This will be my first step into the investment realm. I have recently inherited an older home that I want to make some fixes to and rent out. There is no mortgage. The house is older and needs new roof, furnace, electrical, plumbing, flooring, windows and a basic landscape job. My problem is I don't know how to figure out what will be reasonable to invest in it to still make a profitable cash flow. In my area I can rent it for $600 to $700. I have capital to work with and don't need to get a loan to fix it. Any thoughts on this would really help.
Find the nearest Real Estate Investors Association (REIA) and network to find out some reputable contractors who do rehabs for investors. Get 3 bids (you may want to start with one and get a list of work items, then get the other two to estimate the same work - don't share pricing!) and select the one with the best reputation with a reasonable price (not always the lowest).
Rather than spend your capital, consider to do a HELOC or cash-out refinance to fund your rehab and put any excess plus your own capital into additional properties if you want to do more of this.
I hadn't thought of a HELOC, I guess I would need my capital for a reserve. Thanks for the info on contractors. One more thing I need to build a list of contacts for. This is a huge learning curve. I feel like I am coming into a class late and am cramming to prepare for the first test.
Rental property is largely about structure repair/maintenance and people management.
The job of a tenant is to pay for and take care of your investment house. If they fail in either job, they've got to go, now, like moldy fruit or stinky fish.
As for the structural part, you can learn a lot about what repair, how to get it repaired and how to deal with handymen and contractors. Start with 'Fixer' Jay Decima. He's not young (well into his 70's) and has had over 200 properties that I know of.
Much of smooth property management is really about having consistent policies and good systems.
Many people don't have the stomach for dealing directly with tenants. If this is so, a property manager is a good solution for all these. The challenge, of course, is how to find, work with and manage a good property manager.
Mary, maybe you could sell it in its current condition then use the money to buy a duplex or a few single family homes that don't need so much work. A free house that needs a lot of work with positive cash flow of $700 might not be the best use of that equity.
Rick, all good thoughts and I appreciate them all. You have also given me more to look up and more reading, I will defiantly look into Jay Decima, he sounds like I could learn a lot from him. I don't see dealing with people as a problem for me but I guess time will tell about that. I will look into property management especially since I am new and have a lot to learn. Thanks for your comments, they help.
Glenn, I hadn't thought of selling. Looking at all my options is a good idea. I am still learning to run the numbers so I need to speed that up so I can be more knowledgeable in the choice I make.
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