My first duplex renovation and rental!

[Justin Klinghagen]

Thought I’d share some details of my summer project. My first of hopefully many real estate deals! I’ve been reading books, reading forums, going to meetups and listening to podcasts for probably the last 2 years and finally convinced myself to take action and give myself a bit of a challenge. I knew I was as prepared as I could be to jump in and just needed to do a deal to really learn, hopefully not losing all my money in the process. I definitely learned a ton and while this is by no means a home run deal it should do ok for me and my family.

The property is a side-by-side duplex in E St Paul right on the border with Maplewood. Built in 1960, each unit started with 2 beds, 1 bath on each side on the main level. 1 unit had a nearly finished full bathroom and framed in bedroom and living room in the basement. The other unit had just a toilet and sink in the basement but otherwise was a blank canvas.

Renovations upstairs included ripping out carpet and refinishing hardwoods, painting all walls and trim, new front and rear entry doors, new flooring in kitchens and bathrooms, adding exhaust fans to bathrooms, refinished the tubs, new vanities and toilets, painted kitchen cabinets and new laminate counters. I also replaced the fridge and range in one of the units and added dishwashers to both. In the basements I added a bedroom and bathroom to each so each unit is now a 3 bed 2 bath, each with a good sized living room downstairs as well. I also ended up having to replace both boilers.

I ended up hiring a general contractor to do the renovation. The renovation was scheduled to take about 6 weeks but ended up taking almost 20 weeks. Pretty ridiculous, I know. I was pretty careful upfront with screening my contractor (checking license, insurance, signing contract, researching online) but I basically just took the recommendation from an acquaintance and didn’t ask for any other referrals or work samples (my fault, not the acquaintance’s). I was impressed with his promptness, detailed bid and excellent communication upfront but all those things went out the window after a couple weeks. Honestly the work turned out ok for the most part but I’m definitely in the market for a new contractor….

Couple of things I’d do differently:

-Fire the contractor sooner and work harder to find a good one upfront

-Focus on properties with beds and baths upstairs. The basements turned out great but I didn’t get the value I was looking for which is going to make my next deal take longer to get to.

-For how much it cost me to paint the kitchen cabinets I think I’d just replace them next time. This would have allowed me to rearrange some stuff at the same time too so the kitchen flowed better.

Both units are now rented as of late August after quite a lengthy search, which I was surprised by given the hot summer season. This has been much more eventful than I thought it would be as well, especially given that I hired a property management company but I’m not scared away yet!

Any questions, let me know!

[Keith Linne]

@Justin Klinghagen Glad to hear you knocked out your first deal, and I appreciate your transparent feedback regarding the entire process!

The textbook definition of market value is "the amount for which something can be sold on a given market". As such, I've always struggled with how much power the appraisal process gives one individual (especially on FHA deals, as the first appraisal sticks with the property for something like 6 months).

I rehabbed properties full-time from 2011-2014, and we had our share of "discussions" with appraisers when properties were (what we deemed to be) under-valued. I got to the point where I provided 3-4 very accurate comps to every appraiser, prior to the appraisal process, so they knew I understood the market should valuation come up short - that step went a long way in preventing issues! Although you had some issues with the total value-add in your basement, I believe the extra beds/baths will be well worth it long-term in regards to commanding higher rents, better quality tenants, etc.

Sorry to hear about the terrible timeline you ended up enduring as well. I work full-time as a general contractor in the Twin Cities, and meeting timelines is top priority (and the focus of about 90% of our time/effort!). Unfortunately, there are many contractors out there who promise the world, and then come well short of expectations as construction progresses.

I couldn't agree with you more on the cabinetry side of things. With all of the RTA (ready to assemble) and box cabinet options out there, it almost always shakes out close to break even between painting existing and replacing the cabinets (assuming you use a good painting contractor who is finishing things to last). Plus, as you mentioned, you then enjoy the flexibility of improved layouts and updated hardware (soft-close, easier to adjust, etc).

I take a very similar approach to you - you have to get your feet wet before you can truly learn what works/doesn't work. I've had my share of both home runs and failures. As long as the wins outweigh the losses, it's all worth it.

Glad to hear everything is now fully rented, and I hope you are able to pickup your next property before long! If you ever have construction questions, etc, I'd be more than happy to grab coffee/lunch, or simply exchange emails.

Thanks again for sharing your experience!