I am soon to close on my first deal - a 2800 sf legal two-family home in the City of Poughkeepsie, NY. The basics:
Build in 1910
3 BR 1 bath in each unit
hardwood floors are OK, need to be refinished but definitely usable
31 exterior windows
front and back door access into stairwell/foyer
needs full electrical upgrade (still has fuse box)
needs full plumbing installed
needs full hvac system
doing all carpentry and renovations myself aside from electrical (may end up hiring out plumbing too if the inspector will not let my Professional Engineer father-in-law certify my work)
I'm reading all that I can on BP to learn about what level of quality I should use in my purchases and renovations, but is there anything you wish someone told you when YOU began fixing up an old home you were going to rent out?
Thanks in advance!
The most important thing to remember is that everything you do needs to be justified by the economics.
Do not get carried away and try to make this into the Taj.
For every dollar you spend, you need to consider the marginal return. In our business, where we either sell or refi the properties post completion, we use a simple GRM test:
- We want to be all in for something like 10x annual rent (10x GRM)
- So, if we are considering spending $5,000 for something (say, adding a bathroom), it needs to increase the rent by $500 / year or more (ideally more!).
Obviously, things like re-wiring don't add much, if anything, to the rent. So, the more cosmetic improvements (like adding washer / dryer or putting in hardwood) need to be MORE accretive (eg need to come in at, say, 5x GRM or something).
Bottom line: Unless it's a major system (like roof, electric, etc.), do not spend money on anything that won't directly increase the rent.
Originally posted by @Devin Berrian :
.... but is there anything you wish someone told you when YOU began fixing up an old home you were going to rent out?
Thanks in advance!
Just this: once you get it fixed, NEVER agree to let a tenant paint :)
You are probably getting a house with little to no insulation in the walls and upper level ceilings. So plan to insulate. From that time period, you might have balloon framing. That could make it easier to run new wiring - but run wiring before insulating.
Old plumbing must go - whether is is lead or galvanized. And cast iron waste lines might be in need of replacement as well, especially if the units have been vacant for more than a couple of months.
@devin Bettina congrats on your first deal! Hopefully there will be many more to come.
I purchased a 2 family in 2013. In a great area. I ended up gutting to the studs with the exception of hardwood floors. When I bought it it was getting 1200 per month per unit. I had tenants before I finished the project and rent for 2200 per unit. I did do which I recommend if you are taking out walls, the spray foam insulation. The tenants gas bill in the winter in New England is under 150 per month.
I did do high-end finishes Granite air-conditioning central washer dryer. Walk in closets etc. if you are in a nice area I recommend doing it right and you will only have to do it once with very little maintenance. Keep us posted.
edit Devin berrian
I'm certain you should insulate, but I'm not so certain you should do spray foam. It costs more than double what other insulation methods cost. And if the house is balloon framed, you can do blown in insulation into relatively small holes near the top of each wall cavity, rather than demo'ing entire wall (plaster and lath demo is a lot of work and a lot of mess too). Not my call of course ...
Man, this sounds like a big project, but the fact that you're going to rent it out when you're done is awesome. I'll be following this, @Devin Berrian . Will you be posting your numbers at all? Best of luck to you!
Old house like that you cant go wrong with brick
-Think about how you split the water bill, or reflect it in your rent
-Think about how will you take care of clearing the snow to the house, and grass in the summer. Reflect it in rent if you have to
- Know your target market, look for tenants that fit that market and rehab to that market... This will help you decide how much cosmetic work really matters..
-Find tenants that will get along
- carpet the bedrooms if it is an upstairs/downstairs duplex.. tenants hate the late night creaks without carpet in bedrooms
-Dont go cheap on plumbing, toilets, and bathtubs its well worth the cost.
Best of luck
That's Great!! Congrats👍
I just love the 1900s style architecture especially small Multi Family's.
A house built in 1910 probably has lead paint. You need a EPA course on renovation rules to avoid federal law problems.
Also comes up when selling and need to check a box if all repairs done per lead paint law.
Thanks everyone. I will keep you updated and I'm sure I'll come up with a ton more questions. The closing was delayed due to some back taxes found during the title search, but I'm scheduled now to close on July 24th.
Listed price: $37,900
Accepted offer: $23,500
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