What is “rehab work”?

Rehabbing a property involves making a property look new while keeping it relatively

original structurally, electrically and so forth.

In contrast, Remodeling often entails making changes or modifications to the property.

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Nearly all remodeling requires multiple permits and inspections. This can take a lot of time in which your rental property will be un-rentable.

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For example; 

Replacing your kitchen cabinets with your original format would be considered a rehab. (you will not need permits)

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Completely redesigning your kitchen, repositioning plumbing and electrical will require multiple permits and inspections. This would be considered a remodel.

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What is a complete property rehab?

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This does not "necessarily" mean that the whole home is gutted and remodeled. It's purpose is to repair all issues and to bring the property back to new looking, dependable condition.

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What is the benefit?

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Not only to attract better tenants but also to be able to hold them responsible. 

For example, in a home with 30+ years of wear and tear on the doors, walls and floors it will be difficult to hold a tenant responsible for anything short of outright vandalism.

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Also, there are many things that can cause expensive service calls and serious damage, like leaking plumbing, whether it be old faucets, leaky toilets or water supply valves. On a complete rehab all of these items would be addressed at a fraction of the cost of sending a repair man for each individual problem.

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Repairing Your Rental

 

The strategy to maintaining or repairing your investment property is different than preparing a property to sell on the market. Simply put, any shortcuts you take will likely come back to haunt you.

 

For example, if a low-cost kitchen faucet is installed and naturally soon starts leaking, when you send someone out again, you’ve lost more than you saved by installing a cheap faucet. To make matters worse, if the tenant does not tell you it is leaking, you will lose your kitchen cabinets. The leak is also very likely to attract termites, often causing serious structural damage.

 

Basically, this principle will apply to everything from ceiling fans to appliances, so avoid unnecessary damage and service calls by having fair quality items professionally installed.

 

If you are self-managing, avoid the temptation to put off needed repairs because you are looking for that handyman that works for beer or for the sheer joy of working.

It’s true, availability and reliability have its cost. However, in the end, there is more advantage in using a licensed, insured and equipped professional who can actually bring a job to completion.

 

If you are not using a property manager, make sure you are aware of which repairs require a permit. Some repairs cannot be done by a handyman even if he is capable of doing it well, they must be done by a certified tradesmen and permits must be pulled.

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Rental Property Investment Tips

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Prepare for success by making sure all flooring, walls, doors and trim are in good shape, not scarred or in need of paint. Most importantly make sure everything is clean, especially the kitchen and bathrooms. Be sure to have this documented by way of photographs. Tenants that accept properties in dirty or rough shape, unfortunately, have the tendency of leaving them in even worse shape. Be sure there is no clutter of any kind left behind, tenants will add to it and you will not be able to hold them responsible.

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Never allow your tenants to manage your property by performing their own repairs. We get an enormous amount of work from repairing work performed by tenants. Even something as simple as painting can end up costing you significantly more. You will not be able to take the cost of repairing their work, from their security deposit if you gave them permission.  

See Tenant Paint Jobs

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(It is vital to have a documented inspection of the property preformed between tenants, 

annually and even sooner with new tenants.)

 Tenant Acquisition

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Be careful about over investing. Unnecessarily installing a new kitchen or bathroom in a rental, may have very little return. Though they do need to be in clean, functional shape.

If a new kitchen or vanities are needed, avoid anything with particleboard construction, especially in the doors and faces of the cabinets. It's also advantageous to pick something that can be easily repaired or matched if needed. Solid oak faces are a favorite of many experienced investors.

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Appliances

Good appliances go along way in updating an older kitchen.

Remember if the appliances breakdown you will be stuck paying service calls and repairs on them, it's usually more cost-effective to keep the appliances as up-to-date as possible. Don't waste resources fixing old appliances. 

 

Flooring in your rental property

Avoid laminate! All but the most expensive laminate is too delicate for rentals. Most of the damage is caused at move-in or move-out or because of a pet or plumbing leak.

 

Carpet is the cheapest and the quickest, unfortunately it does not hold up well if there are children or pets in the home. Also, many people have allergy issues.

 

Tile, though it has a high initial cost, mostly because of the intense labor needed to install, it is usually the best long term for rentals. 

Avoid ceramic, it chips easily, especially in the kitchen and living areas.

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What work should I do if I want to sell my property?

 

The first three rules of real estate are location, location and location. There is no point in investing just to break even.

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Find out what the property is actually worth in the condition it's in, compared to after your repairs and or improvements. That will give you your investment limit.

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To do this, you will need to consult a qualified realtor with access to the most recent comps and other information. If you are an amateur investor who doesn't want to pay a real estate commission, consider getting licensed yourself, it's not very expensive and will give you access to tools and experience you'll need so as not to lose your shirt.

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Property Preparation 

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There is a list of requirements a property must meet in order for a bank to give a loan on it, make sure the property meets those requirements.

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In most cases you will want to make sure all the interior walls, doors and trim are in good order and painted to make the majority of the home look new, and any other minor repairs completed. As long as the cabinets and bathroom vanities are not damaged and appliances are good order, preferably updated, it will likely catch the eye of a serious buyer.

 

Of course, that's if the potential buyer walks into the house. If the exterior is in rough shape, they may simply drive to the next property on the list. If they do pull into the driveway, how does the entryway look? Are the weeds pulled? Is the front door in good shape? First impressions carry a lot of weight.

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Unless you own the property outright or have considerable amount of equity, be careful not to over invest. You need to know what it is actually worth, and that changes constantly.

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Remember, unless you have a cash buyer, ultimately the banks will decide the value of the house.

 

So yes, it's always wise to invest a bit. At very least it will help your property stand out from the others and get it sold quicker. It is important to understand if, and how much, your improvements will actually increase the equity. Sometimes it's more cost-effective and stress reducing to allow the buyer to have the fun of putting the final touches on the property.

 

So what work should you do?

At very least make all obvious repairs, have it thoroughly cleaned, professionally painted and update items as your budget allows. These things will go a long way in attracting a homebuyer, instead of lowballing Investors.