Hi all, I just purchased my first SFR in South Bend a few days before the new year meeting my goal of purchasing my first investment property prior to the new year! I am very excited and hope I don't screw it up from here on out. Wanted to get some advice from the community.
It's a small home at bout 800 sqft with 2 bedrooms (10 x 10 each), 1 full bath, common room, kitchen, laundry area next to kitchen. Do not need to do gut rehab or replace anything major likely electrical, HVAC, water heater, roof, etc. The rehab quote I got is as following:
|Caulk/paint white area around cabinets||$250.00|
|Sand/Finish existing cabs||$150.00|
|Tile backsplash above existing cabinets||$300.00|
|Stainless Vent Fan above range||$300.00|
|30”x12” over range oak wall cabinet||$200.00|
|12”x30” oak wall cab||$200.00|
|New cabinet handles||$150.00|
|Remove mirror, repair holes, repaint walls and trim.||$350.00|
|Caulk all trim and corners, fill holes in wall, paint.||$500.00|
|New vanity, sink, faucet & drain.||$950.00|
|New mirror, approx. 28x42||$150.00|
|Scrub tub, surround, remove and soak faucet and handles in vinegar, re-caulk tub.||$250.00|
|New Shower Curtain and Bar||$125.00|
|New towel holders (3 piece set)||$175.00|
|New floor mats||$75.00|
|Paint ceilings and walls flat, trim semi-gloss||$450.00 per room|
Since fixing up the cabinet vs replacing is not much of a cost difference I'm leaning towards just getting new ones. Are these numbers reasonable?
On a separate note I have just setup a LLC and looking to get other investors to invest with me. For others who have this setup how have you guys setup the distribution in regards to finders fees, monthly percentage cut for yourself, and distribution of profits? In the beginning do you distribute the left over profit or use it to grow more?
Thank you and any help is appreciated!!
Be very careful hiring contractors, it is the hardest part of this business. I would advise getting estimates from several contractors and check their references. Put together a scope of work with payment timelines, never pay them up front!
Also, be careful of hiring unlicensed contractors, in some states its illegal. Here in Arizona, if you pay an unlicensed contractor over $1000 for work on a property that you are going to resell or rent it is contracting without a license (The contractor and you) which is a class 1 misdemeanor with up to six months in jail and a minimum $1000 fine for a first offense. Good luck.
@Vishal Didwania Congratulations on your first purchase and welcome to the world of South Bend. I agree with the comment above about hiring sub contractors or handymen. That is especially true in this market. I have seen first hand out of state investors lose a lot of money by not using appropriate labor. If you need any referrals please contact me privately and I would be happy to help. Congrats again. What a great way to start the year!
@Vishal Didwania congrats on your purchase! I don't know which part of the market you are in, but I would highly encourage you not to "over improve" in South Bend. Coming from Chicago, where it doesn't feel possible to over improve, I had trouble initially with this. I wanted my units to all look outstanding, but I didn't realize that the rental standard in South Bend is quite a bit lower (as are the rents for that matter).
If you don't have to replace cabinets, vanities, etc I would highly encourage you to leave them in place, at least for one tenant cycle. Also, have you selected your management company yet? I learned the hard way the importance of property management in out of state investments!
@Matt Shields - that's good advice. I've heard that before but it definitely wasn't on my list of things to double check. Thank you.
@Stephen Sokolow - thank you. that's is one of my biggest fears being out of state investor with my first purchase. I will definitely reach out to you if I have any questions.
@John Warren - figuring out what to rehab and not is very challenging. I've read horror stories of people going overboard and trying to make it into a place that they would like to live instead of what good for the local rental market. Thank you for your thoughts!
Wish me luck!
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