Under Contract - Need Rehab Advice

10 Replies

I'm currently under contract (my first ever purchase) on a 2 unit + garden in Irving Park, hoping to close next week and would like to get the ball rolling on work ASAP to get the vacant units on the market by 10/1 ideally. The two legal units vacated 8/1 and I plan to do some work to both. Units 1 & 2, which are both 2br/1ba, previously rented for $1,450 and $1,300, respectively and I'm hoping with some TLC I can achieve $1,600+ for both - my broker thinks I can reach $1,800 - 1,900 but that seems a bit far fetched in this area, especially since I'll likely be listing them in October.  I'd like to know your thoughts on material/pricing/labor etc...

Unit 1: Needs minor work and has much better existing conditions compared to 2nd unit. Kitchen has granite counter tops and SS appliances already in-place. Cabinets are slightly banged up and would like to sand and repaint them white. The kitchen floor is currently a cheaper laminate tile and would like to swap out with luxury vinyl plank. Remainder of unit is in solid shape and just needs a fresh coat of paint. I'd like to know:

- New paint to entire unit: what colors are currently best suited to appease renters? Assuming any form of white or light grey paint would be safest but would like to confirm this. Also, what can I expect in labor costs for this type of work? Space is roughly 900 sf.

- New kitchen floor: seems like the consensus pick on this are luxury vinyl planks (due to durability and design) and I've seen several mention that Lumber Liquidators offers good selection/pricing. Does anyone here think otherwise in regard to material? Also, what can I expect in labor costs for this? Kitchen is 11' x 11'.

- Repaint kitchen cabinets. I'm considering doing this myself, however, cabinets seem to be a tricky subject. I have minimal experience with house work (minor paint and have installed LVT before but that's it...and it took forever) and would imagine it might just be worth it for a professional to take care of this quickly and correctly the first time. Thoughts?

Unit 2: Unit two will take up the bulk of my budget. The entire kitchen will be ripped out aside from potentially keeping the SS fridge, depending on whether or not I can find a solid appliance package. The kitchen measures 11' x 11', but there is a radiator along one wall which takes roughly 1' off, so let's assume 11' x 10'. I'd like to know:

- New paint: Same as above

- Kitchen Floor: Same as above

- Cabinets: What should my estimated costs be for material and labor? For white shaker, soft-close cabinets, I've been quoted anywhere from $2,300 - $3,300 for more or less the same products. Does this sound right? Want to make sure I'm not getting hosed since I'm new to this. Also, what costs can I expect to incur for cabinet install? I'm currently budgeting $1,500 for that alone (including the demo of existing kitchen).

- Counter tops: I have been quoted, in total, for design, material and install, just under $1,600 for white quartz counter tops which seems like a fair price to me. Thoughts? Also, any pros and cons when comparing granite to quartz? I hear quartz may be a bit more heat sensitive but granite can lose its seal quickly if not cleaned properly. What is recommended for a rental?

- Appliance: My first thought was to go to Craiglists and find a used appliance package, but I don't want to run the risk of buying faulty appliances that my tenant's will be calling be about after 2 days of living in the space. I'd much rather play it safe and fork up a little more to ensure my tenants are happy. Where are some places you recommend I look for reliable, SS appliances? Abt has some packages for ~$2.4k but I'd like to be under $2k for oven, fridge, dishwasher and microwave. Does that sound feasible?

Labor: This pertains to both units and is by far my biggest concern. I've reached out to my immediate network and all workers I know, or that my friends know, are currently swamped. Do you have anyone in your network that could take care of the mentioned at a reasonable price and complete it quickly?

Etc.. : As a first time investor, I'm sure there are things that I have left out here that I have not even considered. Do you have any "words of wisdom" or things I should also consider during the rehab process or simply the first couple weeks/months of becoming a landlord?

Thank you for reading this exhausting post - any feedback is appreciated!

@Jay Miller

I just added some cabinets and countertops to a kitchen in Florida. I did 6-1/2’ of basic over under with a basic granite. My costs were $1100 for cabinets, $650 for counters. I also had $1000 in electric for this. These numbers include labor on electric and counter, but I did cabinets myself.

This is all with no sinks and no corners, and does not include a backsplash.

1. Don't do kitchen cabinets by yourself unless you have plenty of experience. You will do a bad job, it will stick out like a sore thumb, and you will have to redo them, thereby blowing your October move in. Pay the money and get them done right by someone who specializes in painting kitchen cabinets.

2. Scratch the microwave from your appliance package unless you're doing built in. Spend extra on your stove vent -- you do not want grease and smells building up.

3. $1,600 for white quartz countertops? No. Something's wrong there. Too cheap. Also, Quartz WILL get burned/melted. The tenants won't care. Do granite and on your six-month walk through inspection re-seal the counter top then.

4. Floor -- What are your competitors doing? If they are doing select grade red oak, then you are doing select grade red oak. If they are doing less then you can get away with less. Personally, I go to the top of the line on fixtures like that, on the grounds that I can get higher rents, it's easier to raise rents, it's easier to sell when you want to sell, and the tenants will stay longer. They grow accustomed to nice oak floors and when they shop around rather than pay your rent increase, they will notice that the floors in your competition aren't as good, bite the bullet, and re-sign with you.

5. I skimp on the stove and splurge on the fridge and dishwasher. Usually the husband isn't cooking, so he's neutral on the stove. He does use the fridge, though, and he does use the dishwasher, so both spouses pay attention to those. Also, you can upgrade the stove after a few years if the tenants renew (an enticement). Again, they bite the bullet and re-sign.

It's not your expenses that kill you, it's you loss of income from vacancies.



I'm going through a lot of this on my first multi up north and best thing you can do is have your agent send a cma of .5 mile radius 2/1 rentals in the last year and gauge it from there on what you'll do on the rehab. Whatever the market dictates, keep your own taste/preferences out of it.

Ask your agent if he has any contractor connections. Having a good contractor(s) imo is easily the hardest part of the investor equation. If he doesn't have anyone, hang out at the Home Depot pro desk from 6-7am and get as many numbers as you can. 

@Jay Miller - Hey Jay, Congrats on the deal! 

Homewyse.com is a good resource to get good numbers for renovation costs in your area. The Thumbtack.com app is a good way to find local contractors with customer reviews for just about anything. I just had success in the Seattle area with a countertop fabricator and installer when my usual guy was too busy. 

Get a decent cost that works for you from Homewise and tell the contractor that's your budget. Pay for the materials and up to half the labor upfront and the balance when you're happy with the work.

Going in confidently with a price and a structure will really help things go smoothly for you.

Good Luck!

@Jay Miller - Congrats on your first purchase!  You bought in a great area and no matter what will be a good long term investment.

A lot to unpack there from your post, but I can offer some help. Sounds like you need a good GC to walk the property and help you finalize your scope of work and price.

I can recommend a couple of great GCs that would be interested in your project.  PM me and we can discuss.

@Jay Miller - Hey congrats on the first purchase!

I my self just recently joined BP recently hoping to get into real estate investing.

However, as of right now i'm attending college and working part-time for a custom cabinetry company for the past 4 years. So Ill try to provide you some insight into your cabinet dilemma. 

1) First, as mentioned earlier I do not recommend you try to refinish your cabinets yourself. Unless, you have the time, patience and proper tools to do so. With that said if you do decide to tackle this project yourself feel free to reach out to me and ask me more questions.

2) Second, as far as the quotes for the replacements i'm assuming these are priced for China made cabinets, and therefore i'm uncertain of the quotes accuracy (As I only make custom cabinets) but they seem to be to awfully inaccurate. However, some of the reviews i've heard from other fellow contractors on china made cabinets have been mixed but it seems to be a general consensus not to go with the cheapest cabinets.

Again, feel free to pm me and send me pictures of the kitchen and id be happy to discuss further in detail to help you out.  You can also check out specialtywoodworking.com (the company I work for) to check out some of the work I've contributed to. 

Originally posted by @Kris L. :

@Jay Miller

I just added some cabinets and countertops to a kitchen in Florida. I did 6-1/2’ of basic over under with a basic granite. My costs were $1100 for cabinets, $650 for counters. I also had $1000 in electric for this. These numbers include labor on electric and counter, but I did cabinets myself.

This is all with no sinks and no corners, and does not include a backsplash.

Got it - thanks for the insight. Did not account for electric so I'll be sure to plug that in to budget as well.

 

Originally posted by @John Clark :

1. Don't do kitchen cabinets by yourself unless you have plenty of experience. You will do a bad job, it will stick out like a sore thumb, and you will have to redo them, thereby blowing your October move in. Pay the money and get them done right by someone who specializes in painting kitchen cabinets.

2. Scratch the microwave from your appliance package unless you're doing built in. Spend extra on your stove vent -- you do not want grease and smells building up.

3. $1,600 for white quartz countertops? No. Something's wrong there. Too cheap. Also, Quartz WILL get burned/melted. The tenants won't care. Do granite and on your six-month walk through inspection re-seal the counter top then.

4. Floor -- What are your competitors doing? If they are doing select grade red oak, then you are doing select grade red oak. If they are doing less then you can get away with less. Personally, I go to the top of the line on fixtures like that, on the grounds that I can get higher rents, it's easier to raise rents, it's easier to sell when you want to sell, and the tenants will stay longer. They grow accustomed to nice oak floors and when they shop around rather than pay your rent increase, they will notice that the floors in your competition aren't as good, bite the bullet, and re-sign with you.

5. I skimp on the stove and splurge on the fridge and dishwasher. Usually the husband isn't cooking, so he's neutral on the stove. He does use the fridge, though, and he does use the dishwasher, so both spouses pay attention to those. Also, you can upgrade the stove after a few years if the tenants renew (an enticement). Again, they bite the bullet and re-sign.

It's not your expenses that kill you, it's you loss of income from vacancies.

Thanks for the input, John! I'll be sure to keep all of this in mind. My biggest focus is being able to retain tenants, because as you mentioned, downtime between tenants will prove to be my biggest expense. As for the counter tops, I received the referral from a friend who had a kitchen done with similar dimensions at this quoted price. The work turned out great and was completed quickly. Appears to be a great find based on everyone's feedback here. The granite they had was priced similarly so I might go that route per your guidance.

 

@John Clark

This was my first attempt with cabinets. It was a as simple a setup as I can imagine. I needed to reset 2 of my bottoms, and probably wasn’t all that quick about it, but I got all 6 units in in 2 4 hour days, minus the hardware and they looks as good as the previously existing cabinets. Maybe I just got lucky.