Best Methods for Renovating Rentals

Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Robert: Hi. Welcome to today’s class. My name is Robert Syfert and I’m with USA Portfolio, Inc. I’m here as the host of your REI Classroom today to discuss with you what are the best methods that we use for renovating properties.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Robert: Specifically to rentals, but this can apply to any renovation as well. Some of the key things that you want to look for inside of a property when you’re doing it, and again in my opinion, it’s going to be kitchens and baths number one. You’ve heard that a lot but it’s primarily the most important thing in your renovation retail or rental. One, if it’s retail it’s going to attract the more higher end client that’s going to pay you top dollar. If it’s a rental property, again, it’s attracting the best tenant possible.
With kitchens and bathrooms what you really want to do in our opinion, we tend to go more new than anything else. Why? Because it gives the best appeal and it’s the things that people most look at. Things detail wise that you’re going to want to look at, are you doing cheap on the flooring, just putting some sticky tiles in which may work for some rentals as long as you get an adequate new feel. I would tend to spend a little bit more and put the full tiles in the property.
The other thing, at a minimum even if it has good cabinetry in the kitchen that maybe you can repaint and it gives it a fresh new look, then at a minimum change out the sinks and change out the countertops. Put in a brand new fresh countertop. It doesn’t cost you that much to go down to Home Depot or Lowe’s and grab a great solid piece countertop.
The other thing is the faucets in your sink. Put in a great stainless steel sink. Double sink is great if you can get it. Single sink is okay. The other thing that’s more important though is on that faucet. Go the extra little step and get yourself one of the spray handles that pulls out for the kitchen. It just sends another nice little appeal touch and it attracts a better person and higher quality person that’s willing to pay more for the house on a rental and also willing to pay more on retail.
Same things in the bathrooms. We generally replace all vanities just because we like the newer fresh appeal. Change out all your toilets. Put in brand new ones. This is a very simple thing to do. It’s very inexpensive and it just makes a big difference. Would you want to sit on an old toilet? Highly unlikely, so go ahead and change those to brand new.
With bathtubs, if they’re surround, change them out and put brand new. It goes a long way just to have brand new day one so that you know what’s behind it, because there may be some hidden things that could come up later that you could’ve avoided if you just ripped it out and spent a couple more dollars up front and did it the right way. If it has a solid fiberglass tub or steel tub, in that case, you can go ahead and have that reglazed, but again I would rip out any surround and I would replace it. More importantly, I would go with the tile backs if you can. Again, a little bit more dollar up front but less long term maintenance and you’re going to eliminate the things that people do for CapEx.
Let’s talk about CapEx. A lot of people speak of rentals and they say, “Well I can do it cheaper and I can just estimate for CapEx.” If you do your renovation right up front, you can eliminate CapEx. What do I mean by that? Replace your roof. If it’s got five years left, don’t wait for five years and estimate that you’re going to repair it, because here are the things that you’re not estimating in that CapEx. The maintenance calls are coming in for the leaks for the roof, the repairs that you do over the next five years and all the damage that it may cause inside, water damage to drywall, tenant issues and a tenant possibly moving causing you vacancies. There are a lot of things that go wrong.
If you would’ve just replaced it up front before you moved in a tenant, now you have no CapEx to factor for. You’ve also eliminated all the potential maintenance issues that are going to come up over the next five years that you weren’t planning for to begin with. So I’m always for new up front, again because it goes a long way in things that you’re not thinking about as far as making a maintenance call when somebody’s in the home and having to do multiple repairs to different areas of the home because you didn’t take care of something up front.
In our renovations, again, new is always better in my opinion. Don’t cut corners up front because those corners that you cut up front are always going to cost you more money. How do I know? We’ve managed hundreds of homes and worked with several masterminds that managed tens of thousands of homes, and across the board, the people that have 10 to 15% plus in their maintenance are the ones that factored CapEx and thought they could get away with it. The ones that are in 3 to 4% maintenance long term are the ones that did all the renovation up front to make sure before anyone moved in and we had any issues it was all taken care of.
This goes for your mechanicals, too. Maybe you’ve got a 10-year-old furnace that works well. Replace it. Don’t think you’re going to replace it later. Why? Again, the maintenance issues when it breaks down. You’re thinking of inspecting every year. That’s fine. But, you’re not thinking about the pilot going out, the multiple issues and multiple calls that you’re going to have that are going to add up over time. They’re going to cost you a lot more money than simply just replacing it up front and having it under warranty.
Again, hopefully, this taught you guys something on renovations. If you want to learn more, always reach out. It’s another classroom. I’ll see you guys on the next lesson. Have a great day.
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