While flipping properties can generate large amounts of cash, I have found that nothing allows you to generate wealth like long-term buy and hold rental properties.
One of my goals on this page is to share my experiences with real estate so others can get a real-life view of what the process is and hopefully learn from my mistakes. Here’s my latest project…
We recently acquired an amazing deal on a 1400 sqft, 4 bedroom all brick rancher for around $50k. What exactly does a $50k house look like and what kind of condition can you expect it to be in? Here’s what we’re working with:
Not quite move in ready, right?
Steps for rehabbing:
Step 1: Conduct a walk through and estimate repairs
Step 2: Gather estimates from contractors
Step 3: Schedule repairs and begin work!
Step 4: Expect something will go wrong and over budget
Step 1:The first step before jumping into any new investment property is to conduct a thorough walk through of the property, making sure to take notes of anything you see that needs to be repaired. Our list for this project:
- Windows – Many of the windows were rotted and in bad shape, some wouldn’t open. Windows are almost always on our list of items to replace as they can make a huge difference both in visual appeal and energy savings for our tenants. Windows are usually worth hiring someone to do correctly.
- Flooring – Flooring throughout the house is 70% 1970’s vinyl and 30% heavily stained hard woods. The vinyl most definitely has to go and we plan to refinish the hard woods ourselves to save money.
- Electrical – Lessons learned from a previous investment property. If the breaker panels look like they are from the 1960’s, we just have them replaced along with any small electrical issues found during the walk through. Overall the house has good electrical (no knob-and-tube wiring thankfully).
- Foundation – One room at the back of the house was sagging and will need a few floor joists replaced. I’m not brave enough to do this myself so we will hire it out.
- Paint – As much as I hate painting, it is relatively easy to do and expensive to have done professionally. Needless to say, we will paint the house ourselves.
- Bathroom Vanity – Bathroom is in overall good shape but does have a rotting vanity that needs to go. Normally I hire out plumbing, but for simple stuff we can handle it ourselves to save money.
- Appliances – no appliances are in the house so we will have to purchase. For rentals we find the lowest cost appliances with the best warranties.
Step 2: Gathering estimates from contractors to decide what work you will hire out and what you will do yourself. If you are just starting out, I recommend getting 3 bids for any large repairs, and you will see why in a minute. Once you’ve done the same repairs a few times, you’ll have a good idea of what things should cost and you can get away with 2 bids and even just 1 bid if it’s a low cost repair. Our finalized estimates and costs:
- $6300 for 20 double hung/2 large pictures windows. We gathered 2 bids, one came in well above $14k which would kill our entire budget.
- $2200 Carpet in the bedrooms, bonus room, and Vinyl in the kitchen.
- $400 Floor sander rental, stain, polyurethane, and applicator supplies.
- $1750 New 200 amp panel & breakers, switches, outlets, and some new wiring in the attic.
- $900 Floor joist repairs. First bid came in at over $30k from a large company stating they need to rip out every floor joist and beam under the house and install $15k worth of smart jacks, otherwise they couldn’t warranty it. They are in business so this must work on some people, not today!
- $700 Paint & supplies
- Bathroom Vanity
- $500 Cabinet & stone countertop
- $450 Range
- $550 Refrigerator
- $600 Cost will cover a 1o yard dumpster and 2 dumps if needed.
- $1500 Tools, trim, mailbox, lumber, drywall mud, etc..
Step 3: Schedule repairs and begin work. Here’s where the fun begins! There is a logical flow to rehabbing, so use common sense and try not to schedule contractors at a time that will interfere with another contractors work. For example, you might not want to be staining floors while someone is installing sheetrock in the hall way, or paint while another contractor is sanding the floors in a nearby room.
Here’s what’s completed so far and the order we did it in. I will go into more details on these items in a future post.
- Clean and remove all of the leftover junk
- Foundation and electrical
- Sanded wall panels and sprayed interior of house with kilz primer
- Painted the entire interior of the house beginning with the ceilings and trim first followed by the walls.
- Vinyl installed in the kitchen and carpet in the bedrooms and bonus room
- Appliances installed
- Refinished the hard wood floors in the living room and hallways
- Windows installed
Here’s what’s left:
- Pressure wash/prep exterior wood for paint
- Paint exterior wood
- Resurface kitchen countertops
- Install bathroom vanity
- Install trim in the living room
- Touch up any paint throughout the house
- Install mailbox
- Post property for rent!
This project will be finished in a couple of weeks. Even though this is our 4th rehab, we still managed to make mistakes which I will be writing about in a future post, along with pictures of the completed project!
Thank you for reading and I would like to hear from you. Please comment below.