How to Finance & Build 10K/month Cash Flow from Rentals!


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How to Finance & Build 10K/month Cash Flow from Rentals!


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What repairs should you do when rehabbing a home?

When investing in rehab properties, you often run into homes that are in really bad condition. These are the homes I love that are in complete disrepair, ugly and unlivable. To many this is a turnoff and says headaches. To rehab investors it says profits and the evaluation process begins. When creating your rehab list and budget, it is crucial to focus on completing Value Added Repairs. Items that add value usually have to do with Kitchens, Bathrooms and Curb Appeal.

It is key to get people to fall in love with your property and get emotionally attached. They must imagine themselves living in the home and it starts with the property being inviting when they first lay eyes on it. The first impression must be “WOW.” The home is inviting with nice landscape, fresh paint and some pop in the colors used. Sometimes it is as easy as adding a little paint and cleaning up the landscaping. Putting about 2K into Curb Appeal can often increase value significantly.

Then they enter and find warm neutral colors and new or at least nice flooring. But the Kitchen is usually the place they head. Women love kitchens and this will be a huge part in the purchase decision. Don’t overdo it though, putting in a 40K kitchen into a 100K home does not make sense. Spending 5K could with nice appliances can already get the buyers thinking about cooking and enjoying dinner with family and guests.

The 3rd part of the home where significant value can be added is the Bathrooms, especially the bath in the Master bedroom, the one the buyers will be using. They will instantly imagine using the bath and what it will be like to sleep, live and spend time in this Master bedroom and bathroom. Adding a bathroom or converting a half bath to a full bath can also add significant value to buyers with children.

Finally, the mechanics, plumbing, electrical, roof, foundation, etc must not create red flags during the inspection period. That can kill a deal really quick. It is important to not go overboard on items such as finishing a basement, materials that overshoot what is common and expected in the neighborhood and doing any upgrades that will not add value. If you ask yourself, will the $ I am spending on this repair add value to the sales price? If not, save the money. Focus on Value Added Repairs with Kitchens Bathrroms and Curb Appeal.

Rent and hold properties you really want to keep it cheap and simple. It has to be rentable so the answer has to be Yes if you ask yourself if repairs will increase rent and keep the tenants around.

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6 Responses to What repairs should you do when rehabbing a home?

  1. Eric K says:

    When we do rehabs we focus we make a lot of properties as general as possible. We try to give them some “pop” but they need to appeal to all. We normally lay tan carpet and paint the wall the famous “Swiss Coffee”. Then painting all trim a shiny white, really makes the trim pop with beauty highlights. This leaves a blank canvas for the new home buyer. Too many colors or dark colors often turn the buyers away.

    I completely agree with the Kitchen and Bathrooms. This is an area that cannot be missed. When doing the kitchens we try to use a modern laminate counter tops for our low end properties and either corin/granite for our higher end properties. The kitchen and baths are what win people over.

    The curb appeal is also very important. We have fresh rock spread on the ground, here in AZ, and the trees and plants trimmed. We need to get the buyer’s in our home so we make it very welcoming.

  2. Ryan Moeller says:

    I totally agree Eric, thanks for the post. It is very important to use neutral colors and materials to appeal to the masses and as you say leave a blank canvas. Shiny white trim always seems to provide that contrast and POP needed and adding a bit of paint is extremely low cost for the value added.

  3. Here are my 2 cents . . .

    Usually, we’re rehabbing rental properties. I probably put more effort into my rentals than I really need to though, and am learning to hold back a little.

    I agree that a nice, neutral paint scheme is key; however, I’m tired of the ‘landlord beige’ and the high-gloss trim. I have found a Porter Paint color called “indian ivory” which is absolutely completely perfect in every application where I’ve used it. I even painted my own home’s interior this color. As for trim, I select a white, but it’s a satin finish–not shiny. This indian ivory color is completely neutral, but warm and inviting and goes with absolutely everything. Every prospective tenant who sees a newly painted home of mine makes favorable comments. My tenants always tell me how wonderful their furnishings go with the wall color. One thing I nearly always do is paint the exterior of the front door a nice, deep barn-door red. I also make sure there are nice, modern house numbers and a sturdy mailbox (we have to-the-door mail delivery in town). It really makes the entrance pop.

    In my rentals, I am very concerned about durability and upkeep–I don’t want to be called out for repairs, and I don’t want to replace anything twice. If there are hardwoods in a home, I will restore them and eliminate all carpet if possible. In my lifetime, it is unlikely I will ever have to replace these hardwood floors. The most I’ll need to do it a light sanding a new coat of poly every 10-20 years, tops. However, carpet must be cleaned in between tenants, and replaced much sooner than later. Laminate floors should be avoided at all costs–they always look like plastic, and you’re really not saving any money. If bathroom or kitchen flooring needs to be replaced, I’ll install tile before I’ll do vinyl. I try to find affordable, full-wood construction cabinetry (versus particle board cases) because they’ll last forever. I use strong door hardware because tenants seem to love slamming doors. I also make sure my toilets have a minumum 2″ fully glazed trap. You’d be amazed how often you’ll be called out to deal with a plugged up toilet otherwise. I used to install garbage disposals in my new kitchens; I don’t do that anymore. Tenants think they can stick anything down there. But every new kitchen gets all new appliances including a dishwasher–the ladies love it. In my new kitchens, I also try to install can lights. My husband is my electrican, so it’s just the cost of materials. Plus, they never go out of style. Plus tenants really can’t damage them–they just replace the bulbs.

    Well, I guess my 2 cents became more like 20 cents, but it’s always fun to share with fellow investors.

  4. Ryan Moeller says:

    Terri, amazing content!! I really appreciate you sharing. I am definitely going to check out those colors and consider some of your other expert techniques.

  5. Ken Zajac, AIA says:

    Having owned investment properties in Chicago and Florida for years, I found your article well wrtitten and informative. Terri Pour-Rastegar also added some great comments.

  6. Haha!!! Excellent work! Those dudes at your competition (you know who) don’t even have a clue! Keep it up!

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