First Investment: How Much Should I Spend Remodeling/Improving?

Question

Hi BP Community!

A month ago I closed my first Duplex in Jacksonville, FL.

Total: $141,000

Cash: $27,000

But now, I'm very confused onto what to do next.

I'm needing to make some minor fixes to the property, mostly cosmetic, and am being advised to fully rehab the bathrooms as these bring great perceived value to the property appraiser.
Bathrooms are Ok, fully functional and spacious, but with an older 1990's look.

I bought at $50/sqft and with rehab and repairs costs it's going up to $60/sqft.

I'm looking to refi at around $75-$80/sqft and have an 8% cash on cash return once the property is rented.

My question is:  should I also include bathrooms in the rehab? Do these actually make a big difference when appraising a property?

Would love to learn from you!

Cassi Justiz · Answer

This is going to depend on your market comps. Look at what bathrooms in the other houses in your area look like. It can change your appraised value, but you will still only appraise as high as your highest comparable. If the norm in the area is for fully upgraded bathrooms then I say do it. If it's hit or miss or not common then I probably would just do basic cosmetic updates (paint, refinish *not replace* the counter tops and tub if needed, professionally clean the grout, etc).

Al Enrique Canall · Answer

@Jack Bobeck, will do.

Thank you.

Frank Geiger · Answer

1990's isn't too bad. You may be able to get away with some paint and finish work. You can save a bunch of money by doing it yourself. Hopefully, you worked a rehab into your numbers. Go off what the comps look like.

Al Enrique Canall · Answer

Thank you for your replies!

Very helpful.Will keep you posted!

Jack Bobeck · Answer

@Al Enrique Canall Sounds like you want to make a rental? Renters destroy everything, even the good ones wear the heck out of your stuff. If you are going to rent it out, get a property manager in there to look and make recommedations, I'd recommend Traditions Realty and ask for Sacha, he can help you so that you do not overspend on repairs.

Appraised value? Most appraisers are coming from outside the area and are going to compare your property to other similar sq ft. Ask Sacha about this as well. Spend as little as possible to rent out the units. People are desperate for good offerings and something renovated in the 1990s should be fine for more tenants.

Best of luck!

Sidney Qiu · Answer

I agree with Cassi. If the rental market is average, you really just need to bring the bathroom at par with other similar properties in the area. no more no less.

First Investment: How Much Should I Spend Remodeling/Improving?

Most Popular Reply