If you have not read the post on getting a mentor please do so here.
In this post we are going to talk about rehabbing – or fixing up a foreclosure to make it ready for rent.
The rehab process starts long before you actually close on the property. After your offer is accepted, you will visit the property (again). Write down the things you will need to do. I find it best to break it down into general items for the entire house and then a room by room needs list. For example, I might write down ‘All new carpet and pad’ under the General list instead of repeating ‘carpet’ in every room. You will price it that way as well.
1. Rooms: Measure the rooms as you are going to need it not only for budgeting but also when you market the property. You cannot rely on measurements stated in the foreclosure listing. Draw a rough floor plan and write the measurements on it. Prospective tenants like to see the floor plan drawing in the lease listing ad.
2. Flooring: If you will be replacing carpet, measure roughly how much carpet you are going to need. Your contractor will measure before he bids you but you can use your measurements to check his measurements or use it to get rough bids.
3. Kitchen Appliances: If you are replacing appliances, get height, depth and width measurements for where they will go. Do not assume they are all standard. Time is of the essence when you are rehabbing, so every mistake made is time lost.
4. Outside: Do not forget to measure outside for fencing, landscaping or driveway work needed.
With your list of things to do and your measurements you can arrive at a pretty accurate budget for the repairs. Schedule your contractors to come and give you bids. You must meet them at the house with your agent and for the first few ones, ask your mentor to go with you as well. Get written bids and time-lines. Schedule your rehab from start to finish and accommodate for bad weather, long lead times etc. Order the items that need shipping time. Make sure you can cancel the order or return items without too much cost if you decide to not go ahead with the deal. Call the utility companies well in advance and make sure they can turn the utilities on in your name at the day of closing. You must be ready with people, materials and utilities to go on day one of ownership.
What all to do?
I believe in providing the best product at the best price. You also don’t want things to keep breaking. It’s much easier and cheaper to fix everything before you put the property into service. With these things in mind here’s what to do:
If the carpets are stained and cannot be cleaned to look like new, replace all carpet. You can upgrade to laminate or click install hardwood floors in select living areas as well. Upgrade all vinyl flooring to ceramic tile in wet areas like kitchen, bathrooms, utility rooms and entry/exit ways. You may also want to consider using tile in formal living and dining areas, heavily used hallways.
You do not need to get fancy granite, porcelain or marble tile. Just get a neutral color ceramic tile. I have found good deals at Floor and Decor.
Make sure your contractor removes the vinyl and prepares the floor before installing the tile. I will write a post on how to get and keep good contractors.
If the paint is too custom, dark or worn out, get a full two-tone interior paint job done. A full two-tone paint is one neutral light color on the walls, like a beige or taupe and semi-gloss white for the trim and doors. On the walls, flat paint looks best but it stains easily. If you go with eggshell or satin, you can brush stains off pretty easily but there will be some shine on the walls. If you have wooden walls, you may want to paint it the wall color to lighten the room. Stay neutral and it will appeal to more people. Get rid of wallpaper and texture the walls.
On the outside, get a three-tone paint: one neutral color on the siding, another lighter color on the trim and a darker contrasting color for the front door. The back door can be painted white on the outside.
These paint color choices will make your house look like a new builder house and will appeal to more people.
If the appliances are not in good condition, mismatched in color badly or simply not functional, too stained or too greasy, replace all of them. Get the same make if possible for all. If not, at least get the same color. You can get stainless steel appliance set from places like Sears Commercial for a little more than what you can get white/black sets for. You may get a good deal when you get their installation package as well. You’ll typically need an oven-cooktop combo (range), over-the-oven microwave with a vent-hood, dishwasher and garbage disposer. You need not provide a refrigerator unless it’s customary to do so in your market area.
If the counter surface is worn out you may want to remove it and upgrade to ceramic or granite tile. Given the counter area the upgrade might not be too expensive. Do not use marble tiles. They stain too easily. If you choose granite tiles, seal them thoroughly. If you use tile, you can either have wood trim or you can get matching tile trim pieces. Granite slab might be too expensive for our purpose. Sometimes you can get a good deal on a prefabricated 2cm granite slab and based on the area your house is in, that might be a good option. Check out stores like Seconds and Surplus for their in-stock prefabricated granite slabs. If you go with a 2cm granite slab, get it installed over a 3/4″ plywood backing. You may have to get an over-mount sink with this configuration as well as plywood will show with an under-mount. Get a 18 gauge or better deep single-bowl stainless steel sink.
If there is no back-splash, install one. You can use ceramic or tumbled marble 4″x4″ tiles. They are easy to install and will keep cutting to a minimum. Check out Floor and Decor for their tile collection.
You never want to replace cabinets unless you absolutely have to. You can fix them, paint them and add hardware and they’ll look like new. You can add moulding/trim to the top and place fake lightweight plants and small lights to decorate (for the showings). You may want to install a fresh shelf-board inside the sink cabinet – they are usually worn out with water damage.
If the fans and lights are too old, unmatched or simply non functional, replace all of them. Get the same fan with a light kit in all bedrooms. You may make an exception for the master and the family room but it’s more important to get an energy efficient, clean looking fan than a fancy one that might appeal to only some people. One way to do it is to ask your Lowes or Home Depot, what the best selling newest model fan is. There will be one in each range. For the houses in the price range we are talking about in these blogs, get a fan that’s about $60 to $100. All lights and fixtures should be either satin nickel or oil rubbed bronze. You can get a chandelier that matches your fans/lights for the dining area. Keep it simple and elegant and it will appeal to more people.
Once the house is all painted, if the switch plates are not clean or the switches/plugs are not clean, they will pop badly. So decide if you need to replace all switches, plugs and plates or cleaning them will suffice. Note that it might be easier to clean the plates and make it look new but cleaning the switches and plugs might not be easy.
Get a licensed electrician to do all your electrical work and get a package deal.
Plumbing and Bathrooms
Tub: If the tub is rusted out get a new one. If it’s just stained but the structure is still good, you can get it resurfaced. Note that the resurfacing paint is toxic and it needs proper respirator masks and goggles. Ventilate the property for at least 24 hours after a resurfacing job. Install a ceramic tile tub and shower surround that matches the floor. Make sure to use green board or other mold resistant material in wet areas.
Sinks and Counters: You can resurface bathroom sinks and counters as well, if the structure is good. I do not recommend resurfacing kitchen counters. Just replace them or tile them as we talked about.
Faucets and Valves: If the faucets are old or dripping, replace all of them. Replace them with either satin nickel or oil rubbed bronze finishes. Keep it uniform throughout the house. Get a matching shower head. You can get sets that are a good deal sometimes at membership stores like Costco and Sam’s Club. Replace all cut-off valves. Get half turn valves as you’ll only use the on or off setting.
Toilets: Unless the house is new (less than 5 years old), replace all toilets. Get the elongated bowl. Sometimes, the toilet is fine and you may just be able to replace the seat. You can save by replacing all parts in a toilet, the flush and fill systems without replacing the shell. See Seconds and Surplus for their toilet collection.
Water Heater: If the water heater is old, replace it. Get it installed per new code with a pan underneath. Sometimes the water heater shell is fine, you will just need to replace the elements (for an electric water heater). If the house has been vacant for a while, it’s possible that you’ll see sediment or a foul egg smell. You may be able to fix these problems without replacing the water heater if it’s not too old.
Get a licensed plumber to give you a package deal on all your plumbing needs.
Locks and Knobs
Get the smart key locks for the front, back and garage entry doors. You’ll need the dead bolt and keyed entry set combo for these doors. You’ll also have to install a one-sided or half-dead bolt that can only be opened from the inside on the front and the back door (any door that leads to outside). Keep the finishes in the house uniform by getting the same satin nickel or oil rubbed bronze finishes. If the interior knobs are old or painted over or non functional, replace all knobs to match the exterior ones. Get only passage knobs (the ones without locks) for kids bedrooms. Get privacy knobs for all bathrooms and the master bedroom.
In the next post we’ll talk about the order in which to get things done. To check out some finish examples go to dallasrenthouse.com.
Pingback: The Rehab Order | BERCAT Real Estate
Pingback: The Rental Business – Marketing Your Property | BERCAT Real Estate Investor Blog
Pingback: The Rental Business – Talking To Prospective Tenants | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: Showing Your Rental | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: The Rental Business: Rejecting an Application | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: Myths about Tenants | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: The Rental Business – Move in Process | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: The Rental Business: The Lease | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: The Rental Business: Pricing Your Rental | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: The Rental Business: Maintenance and Repair | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: The Rental Business: Move-out Process | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: Rent to Own | Real Estate Investor Guide (Dallas, Fort Worth)
Pingback: What’s a Good Rental? | Real Estate Investor Guide (Dallas, Fort Worth)