Hey everyone, new to the area relatively, and this space as well and was wondering what thoughts you all had when it comes to rehabbing older properties. In my market many of the properties are pre war construction with plenty hovering around turn of the century, that said many of them have unfinished basements and a lot of original things such as walls and floors. My question then as someone who is getting into this space is would it make sense to try and rehab or remodel these things to get them into the modern age, or are they best left untouched. Obviously there is cost incurred when undertaking a rehab and you have to weigh that against your returns, as a buy and hold investor in a college town (Mankato) it seems to make sense to me to rehab this or at least get it up to snuff and let it appreciate so that I could take more out later, but at what point do you draw the line.
What common things do you like to renovate or fix up, and when do you call it quits.
Looking forward to reading the responses, thanks!
If it were me I would look at flips done in the past in that area. How much they sold for a d what improvements were made
if possible go look at similar houses for sale which have been fixed up. What did they do? What did they not do?
to me flipping is part science, part math part art and part luck.
I often question ok what could I have NOT done and the house still sold just as fast at the same price.
The barn door? What about just refinishing the cabinet doors instead of replacing. And it’s an ever moving target in my opinion. Based upon what others are doing as well as if it is a seller or buyers market
What you HAVE To do in a buyers market doesn’t need to be done if everything is flying off the shelves like it is now IMO
@Collin Lee Johnson hi Collin, I'm a local investor and agent and would be happy to connect and talk real estate! I am going based on the assumption that you're in business to make a profit, so if that's true, you just need to make sense of the numbers! Whether you're doing BRRRR or flipping, you need to make sure you're able to profit from the work you put into it! In this market, deals are hard to come by, but it can certainly still be done
If no one in the last 100 years has finished the basement there was probably a reason.......Usually they’re wet and have low ceilings.
There's a number of pitfalls with older homes, but I'm doing one now. Purchase 84k, 50k rehab, ARV 200ish. The numbers can work and inventory is so tight sometimes it doesn't have to be perfect to sell. I have limited knowledge of the Mankato market, but I looked through some recent sales and I might be worried about your ARV. I see some descent turn of the century properties that have closed recently between 150-200. What do you think you could purchase one for? You might be better off trying that 1960-1970s rambler unless you really know what you're doing. I think I have a blog post about purchasing older homes in cold climates if you want to check it out.
@Collin Lee Johnson - All of our properties are pre 1930 homes anywhere from SFR to 4-plex. I am consistently surprised by the rent increase with a moderate rehab (paint, fixtures, flooring, appliances, etc.). We are able to increase rents 25-35% with basic rehabs on buy and hold properties.
Now the aspect of this that is important is that, for us, there is only about a 15k swing between a light renovation as detailed above and a deeper renovation that includes all new plumbing, updated electrical, new HVAC, new kitchen and bathrooms, etc. What this means for a buy and hold investor is less calls for maintenance and fixes for 15k. We spend less than 100.00 a property on maintenance a year based on that type of deeper renovation. In all cases where we have tried to keep appliances, leave the old plumbing valves, etc. etc., we have ended up getting calls on those same items.
So the decision we make, and that I encourage you to make, is whether you will keep the property and manage it as a buy and hold or whether you will flip the property. That extra money necessary for successfully managing an older property is just not necessary for a successful flip.