Why is it that almost every distressed property requires a great deal of “undoing?” Is it because so many people have bad taste? Perhaps. I think in a lot of cases it seems like bad taste, but in reality it’s simply the fact that the property is outdated.
I don’t know about your market, but we sure seem to buy a lot of properties with really bad wallpaper, carpet, counters, fixtures, etc. In many cases, the property simply hadn’t been updated since it was built, but in other cases, you’ve got owners that really thought “Pepto Bismol Pink” looked good in the dining room.
Lucikly, most of these cosmetic items are easily fixed or replaced. But what do you do when the previous homeowner took it a step further and decided to finish out the garage or build that water heater closet off the back of the house (yes, the picture is from a house I just purchased)? We are constantly finding ourselves in a position where the decision has to be made whether or not to keep the previous homeowner’s handywork.
I suppose there really isn’t a straight forward answer to this question as there are varying severities when it comes to inheriting somebody else’s home project. However, in many cases, the decision is based upon your plan for the property.
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For example, I purchased a property about a year ago where the previous homeowner had turned one of the garage bays into a finished room. However, true to form for many do-it-yourself foreclosees, the previous owner left the garage door in place and built a wall about a foot inside the door. Even better was the fact that he left the garage door rails in place …. sticking right through the middle of his sheetrock. You get the picture.
Where most investors would automatically spend the dollars to tear all of this down and start over, I knew I was going to rent the property and decided to leave it up until my plans changed. As anticipated, it didn’t stop the property from renting and it didn’t cost me a dime in the meantime. Fast forward to this month, my tenant has just moved out and I’ve decided to retail the property. Knowing that a potential homeowner would be turned off by the not-so-fine craftsmanship of the previous homeowner, I decided it made sense to spend the money to put the garage back together.
In addition to this, I felt like retailing this property also warranted a few other updates and upgrades. In addition to fixing the garage, I replaced the carpet, updated the backsplash, updated bathroom counters, mirrors, fixtures, etc. It wasn’t a drastic amount of changes, but it will make a huge difference to a potential buyer.
The point being that a retail buyer expects a property to be up to date and tastefully put together. A renter doesn’t necessarily expect this to be the case in all aspects of a property. It’s important for an investor to choose wisely where and how to spend money “undoing” the mess inherited from the previous homeowner. Who knows, you may decide polka dot wallpaper doesn’t look so bad when you discover your tenant base doesn’t care one way or the other.