Flip rehab vs rental rehab

16 Replies

Do rentals need rehab the same way flips do? And if they do, is it usually the same degree of rehab?

That is a broad stroke question, and it really depends on what your goal is with the different type of investment. Sometimes rentals may need more rehab long term the more you change tenants. Flips can cost you next to nothing to well over $100k.

Money is not the issue when it comes to Real Estate my friend. You biggest investment is time. You can lose money and make it back. Once you lose time it is gone. My advice is to figure out how much time you want to invest in real estate. The rest will be just a number.

@Joshua Chen   I think this all depends on the specific market the rental is in.  If it is a higher end rental than you need to spend according to what your perspective tenants expect based on your market competitors.

Medium rzt hc 6483Michael Noto, SalCal Real Estate Connections | [email protected] | 860‑384‑7570 | https://www.zillow.com/profile/Mike-Noto/ | CT Agent # RES.0799665

I've never flipped a home, always bought and then rented out, but I think if had flipped any that I own, it would of cost more up front to rehab and flip v. rehab and rent.  I say this because you can sometimes get a home rent ready cheaper and quicker than you can to have it ready to sell, i.e, a renter may not care if you have new siding, carpet etc....  That said, it is all about location, market, timing and how much time, money and energy you are willing to invest (along with a certain amount of luck :) 

Good luck

That is a very broad question.  The answer really depends on your market though.  If you're flipping malibu you should do a high end finish.  If you're renting in Compton you could probably go builders grade 

So far we have have position ourselves for several rental flips...Our first set are coming due to sell in 6-18 months.

We put 8-15K into a rehab, we knew going into it the money needed to flip it was not there.  So now the comps are there.

I've read and heard to flip a house its $10K profit every 60 days you are holding.

We decided to rehab, rent, then sell.  Because it appears we will get about $30K on the sale after holding 2-3 years.  In the mean time we have cleared about $900 a month on the property. So we will make $$33K in rental income, plus another $30K on the sale in three years.  Of course there is a real risk in holding property for that long. But we try to inspect for major repairs, and we are properly insured.

I'm not familiar with your market or exactly what sorts of properties you're targeting, so I can share only my experience in my market. 

Mostly, I buy-and-hold as a rental. I fix up my rentals a little more nicely than the average landlord around here, but I also get top dollar because my houses are in great shape.  So I'm focusing on durability first, but it also must be visually and functionally appealing to a tenant. 

  • If cabinets are in good condition, they get a facelift: new hardware, paint, etc. 
  • If the cabinets are not so great, I replace with new, all-wood construction cabs.
  • New laminate counter tops
  • New appliances
  • Ideally, I tile all kitchens and baths.  My second choice is quality sheet vinyl.
  • Remove all carpet and refinish the hardwoods that are usually already there; or install new real hardwood.  I have a zero tolerance policy for carpeting.
  • I often replace old windows with new energy efficient units.
  • Fresh paint throughout--choose one wall color, one ceiling color and one trim color from the same brand and use it for every house.  You'll thank me later.
  • Replace outdated light fixtures
  • Take care of all obvious repair or maintenance issues.
  • Upgrade electrical panel if necessary--I don't mess around with electricity.
  • Service the HVAC system
  • If a house has only central heat but not AC, I install a new system.
  • I have a plumber go through the house thoroughly to make sure everything is in good condition; if it isn't, he fixes it.

There's more, I'm sure, but I'm blanking out.  LOL.

As for flips, I do much of the same; however, I'm more likely to replace the entire kitchen, maybe re-configuring the layout too.  Granite counters, tile floors, nice back splash feature, add can lights, stainless appliances, etc.  I'll fully update all baths--new everything.  I'll try to enlarge closets and upgrade laundry areas and such.  I'll do a nicer paint color scheme with higher grade paint and maybe accent walls and such.  I'll definitely update the exterior as well, like if it needs new siding and doors.  Landscaping will get the VIP treatment.  With a rental, I just make the landscaping/lawn easy to care for.  It's always a toss-up when it comes to upgrading electrical, plumbing, and HVAC systems because, while those are some of the first things I look at when considering an investment, most home buyers don't have the first clue.  Replacing them before listing the house, I think, is a waste of money--it's not going to increase your asking price (it should, but it won't).  Any problems will be discovered in the buyer's inspection period and can then be remedied through repair or negotiation.

There's a lot more to all of this, of course. However, the bottom line for me is this:  If I'm keeping it for a rental, I'm in for the long haul, so I want everything to function as smoothly as possible and be relatively low maintenance.  If I'm flipping, it has to look amazing first and foremost, but also have what buyers in that area are looking for.  

Hope this helps.

Medium logo 02   extra largeTerri Pour-Rastegar, Blue Sky Homes, LLC | 803‑517‑6579 | http://www.carolinabsh.com

Great post @Terri Pour-Rastegar .  That's the type of information new and old investors can take to the bank....:)  Thanks

Excellent post - @Terri Pour-Rastegar - great information for F&F or fix & hold investors!

certainly a broad stroke question but I agree with @brad 

@Brad McCulloch - all things aside, you'll want to spend less rehabbing a rental

Level of rehab for flips versus buy and hold is a very broad question, but to simplify I would suggest the following.

Flips

  • Open layout as much as cost will allow. That means opening up walls and in some cases putting in a header. 
  • Kitchen: New cabinets (but not at big box stores), New custom counters (granite or quarts), New floors and likely new or newer appliances.
  • Bathrooms: Cosmetic updates to total gut depending on how old they are.
  • New Carpet and Hardwoods as needed.
  • Interior and exterior painting as needed.
  • Landscape within budget

Buy and Holds

  • Don't open walls except where no header is required as needed.
  • Keep cabinets in kitchens and bathrooms unless damaged. Just update hardware and/or paint cabinets.
  • Updated counters with non-custom granite or corian for high end look without high end price.
  • Update carpets and use laminate hardwoods where appropriate.
  • Minimal paint and landscape.

I would suggest you really look at your competition to determine your level of rehab. If everyone else is doing the bare minimum and still getting GOOD tenants then I would just a really basic rehab. In my market however there's a ton of investors buying cheap houses for Section 8 tenants and these tenants are becoming picky. In order to command top dollar and get rented quickly I'm using nicer upgrades and better appliances then the lower end rehabbers. It also helps to increase my appraisal value when I refinance in 6 months and pull out equity. Hope this helps.

Originally posted by @Bob E. :

@Christian Hutchinson what neighborhoods are you investing in?

 @Bob E

Originally posted by @Bob E. :

@Christian Hutchinson what neighborhoods are you investing in?

 We are mainly doing solid working class areas.  Madison Heights, Sterling Heights, Clinton Twp Neighborhoods. Homes that run between 60K-110K.  They were purchases and beat up pretty good cosmetically, and maybe one major system needed repair.