How to Avoid Renovation Mistakes on Your Rental Properties
If read thoroughly, this article should offer immense value at my expense. I’m wrapping up a renovation in which I just made plenty of mistakes. The rental looks great, but in turning over the unit, I upgraded unnecessary components that simply won’t add to cash flow. I went a bit too far with additional costs in order to modernize things. My future tenant(s) will be lucky as a result. Allow me to explain how the situation arose. I’ll be sure to include pictures along the way.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
The Tenants Move Out
My former tenants rented the unit for nearly three years. In my past article, I referenced an REO – this is the one for $85,500. It has been a great investment, but the husband had offered me a deal that ultimately led to a money drain. He was a handy guy and was doing a renovation in an affluent neighborhood, and mentioned that the granite and cabinetry being pulled out of the kitchen were in great condition. My ears perked up. I love upgrades. He offered to pull out the old cabinetry in my unit and place the “new” stuff in there in exchange for one month’s rent.
Ummmm, new kitchen for that? Deal.
This Wasn’t the Bargain
The cabinets looked terrific in pictures once installed, but for some reason, the granite simply didn’t look right. I hadn’t gone to the unit yet. Instead, I was being sent progress pictures on my phone. Big mistake. Lesson learned? Trust, but verify.
The cuts of the granite weren’t the same width (they must have come from different sections). They were pieced off, leaving seams everywhere. It looked terrible. The contractors I brought in refused to touch or fix it. The original formica had already been damaged in removal, so going back to the original countertop was out. I can see the cash flow riding off in the sunset in my mind.
As a result of this charade, the tenants and I mutually agreed to go our separate ways. They had two dogs, so the carpets in both bedrooms had to go. Let this be a lesson that if a deal sounds too good to be true, it usually is. I had to buy new granite for a new tenant. This isn’t how to operate a self-managed rental properly.
For some strange reason, I find satisfaction in doing some of the work myself. The unit was now vacant, with the original laminate floors and worn baseboards. My thought process churned: I’m already redoing the bedrooms, might as well go all the way and tile it all.
The condition was pretty much original from when I had purchased the unit from the bank. It was about to change drastically. The carpets had been been torn out. There were holes everywhere from paintings and artwork. It was time to get to repair work and my arch nemesis … popcorn on the ceilings. I single-handedly scraped the popcorn off of the entire unit and patched all of the walls and prepped for paint. I consumed two full audiobooks in the process, so it was a win-win.
Getting Out of Hand
The decision to put porcelain tile down in the whole unit wasn't a mistake. I love the durability of tile and the maintenance savings for landlords. But don't fret, the mistakes are coming. I found a gorgeous cost-effective porcelain tile at Home Depot and ordered it for delivery. I called in a contractor to lay the tile. He agreed on the labor costs of $2.25 per square foot (a pretty good price, FYI). The conversation unraveled into disaster:
Contractor: We are putting in all new tile. Would you like to replace the vanity in the guest bathroom?
Me: Yeah; no point in having an old vanity on beautiful new tile. (Mistake)
Contractor: Would you like to put in a new toilet, too?
Me: Yeah, might as well. It will look more polished. (Mistake. So unnecessary.)
Contractor: The guest bathroom vanity looks a bit old too. Want to just do that and the master toilet as well?
Me: If I’m doing everything else, let’s just go ahead. (More cash flow just evaporated.)
Contractor: The base boards… do you want standard, or the nice tall ones?
Me: That sounds like a personal challenge. Get me the nice ones. (OK that’s not what I said, but you get the point.)
The Finish Line
The chandelier was almost required at this point. In turn, replacing the rest of the fixtures became necessary from fear of an eye sore. The granite was a choice I found at a steep discount from a past business, so that was a score for me. Overall, the baseboards, the vanities, the toilets, and the fixtures were completely unneccessary and didn’t add enough value to produce the same amount of cash that I put into it.
The cabinets and countertop were a judgement mistake I made when presented with a deal from a tenant. In the end the unit looks great, but now runs the risk of being damaged by new tenants. The lesson here is that rental units are not a landlord’s home, and shouldn’t be renovated as such. Cost mitigation is crucial to a fruitful cash-flow venture.
A tenant is ready to move in at $1,450 per month, and neighbors have offered to purchase the unit, but now I need to make back the cash I just spent. Do not make the mistakes I made. Analyze and simply fix and repair units for maximum cash flow. Aesthetics can get landlords in trouble. Lesson learned.
Have you ever gotten carried away with a renovation?
Share your experience in the comments below!