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Rental Property Deal Analysis & Property Tour (Before & After Rehab!)

Mat Piche
6 min read
Rental Property Deal Analysis & Property Tour (Before & After Rehab!)

We just finished up a single family rental property. I want to bring you guys inside to show you my system and how we renovated it. I’ll also break down all of the numbers and financials on this property to show you guys exactly how much we’re going to make.

Check it out in the video below!

Walk-Through of the Rehab

With our system, we fully flip everything—totally renovate it—because we want high quality tenants who are going to pay top rent.

The Basics

So, we re-did pretty much everything: floors, paint, trim. We did an accent wall, which is something we always do on all of our properties. In fact, if you watch my videos on YouTube, you’ll find that every single property we have looks the exact same as this. We just take this system and do it over and over again. It makes it really simple for us and my contractors to know exactly what to do.

And also, it attracts a high quality tenant. We know our clientele so well in my local area, and they really, really like this style. So, we’re just going to keep rolling with it.

The Kitchen

In the kitchen, we gutted the old kitchen that was falling apart (as you can see in the clips). Everything is brand new. We always do the shaker-style white kitchen (that’s the modern touch that’s in) with the granite-looking countertop. We never use granite or a hard surface countertop on a rental property, just because we don’t want tenants to ruin it with stains, as they can seep into quartz or granite.

So, we did a laminate countertop with this big, square sink. Another thing we’re trying to do now is not use the cheap doubles sinks from Home Depot, where they’re rounded. We’re getting the square, modern one. It looks pretty cool. We do a black restaurant tap always, so we’ve got that black accent, and then the stainless steel/black appliances. It turned out pretty good!

Related: Video Walk-Through: How to Analyze an Investment Property

The Basement

Now, the basement. We took off all the paneling on the walls. I think on the ceiling there was some sort of ceiling tile—I can’t remember. But we took it all down, drywalled everything, and put some spotlights in. We made it look way more modern—just a better space for the tenants to hang out in and have their kids play.


The Upstairs

Upstairs, we carried the theme all the way through. We didn’t go as wild in the bathroom as we normally do. Typically we tile all the walls and everything, but in this case, we kept it because it was pretty clean. So, we kept the tub, cleaned up the caulking.

What we did do was replace the floors here with the white octagon tiles like we always do. We did a new vanity, new mirror, new lights—just painted everything. Nice and easy; in and out.

The Bedrooms

In the bedrooms, we carried the theme all the way through again—new floors, new trim, new doors. We always use the six-panel doors. It’s just a more modern touch with the black handles. It’s all about those little details.

Related: Introduction to Real Estate Investment Deal Analysis

Break Down of the Financials

Alright, guys. Let’s get into the numbers now that the project is done. I can show you exactly where we stand.

The Numbers

  • Purchase Price: $337,500
  • Down Payment: 20% or $67,500
  • Renovation: $35,000
  • Closing Costs/Lawyer Fees: $1,700
  • Land Transfer Tax: $3,648
  • Sleep at Night: $1,800
  • TOTAL: $110,148

We bought this property for $337,500, which is an outrageous price in my local area for a semi-detached property like this. That was a smoking deal. It was just one of those diamonds in the rough.

It sat on the market for a bit. We jumped right on it with a firm cash offer and blew the seller away. They were so happy, but we knew in the background, we were getting a great deal. So, it was a win-win for everybody.

The down payment for 20 percent was $67,500—kind of standard all across North America, right? Twenty percent down payment on a residential investment property.

For the renovation, we spent just under $35K. That was including everything you saw: paint, floor, trim, kitchen, doors, everything. Top to bottom, we refinished the whole basement, as well.

Closing costs or lawyer fees were $1,700. Again, kind of classic price for my lawyers here; that’s kind of standard for what we’re doing.

Land transfer tax on this was $3,648. If you don’t know what land transfer tax is, here in Canada in my local market, we basically have to hand over a check to the government every time we buy a property and the title changes. It’s kind of a cash grab, but that’s the way it is.

wooden model of house on desk with coffee cup, calculator, laptop

The sleep at night fine was $1,800. So, every single time we buy property, if you don’t know what the sleep at night fine means, we put one month’s rent in the property’s bank account.

By the way, every property you buy better have its own bank account. Every single one! It keeps it easy—nice and neat for our bookkeepers and our accountants (and also for you). So, don’t forget to do that for every single property.

But when we buy property, we put one month’s rent in that bank account for a rainy day. Maybe a tenant moves out, and it is a month or two layover, where there’s no rent. Or maybe a tap breaks or something else breaks in the house. We have the money.

This is more sophisticated, but if you have joint venture partners like I do, all my partners are bringing all the money to the deals. I’m kind of structuring the whole deal, making it work. So, I want my partners to put this in there, because if something does happen in the future, I don’t have to look stupid by going to them, knocking on their door and saying, “Hey, we need another $2,000 or $3,000 or whatever to fix this.”

We already have a good amount of money in there at that point. And every single month, we’re putting the cash flow into that bank account, which I’ll get to in a second. We’re just building and building that reserve. That’s how we do savvy real estate business, right?

So, the total investment on this property to purchase it on day one with everything included was $110,148. Again, if you watch my videos and you watch my break downs on the properties, this amount seems to be a common theme for single families. This is kind of standard for the deals in my local area.

The Monthly Payments

  • Mortgage Payment: $1,138.31
  • Property Tax: $197.58
  • Insurance: $90
  • Property Manager: $95
  • TOTAL: $1,520.89

Let’s get into the monthly payments, which is the most exciting and probably what you guys want to see the most.

The mortgage payment on this is $1,138.31. That’s calculated on a 3 percent interest rate amortized over 30 years. Again, a classic structure in Canada for investing properties.

Our property tax on this is $197.58. Insurance is 90 bucks per month. Our property manager is $95 a month.

Yes, every single property that we do is handed over to a property manager. Our job as real estate investors is to grow our business, find more money, find partners, find deals. We don’t want to spend our time managing properties, changing toilets, chasing tenants for rent.

You know, I started off doing that myself when I had one, two, three properties. I kind of did that, and I suggest that for you, as well. If you’re a new investor, just so you can learn how crappy it is to be a property manager, do it. Then, you’ll eventually pass it off and respect your property manager for that crappy work they have to do.

But you want to eventually spend most of your time growing your business. You are the CEO of your real estate investing business. Your job is to find more money and find more deals and grow this business. Don’t be stuck doing this kind of stuff.

The Monthly Cash Flow

  • Expenses: $1,520.89
  • Rent: $1,800
  • TOTAL CASH FLOW: $279.11

Total, our expenses per month are $1,520.89. Our monthly rent is $1,800, which leaves us with a cash flow of $279.11 per month. Not too bad! It’s actually a pretty good single family cash flow for my area.

But we’re not really gonna get rich on this. This is a long-term game for the single family property. So, that sleep at night fund I was talking about, every single month, we’re putting $279 in that reserve fund, just building that up.

And the way we structure our deals and my partnerships is we’re not drawing the cash flow every month. What are we going to do with $150 or so each every month? We’re not going to have a smashing party; we’re not going to retire on that.

We’re banking all of that money, growing that cash flow. And then, when we sell it—typically in three to five years for my partnerships—then, we’ll split all the cash flow 50/50, as well as the mortgage paydown and the appreciation (all the benefits of real estate investing).

That’s the break down. This property turned out really well. It’s now a great addition to our portfolio.

I hope you learned something!


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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.