How Much Rehab to Do on a Buy and Hold Rental

1 Reply

First year investor; I have one rental and two in rehab.  My two rehab projects have had pretty steep rehabs, because we have fixed everything up as if we have to pass inspections/codes to sell to anyone buying.  That means all wiring up to code, new plumbing, fixing just about every known defect in the house.  One house was a hoarder house and we pretty much stripped it down to the studs and redid everything but the furnace blower unit.  

That is OK for an A/B class flip - but I have started looking at some less expensive homes as cash flowing opportunities.  In the Pittsburgh market you can get a lot of house for a little money - but it seems that every house has issues such as old wiring, plugs without ground, dated plumbing, etc.  The thing about Pittsburgh is that nearly every house has a basement - and it seems like 95% of the basements have water issues.  (That's why I love the two I have in rehab now - slab houses, no basements.)

Here is my question - where do most Buy-And-Hold investors draw the line on rehab to rent? It seems that if we fix all these issues now, the return is greatly reduced, due to the rehab cost. When you fix electrical issues, plumbing issues and leaky basements, the average person walks in and does not see the money spent there, like they would on a new kitchen. Obviously any safety items or roof leaks etc. have to be fixed. But it seems like a dilemma - if you let some things go to reduce your up-front costs, then when you go to sell someday, you will either have to fix them on the back side or sell to an investor "as is".

Some renters would live with a small amount of water in the basement, especially in B or C class neighborhoods.  But go to sell that house, and the first time buyers might be scared, or any buyer not be able to get a loan because it might not pass inspection.  Do you have to have top notch wiring to rent - can people live with two prong outlets in bedrooms, for example?  What is common practice?

Advice?

@Brian L Dowler i am a local Pittsburgh investor, born and raised in the area.

Every rehab job i believe is its own project and often needs different work (obvious right?). What i am saying is that in this area houses often range from 15 to 100 years old. And that results in a number or different electrical and plumbing scenarios that could effect the rehab costs.

To get to your question i think with buy and hold properties you need to find the middle ground. I regularly replace all electrical devices and then depening on quality and type of wire you may be rewiring the property. Then all saftey concerns should be handle one for safety and two for your wallet. This will save you in the long run. Water in a basment in small amounts is pretty normal and often not an issues to Pittsburgh residents. Its never stoped myself or many others from buying a house. As long as its not a serious amount or a structural concern.

I could continue on and on about various little things, but if you have any questions feel free to reach out.

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