New to Real Estate · North Texas · Member since 2023 · 4 posts · 2 votes
My son and I are going to buy a property that he will live in for a year while we prep it to be a rental. We're looking for something off-market that is liveable but needs work. What are the things we should prioritize for rehab that will give us the most forced appreciation?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
3y
@Bart Blair I see you have some comments above but the answer is really dependent on what the comps are for that neighborhood. Usually when we are buying an "off market" property that fits the BRRRR method it's the numbers that are of importance - not the location. Sometimes you property might be on one side of the town or the other. Now, usually we are targeting properties that rent well (sub-$300k in most markets) and most of the properties in that type of a neighborhood aren't going to demand quartz counter tops. But some neighborhoods might demand different things though.
Here's some examples of what I mean:
- Enclosing a garage - if the similar properties in a neighborhood have them, then yes, run the numbers and see if it makes sense. But if you are the only property with an enclosed garage and all of your comps have garages...you may actually HURT your ARV.
- Granite Countertops - same thing here. If your comps have 'em, you better have 'em too if you want that value. If they don't, then no need to spend the extra money.
This can go for adding bedrooms, baths, pools, decks, etc. You should not OVER IMPROVE your property based on the neighborhood nor should you UNDER IMPROVE it either.
I hope all of that makes sense. Feel free to ask anything else if you need. Thanks!
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
3y
With a reno timeline of a year, the ideal thing is to buy something that is BARELY habitable. Weathertight, but maybe something abandoned mid-renovation because the owner was forced to sell for one reason or another. A hoarder house the former occupant or others can't bear to clean out and put on the retail market, so they let it go as a pocket listing for an agent who is a family friend. Serial-cat-adoption homes, reeking of urine. That's where you would really make your money on a buy like that.
The easiest way for an appraiser to quantify the amount of money that has been spent in a renovation is to spend it on the kitchen and the bathroom(s). Especially if you can switch the position of a big, old-fashioned dining room and a tiny little utilitarian kitchen. Move a non load-bearing wall to shrink a secondary bedroom a bit in order to make a main bathroom bigger and more ornate.
One exception to the kitchens-and-bathrooms rule is to create a walk-in closet for the main bedroom. Another (at least in my area) is to finish an attic with a closet and thereby add an extra bedroom. You're looking for stuff that can be put down on paper and quantified, so it can be easily compared numerically to other, similar houses, or to the information available on the property before you started to renovate it.
Real Estate Agent · Wilmington, NC · Member since 2021 · 166 posts · 116 votes
3y
Easily the most important are the kitchen and bathrooms. Look on Zillow for how the highest sold comps in the area were finished, try to keep yours on par with something similar or better. I think it goes without saying that increasing SF if possible in an unfinished area would be a huge value-add as well, but also depends on the subject property and what is already there. In my area a lot of people will add a 1/2 bath and bigger closets to some of the old and smaller historic houses, which is what gets them more money from buyers here.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
3y
@Bart Blair I see you have some comments above but the answer is really dependent on what the comps are for that neighborhood. Usually when we are buying an "off market" property that fits the BRRRR method it's the numbers that are of importance - not the location. Sometimes you property might be on one side of the town or the other. Now, usually we are targeting properties that rent well (sub-$300k in most markets) and most of the properties in that type of a neighborhood aren't going to demand quartz counter tops. But some neighborhoods might demand different things though.
Here's some examples of what I mean:
- Enclosing a garage - if the similar properties in a neighborhood have them, then yes, run the numbers and see if it makes sense. But if you are the only property with an enclosed garage and all of your comps have garages...you may actually HURT your ARV.
- Granite Countertops - same thing here. If your comps have 'em, you better have 'em too if you want that value. If they don't, then no need to spend the extra money.
This can go for adding bedrooms, baths, pools, decks, etc. You should not OVER IMPROVE your property based on the neighborhood nor should you UNDER IMPROVE it either.
I hope all of that makes sense. Feel free to ask anything else if you need. Thanks!
That's really helpful. You mention enclosing a garage, which reminds me of a property I recently looked at that did not have a garage at all. Nor did it have a paved driveway. The area is notorious for hailstorms and I wondered if paving the driveway and building a carport. What do you think?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
3y
@Bart Blair same thing here - consult your comparable properties - your comps. Sometimes building a carport will provide no value, and sometimes it will. A paved driveway is a requirement in most neighborhoods but out in the country not so much. Whatever your comparable properties show, that's what you need to factor in...at least, if you want the value of those comparable properties. The less similar your property is to the comps the more risk you are taking with the future appraised value. That's the truth on it.