak cabinets, laminate counter, appliances from 2011. It rented at $13.50. The median in that metro is $14.74. So you already know why it's been sitting at the bottom of its comps. Your contractor walks it and quotes you a full kitchen. 18 extra days beyond a normal turn. Most of that waiting on appliances and a counter. And after, he thinks it rents at $1,525. So that's $175 a month more, $2,100 a year. Against $9,500 plus 18 empty days. Your daily rent, by the way, is $44.38. 18 days of that is just under $800, which never appears anywhere on the contractor's quote. Run it, and the whole thing pays back in 4.9 years. Which is fine. That's the point at which most people sign. Then he mentions there's another version. Paint the cabinets, new hardware, counter only, leave the appliances alone. $2,400, four extra days instead of $18, and he reckons it still gets you $1,45. That's $95 a month, $11.40 a year, against $2,400 in change. 2.3 years. Same kitchen, half the result. Less than a quarter of the cost. So here are your three options. Option one, do the full $9,500 kitchen while the unit's empty. You'll never get a cheaper window and the property stops competing at the bottom of the market permanently. Option two, list it Friday exactly as it is. Rent starts immediately at $1350. You keep the $9,500, and the kitchen becomes a decision you make later with better information. Option three, do the $2,400 version and list a week from Friday. Most of the visible improvement, a fraction of the money, four empty days instead of 18. Three options. Hit pause, decide, then come back. Alright, here's where I land. And I want to start with what almost everybody gets wrong about this, including me, for years. Most operators run this comparison the wrong way around. They ask, is the kitchen worth $9,500? And the answer is yes. It pays for itself in under five years and the property is better forever. So they sign. But that was never the choice on the table. The choice is between the $2400 version and the $9,500 version. And the only honest way to compare those two is at the margin. So let's do that because I don't think I've ever heard anybody actually run this number. Going from the cheap version to the full one cost you an extra $77.21. That's about $7,100 more in materials and labor, plus 14 more empty days at $4,438 apiece. And what does that extra buy you? $77.21 for $960 a year. That's an eight-year payback. Sit with that, because it reframes the whole thing. The first $2,400 of that kitchen pays back in a little over two years. The next $7,000 pays back in eight. You are not evaluating one project. You're evaluating two projects that happen to arrive on the same quote, and they have wildly different returns. The 4.9 year number is just the average of them, and the average is hiding the bad half. And there's a reason renovation returns come front loaded like that. Think about what a tenant actually sees on a showing. They see surfaces, cabinet color, the counter, the hardware, whether the room reads clean. The cheap version buys almost all of that. The expensive half buys appliances behind closed doors and cabinet boxes nobody opens while you're standing there. Real improvements, just not the ones that price the unit. And if you did the full kitchen on your last turn, genuinely don't let this land as a mistake. You bought a better asset and you bought it at the cheapest moment you'll ever get. The point isn't that you overpaid. The point is that the second half of it was a different decision than the first half, and nobody handed you a quote that said so. Now let me defend option one for a second, because I don't want this to land as never renovate. The empty unit window really is the cheapest time to do work. No tenant to schedule around, no half day access, no rent abatement. That's real. And here's the condition that flips option one back to correct. If those appliances aren't dated, if they're failing, then replacing them was never part of a rent lift calculation in the first place. That's a capital expense you owe no matter what. And doing it while the unit is empty is the cheapest version of a bill you're already going to pay. Run it as its own decision. Don't let a rent argument justify it, and don't let a weak rent argument stop it. Option two, list it Friday as is, has the strongest instinct behind it of the three. Rent starts now, and every empty day is $44 you don't get back. That instinct is right, and it's exactly what we spent Monday's episode on. The days you control are the ones with the money in them. But listing at $13.50 doesn't defer the decision. It prices the unit at the bottom of its comps and locks that in for a full lease term. You're not choosing renovate later. You're choosing to collect $95 a month less than you could have, 12 times. That's $1,140, which is most of what the cheap version would have cost you, spent on nothing. So option three, do the $2,400 version and list a week from Friday. It captures about 54% of the available rent for 25% of the cost. Four empty days instead of 18. And on the value side, at a 7% cap rate in that metro, $1,140 a year of extra income is roughly $16,300 of property value created for $2,400. Call it $6.5 times your money. The full version creates more value in absolute terms, about $30,000, but it does it at three times your money instead of six and a half. And that's forced depreciation in its least glamorous form. Not a gut renovation, not a repositioning, just knowing where the return stops being steep and stopping there. There's one more reason the cheap version wins here, and it comes straight out of Tuesday's piece. We priced a turnover in months of rent instead of dollars. And in six out of ten American metros, one turnover costs at least two months of gross rent. On a 1350 unit, 14 extra empty days isn't a scheduling detail. It's a meaningful slice of the very number you were trying to improve. Which is the quiet joke in all of this. The expensive version of a renovation pays for itself partly by making the vacancy longer. Your challenge today. Pull up the last make ready scope you approved and split it in two. The cheapest version that would have bought the visible change and everything above that line. Then price the second half by itself, just the incremental cost against the incremental rent. If that number can't carry itself, you didn't approve a renovation. You approved a capital expense wearing a renovation's clothes, and it should have been argued on its own terms. The full write-up, all three options side by side with the arithmetic, is linked right there in the show notes. Half the kitchen, most of the rent. The other half can wait for a tenant who's already paying you. I'm Martin Maxwell. This has been the Five Minute Prime Podcast. I'll see you next episode.