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**Newbie-first rental investment**
Hubby and I close on first rental investment property next week!! Exciting, nervous, all the feels. We are following the BRRR method, so I've been doing my homework, but have a couple questions for the experienced.
Property is located in Magee, Mississippi, population of about 4000, mixture of renters and buyers. Property close to an area that a builder will start throwing up homes.
What I’ve read and research I feel like I’m getting a mixture in regards to the rehab phase. I’m seeing that some investors advocate for higher end materials when you can-granite counters, stainless steel appliances, tile bathroom. However, the realtor that I’m working with (has properties in surrounding Jackson area) has a more “renter ready” approach because renters tear things up anyway. Also, the contractor said he would lay vinyl all the way through and skip the granite. Thoughts?? Still waiting on an estimate from this contractor and meeting with one more this evening. on one hand, if it is in the budget, would it be smarter to lay the nicer things, but then the unknown of a bad renter tearing the house up makes me nervous. How do you weigh the pros and cons? Other factors that help you make a decision? Get with the builder and see the plans for the new houses?
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comps, comps, comps.
with a BRRRR, you want it to appraise at what the comps are valued at.
so you rehab it to the level of the comps.
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As Nicholas said, get your agent to pull some comps in the area and check the finishes, etc. You'll want to push that appraisal up if you want to get the most cash out. See if you can hit up a few open houses while you're at it. Don't forget to look at the rental comps as well, closed and available to see what your 'competition' is up to.
I always go for a mixture of tough/durable and nice fixtures in my BRRRRs. For example, I only use SmartCore Ultra LVP flooring. I've found that it goes down easiest and lasts a long time with tenants. I'd suggest pricing out quartz counters instead of granite. I've got a great supplier/installer here on the Coast.
I'm not familiar with the Magee market, but a quick MLS search shows no active rentals on market in town.
I've learned the hard way on the BRRRRs, if you go ahead and do everything (within a reasonable budget) Roof, HVAC, windows, kitchen bathrooms, you'll save yourself time/money down the road.
Good Luck! It gets addictive! After a solid 6 month intensive full rehab and pulling all the cash invested out I like to tell my wife 'Hey look at all the free passive income we have!' (There's nothing passive about managing the rehab!)
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I would rehab it to what other sales/rentals in your market have. If you put more into it, you probably won't see much of a value add. If you plan to rent it out, the main thing is to make sure it is durable and can withstand tenant wear and tear.
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You have good advice here. If you know it's a long-term rental, you want it to be rent-ready and more durable, less extravagant, especially in a town of 4,000. But, parroting what others have said, your real job on a BRRRR is to get the highest appraisal possible so you can pull all your money back out. For that, do as others have said, review every sold comp within 1 mile (rural areas sometimes even larger) in the past 6 months to a year and see which one your house setup mirrors most and then review their finishes. In a town of 4,000 you probably don't want to go too crazy, especially on your first BRRRR, but never take finishing advice from contractors.
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What a lot of people suggest doing is going for the highest value spending the least amount of money possible. For example, stainless steel appliances might look nice and might assist in a potential renter's decision to rent your unit. It's not going to cause it to appraise for more as the appliances are considered "personal property" and not part of the actual property.
So if your goal is to appraise for more, which is the goal of the BRRRR method, it would probably be best to invest that money into things that will cause it to appraise for more such as improving the house itself to be more aligned with the comps in the area. You might also want to take into consideration if it's a single-family or a multi-family. For single-family you'll want to bring it up to the standards of other single-family units in the area, while if it's multi (duplex, triplex or 4 unit) you'd want to bring it up to the standards of the other multi-family properties in the area. If they use vinyl floors, so do you.
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Thank you all for advice!!