I have a friend who recently bought his first rental property in a fairly rough neighborhood in Atlanta. He has no experience and jumped right into the thick of things without much advice from anybody else. After he bought the property, he was instantly faced with the question, “How do I go about renovating this property and making it marketable to renters?”
I would imagine there are a number of new or aspiring investors who could benefit from a simple plan of action when it comes to renovating their first rental property. Here is a very basic strategy for assessing and executing the renovation of a rental property.
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
Secure the Building
The very first order of business in your rehab is securing the house with new locks throughout. This means either personally changing the locks or calling a locksmith to make sure the building is fully secured. In some cases you will need to make a temporary decision to deal with windows and doors that do not secure by having them boarded up or blocked off until you can change them out. You want to make sure you are securing the property well enough so that vandals cannot get their hands on anything inside the building. If you do not take the time to check and double check the security locks on the home, then vandalism, either by actual damage or stealing fixtures, appliances, or even AC units, could leave you with far more work than you had originally intended.
You should also make sure that you get the electricity turned on right away and leave (or add) exterior lighting on at the property. This might mean replacing some bulbs or purchasing a few floodlights to keep the area well lit. You may also consider leaving a light or two on in the interior to make it look like someone is there.
Work With Local Authorities
If you feel you’ve bought a property in a rough neighborhood, you may want to contact the local authorities and tell them that you have purchased the property and are currently renovating. Ask them if they could have police patrols on the lookout when in the neighborhood. They will likely be very happy that you are renovating a property in the neighborhood and will be fine with keeping an eye on things for you.
Create a Game Plan
Having a scheduled game plan that makes sense is always a good idea before starting the rehab. For instance, you don’t want to replace the flooring before repairing the walls or ceilings. Take some time to consider the property and what needs to be done. Make a list and then order it, starting with major systems such as electrical, HVAC and plumbing. The cosmetic items, such as paint or new lighting fixtures, should come last.
Also, be sure to take a close look at the roof to make sure you don’t have any potential water leaks that could damage the work you are doing on the inside.
Remove Initial Debris
It is vital that you make sure that you start by removing any loose debris that lies in the yard and around the house. For one, the neighbors will be pleased to see you are cleaning up the property, but you also want to comply with local codes. The last thing you need is to have any kind of code enforcement citations coming at you when you are just getting to know the property. Do not worry about any major renovations on the landscaping or exterior until you have tackled the interior changes.
Start the Interior
It is recommended to start all of the interior work first, unless you have some leaks that need to be fixed before getting started. One reason for this is that you want to utilize your budget on the inside where people will be living before tackling the overall curb appeal. While you might have a rough idea of the costs, you never know what you will find in a building until you start the work.
Windows and Doors
Take a really good look at the current condition of all of the windows and doors on the property. You may need to order new items, and that will take a number of weeks or more for delivery. Getting that taken care of right away will keep your renovation timeline and budget on track.
Hide the Work
Again, if you happen to be in a rougher neighborhood, putting up fabric or sheets of butcher paper over the windows will distract those on the outside from being able to see what you are doing on the inside. Make sure that you keep your work under wraps while you are taking care of it. Keeping the outside world from peering in discourages unwanted advice, as well as vandals or thieves from breaking in. You do not want those brand new light fixtures to go missing.
Remove Interior Debris
You cannot start renovating if there is junk all over the house. Cleanup and demolition can all take place the same day, but demo cannot start until the house is empty. This will make for a safer work environment. Once the junk is gone, you will have a better look at the exact demolition that needs to be done. Also, be sure to have a plan for junk removal, rather than piling it in the front yard. If the property requires a great deal trash and demolition to tackle, it is best to rent a “roll off” trash dumpster that can be dropped off in the morning and picked up that night or the next day.
Begin Repair Work
The next phase of your rehab is to locate the major systems that need work. Be sure to hire licensed electricians, plumbers, HVAC contractors, etc. to evaluate the entire property and make needed repairs to these systems. Also, if installing an HVAC condenser outside, be sure to have a plan in place to protect this from theft (i.e. a metal cage). Once these systems have been fixed and are in working order, you’ll want a good handyman to make sheetrock repairs and prepare for paint.
Once the major systems have been fixed and sheetrock has been put back together, you’ll want to have the interior ready for paint. If you are painting kitchen or bathroom cabinets, then be sure they have been sanded so that a new coat of paint can be applied correctly. Everything you don’t want covered in paint should be covered in plastic or painter’s tape.
A new coat of paint always results in a noticeable change to the interior aesthetics. If you are painting the entire interior, then consider working a professional painting crew into the budget. The time they save will make it well worth the additional cost.
Replace or Repair Flooring
When tackling the decision about the flooring, consider cost, durability, and overall appeal. New carpeting always makes a property look nice, but doesn’t necessarily stand up over time. As such, you may consider refinishing original hardwoods or even installing laminate floors that may be more durable over time.
You also want to consider the current kitchen and bathroom flooring. If it looks old and dirty or has broken tile, you are probably better off replacing with new tile. New tile or linoleum always adds to the appeal of the property and will likely help you justify top dollar for the rental.
Tackle Exterior Needs and Desires
Once you have completed the interior rehab, take a look at the essentials needed outside. This would include siding, porches, railings, shutters, screens, garage doors, gutters, etc. If the exterior is in bad shape, you’ll want to consider painting. However, if this is just a rental property, you may want to consider touching up or painting the front of the house to add to the curb appeal without breaking your budget. You’ll also need to be conscious of any items that may pose a danger to a potential tenant (i.e. broken handrails, falling retaining walls, etc.). Be sure to pay careful attention to any items that might become a liability.
Take some time to make the landscape attractive, with pops of color from flowers and a clean look for the yard. Hiring a landscaper may be worth the money for this project. Other things that might seem minor, like a nice mailbox and proper numbering on the building, are all things that will improve the value of your rental property. Take time to check out these details ,and if you can affordably make changes, do so. These items are going to make your rental property feel like home to some prospective renters.
Following these steps to a quality renovation will give you everything you need to attract the right tenants and to keep your rental property competitive in the market. It’s always wise to take the time to make good decisions about what and how to rehab in a rental property. Doing this thoughtfully can make the difference between a profitable and an un-profitable investment.
Have any questions about this process? Rehabbers: Any details you would add?
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