Rehab dilemma - keep it simple, or do it right at the get go

12 Replies

I'm sure I will one day regret all the "stupid" and embarrassing questions I am asking online right now - but for now the help is appreciated, so here goes:

I have a small single family property that I just purchased. It's a 140 year old row home. 960 sq.ft. In decent condition - but the last tenants were disgusting. They managed to infest the building with bugs, destroy walls, urinate everywhere, and generally leave the place looking and smelling like a total POS.

When I was buying it, I went through, generated a scope of work that would result in a clean, simple, functional and cute home. I had a LOT of contractors come bid on it, and selected one to do the work for $5000, plus materials. I will still need to do some painting, and minor projects myself after this, but it would get me the repairs and upgrades that I need - electric (outside wiring, 220 for dryer, GFCIs, new 3-ways, etc), window/door capping outside, new hardwood floors installed throughout, demo, new bathroom - floor, joist repair, tiling, vanity, toilet, lights, etc.

The problem is, once I started opening things up, I saw that the "filth" from the previous tenants had infiltrated the ceiling space between the upstairs and downstairs - I'm removing a small section of ceiling to repair a minor leak and fix a couple of joists. On seeing this, my initial reaction is now to want to keep ripping it open. If I were to live in this house, I would not want all this grime and grit in the home - even if it were inside of walls and other cavities. I do understand that this will increase the time and cost of the rehab, but, perhaps naively, I want to do things right the first time. 

Does anyone reading this have experience with older homes? Have you had to decide between covering up surface issues, or fully removing older materials to get the old funk out of a building.

I know it is going to be way cheaper for me to just keep things as it is - new paint and a small bit of patching and the walls and ceilings will look just fine (I plan to rent this between $1000 and $1200 for a 2-bed, 1-bath SFR with a great little yard). However, I plan to hold this for 10+ years, as the neighborhood is trending in a very positive direction, and rents are bounding upwards, as are property values. Does it make more sense to throw down some extra money up front and just "reset" the property to a clean and mostly new state? If I do that, am I risking encountering a world of problems behind the walls? ...If I don't am I risking encountering ongoing problems with a property that has many old features?

Thanks for your help with this dilemma...

Hey Alex - I have limited experience in rehabbing myself, but for what it's worth, I'd say get it done right the first time, especially if you are expecting to keep the house for the long term. I know people that only buy rentals built after 1970 or 80 to keep maintenance costs down. So I would imagine your maintenance costs on a 100+ yr old home are going to be higher. Tearing out floors, ceilings, or walls and removing junk while tenants are occupying the place is going to be a hassle. You could perhaps do the work during a vacancy later too, but you risk the smell or grime seeping through in areas and getting complaints from the tenants. It's a gamble, I guess. I think you need to weigh the anticipated future maintenance costs vs. the current repair costs.

Now if you're flipping the property - that could be a different story...

@Chris Zwakenberg   - thanks for the response. Most of the similar homes on the street are going through flips right now. That seems to be the preferred strategy for many of the investors in the neighborhood. In almost all of these, the homes are being fully gutted down to the studs.

I do a lot of rehabs on 100+ homes. I would suggest doing things right the first time will save you trouble and headaches later. 

You will encounter a lot of unforeseen problems but if you can afford it now it will save you time and money in the long run. What ever you think it will cost or the time duble it. 

@Peter MacKercher   - thanks. I've definitely seen a lot of folks on here saying to double your estimates for rehab costs. Given that you have done a lot of these older homes already, is that really the math that you would want to use? If so, my decision may be being made for me anyway, as I do not have a big pool of resources to support doubling of a budget.

@Alex M. Thats understandable do what you can with what you have but don't break the bank. 

If it's not something that will cause the home to deteriorate or make it unsavory, I'd patch it up for know and save up the cash flow to fund future work. My first rental property has gone like that, I did a ton of repairs and upgrades and then rented it. After a year the first tenants moved out, I'd saved the positive cash flow from that year and with a bit of my own money redid the bathrooms. Then the next year those people moved out and I used that cash flow to finish more of the basement. I look at it like the property is a little machine and in the begining it'll need to repair itself so it'll run a longtime later.

just my 2 cents, I'm still trying to figure all this out as well

@Alex M.   I agree with what everyone has been saying about doing it right the first time but keep in mind that this will be a rental unit. You probably don't want to make everything brand new and shiny since we know that renters don't always take care of your property as well as you would. Just something to consider.

I try to avoid the older homes like that. But you really run the risk of hitting some significant costs when you start opening up walls to "clean" whats in there. Technically, most villages require that once you pull down a sizable chunk of drywall in a room(30% or more of the room), you have to update EVERYTHING in that room (i.e. electrical, plumbing, ductwork maybe).  That could be one very expensive cleaning.  

If you think there are some mold issues in there, then I would do it now. If its just dirt and soot or something from age, then I would leave well enough alone unless you're ok with having to rewire and/or re-plumb entire rooms or the entire home.

But that could be one HUGE rehab. And considering it looks like your initial budget was 5k, I'm not sure how much you're going to want to see your budget go to 25k.

Again, if its just one or two rooms, then maybe it makes sense. But if you're talking about opening up drywall throughout the house, I'd be cautious. Because if you do, most villages will require you to update EVERYTHING in those rooms......

@Alex M. From your post it seems as if you're looking for an excuse to "do it right".

Couple of quick points, although I've been doing this for a while, I still haven't done the 100 or 500 or 10000 houses that many on BP brag about (if you can believe them).

1. Clean the freekin' thing, now! $5 or $10/hour guys with tyvek suits, hepas vacs and chlorox make a big difference. Like taking your car to a carwash and cleaning it before you go to a mechanic, they'll think, if Alex takes care of his car/house then I will. (or flossing before going to a dentist;-)

2. Anytime I used to try and cover something up it surfaced at the worst possible moment.

3. You've got limited funds like the rest of us, use them judiciously, repair and upgrade in phases. Like @David Cline suggests

4. @Alexander Merritt that's right it's a rental. Once I decided not to sell a house in Boston that I rehabbed and rent it. After 2 years the tenants moved out and I couldn't believe the "wear and tear" I had to work on. Rehab For Sale and rehab For Rent are very different, you could go to Open Houses and call your rentals competition to see what you're up against.

PS You could also find where your former Tenants moved and bring them some of the things they left behind...

@Alex M.  Hey Alex, I'm new to the site and relatively new to RE Investing having only completed one rental rehab and working on my second currently.   What I'm going to say only applies if you have or will pull a permit for your repairs.  If not then disregard what I say below.  

Something that I'm running into now that you should also consider is the local building codes (If you are pulling a permit for your rehab).  I don't know exactly where your property is located, but I'm working on a property out in Chester County right now and dealing with the building code and inspector my # 1 hassle and # 1 cost.  The township I'm working in requires that If I pull any wall down, I have to put in fire blocking in every soffit/joist in that wall before replacing the drywall.  I have several old plaster walls that are cracked, warped and have holes and old stick on brick and tile.  I want to pull all of these down and put new drywall up but my contractor reminded me that it will add a couple hrs of labor and material for each section of wall I pull down just to put in fireblocking.  

Also another code issue in my area is that if you touch more than 50% of the house then it becomes a "whole house" remodel which then negates any grandfathered things that are not up to code.  Which basically means the inspector may require you to update everything in the house to current code which in some cases is virtually impossible or may cost signifant money that you weren't planning to spend.  In any case, good luck with the rehab

On the bright side, you never know what kinds of treasures you may find behind those walls or under those floors. When I lived in Pittsburgh years ago I read an article in the Post-Gazette about a couple who had bought a rundown house that was 150+ years old. During the rehab, they uncovered some early American artifacts that fetched quite a lot of money at auction.

@Alex M.  Once you open it up, you will be required (depending on where you live) to upgrade everything: electrical, insulation,etc. It's a lot of work and cost to rehab a 140 yr old house but your instincts are right and I applaud your desire to do a good job. 

One thing in your favor is that it's a small house. Is it "Historic"?  Though it's true that a rehab to rental is generally different, in this case I'd say try to make it look as original and authentic as you can (trim, flooring,etc).  Many people love living in older houses and if it's fixed up nicely, it could bring very good rent.

Good luck with it!

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