Tackle Your First Rehab By Following Our Own Renovation
I know how intimidating a renovation can be, no matter the size. Follow us through our most recent reno on one of our rental properties. I will show you videos, pictures, and spreadsheets of how exactly we went about our rehab so that you can gain the insight to do it too.
Click on the video above to see the before video of our property. I will walk you through the property to see where we started.
Follow The Step By Step Process That We Went Through For Our Rehab
To start the process of a renovation, the first thing we do is walk through the property and inspect the as is condition. Generally, we start by taking note of the cosmetic things that need fixed: flooring, molding, paint, appliances, fixtures, hardware. Then, we start to pay attention to the bigger, usually more expensive issues. The following bullet list are some of the skeletal items you will want to make sure to check out. These are the items that can cost you big time if you don't keep up with them and have them serviced when needed:
- heating system
- air conditioning
- hot water tank
- water damage and/or mold
While walking around the townhouse we checked out these major items; the only issue we found was that the HVAC system was looking rather dim and hardly working. So, we called a local service company to come and inspect it and sure enough it needed to be replaced....most investors would be thinking dollar signs $$$$.....
When we bought the property we had purchased a home warranty and decided since we didn't do any work to it in the beginning that we should probably renew the warranty at the end of the year. So, we did and thank goodness that we did! Because we still had the property under this warranty, the service man made contact with our home warranty company and sure enough we received a brand new HVAC system that cost $6,500. The BEST part, it only cost us $450.
Check out our article This One Thing Saved Me $6,050
So here's a rookie tip: when you inspect the property and feel that some of the major skeletal items may be on the downhill, purchase a home warranty so that when any of these items decide to stop working or your tenants destroy them, you are covered!
Well, I digressed...
After we complete the walk thru I sit down at the computer and input all of the items that need replaced, fixed, or contracted out on a spreadsheet so it is in one place. Once the spreadsheet is created than we can start moving on to the next step...building the estimate.
Before Renovation Pictures
Building The Estimate
This can be the nitty gritty part that some investors can't stand. I happen to enjoy it. Now that I have compiled my walk thru list the pricing comes next.
I've done this different ways with different properties. I have taken my list to a store, like Home Depot or Lowes, and walked around writing down prices and item quantities on my sheet. I do enjoy actually going to the store and being able to touch the products and ask questions if I need to.
Yet, I've also sat up late at night and just strolled through the websites of these stores finding and tallying up prices on my spreadsheet. If you are working with a contractor or project manager on a renovation, this is a job that they will most likely do for you. However, as investors, my husband and I still try and do most of the work ourselves because all of those things eat into the actual cash flow we take home.
Once I've checked out all of the items or products we need to purchase, then it's time to make phone calls to contractors. When we need a contractor and it's for a job we haven't done before, we often ask for referrals. A good place to turn for a referral is to your real estate agent. We have also turned to other contractors for recommendations or you can look online.
Once I make contact with them, they come to the property to see the project and provide us with a bid or estimate of the job price and length. Then, we sit down and decide who we want to work with.
For this particular renovation, we contracted out 3 jobs: carpet, paint, and tile. All of the other jobs and projects that needed completed were done by myself, my husband, and my father in law, with little baby Molly as the project manager! 🙂
Here is a link to download the actual spreadsheet that we used through this process that will allow you to see where we spent our money. On it you will find:
- List of products/jobs
Another part of this process that I actually enjoy is the actual shopping trip (s) to buy all of the supplies. Having your list is extremely important for this step because it provides you with focus and restraint. You're not walking around looking and dreaming about what may or may not work. You are there to get your items and this list helps keep you on budget without trying to pick extras that you may not need.
Also, shopping with the completed list can stop you from having to make what seems like a million little trips to the store. This eats into work time. If you are organized then with this big trip you can get nearly everything you need with only having to make a few extra stops at the store.
What's important about this step...keep your receipts. You will want to create a spreadsheet as you are working on the property of all of your expenses. This will be crucial when it comes to tax time!
Check out our article Tax Season is Finally Over..What You Need to Know For Next Year
Get To Work
If you have been following this system then I hope that you feel good about starting into the actual work itself. With this property, we had to do our projects on the weekends. My husband and I both work full time jobs and so we had our contractors come during the week and we went to the property over the course of 5 weekends for our projects.
As I said earlier, we had contractors complete all of the painting. They painted everything, floor to ceiling, molding, ceilings, walls, doors, and trim. We usually go with one color throughout the property, a neutral tone, with white trim. In this property we did a light beige color with white trim and white doors. This appeals to more tenants and can make the space feel bigger.
We also had new carpet installed on the stairs and in the 2 bedrooms upstairs. This was done by Lowes. When choosing a carpet we chose a darker color so that it would not look as worn as quickly. Although, one of the things we do know about carpet is that in a rental you can expect to change it out fairly often. Not to say that with every new tenant you will have to switch, but keep in mind that it does get a lot of wear and tear.
In terms of the projects we did, check out the list below.
- new light fixtures (in each room and bathroom)
- new outlets and plates
- new light switches
- new screen doors (2)
- new back exterior door
- new floor vent
- new door handles
- new blinds
- new house numbers
- new outdoor lighting
- new subfloor by the exterior door
We like to keep as much of the money in our pockets as possible, that's why we invest in real estate. So, when it comes to doing projects, we like to tackle some of them on our own. Even some that can be challenging.
You'll notice that most of the projects were not too intimidating. Yet, as a rookie investor, you may be looking at that list and going oh my god, where do I learn how to do this. That's what I was thinking once too. But guess what, you just have to have the courage to jump right in and learn. You'll make mistakes and that's ok, but if you want to have a hand in the renovations and keep more of that money in your pocket, you just have to decide to start and commit to learning.
You will run into projects that may be more difficult. We have. In this town home we did run into one project that had my husband and father in law working hard.
Check out our article Should You Complete DIY Renovations?
We had to replace the back exterior door due to the bottom of the door being broken. Since it was broken, there was water that leaked into the kitchen and damaged the sub floor under the vinyl floor. Before we could get the ceramic tile completed we needed to fix this.We weren't really sure where to start, but we asked for some help and together we figured out how to fix it. Check out the video, in the mid renovation video section, to see the repair.
List and Rent
Once the renovation is nearly complete you can start with the listing process. Take pictures that illustrate the strengths of the property. Specifically, photograph some of the new changes or additions you have made to the property.
When deciding on a rent amount, you have to consider local rental comparables in order to find a price that is fitting for the square footage, number of beds and baths, and recent upgrades.
When you've done these two things, list it. We listed this townhouse on Craiglist and Trulia and had a lot of interest right after we listed it. If you are planning on managing your property as well, which is what we do at this point, you will have to set up times to show the property.
Check out our 8 Steps To Get Your Property Rented checklist
Tip: When you make your times for showing the property, try and show it back to back. This way renters see that there is other interest in the property so they will not drag their feet in deciding whether they want to rent it or not.
When you show the property make sure that you have a rental application ready to give to them if they are interested in the property. You can find rental applications online or from sites like Legalzoom or ezLandlord Forms, which is what we do.
Post Renovation Numbers
I think that it is important for you to see actual numbers of what a renovation looks like. When you are just starting out it is hard to get a grasp on things that need to be fixed or how much a rehab could cost you. Check out some of the basic numbers here and click to download all of the spreadsheets we used throughout this renovation process.
- Purchase Price: $75,000
- Down Payment: $15,000
- Closing Costs: $2,000
- Rental Rate- Previous Tenant: $850
- Renovation Total: $ 5,324.22
- Current Rental Rate: $1,000
In just 15 months of owning the property and after a fairly cosmetic renovation, we were able to up the rent to $1000, raising it by $150, allowing us to bring home even more positive cash flow each month. After the mortgage payment, interest, taxes, and insurance we are cash flowing $615 a month.
Check out these mid renovation videos to see some work in action!
Post Renovation Pictures
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