Rehab Costs for SFRs / Multifamily Properties

[Ian Livaich]

Hello everyone,

I am starting to analyze some deals in my local area as I am looking to purchase my first property.  I am generally looking at 3BR, 2BA properties and some smaller multifamily properties.   A few questions keep entering my mind when I crunch the numbers.  How much should I budget for rehab costs?  Also, what are some of the items that you regularly choose to rehab for rentals, such as painting, flooring, counters, cabinets, appliances etc. (other than capital expenditures).  

I have noticed that a few listings in my area will state a dollar amount that is needed to get the property "rent ready" (e.g. $25k).  Do you find those type of statements to be accurate or do they often entail more work than is actually needed?

I understand that the numbers will vary based on the location and the condition of the property.  I am curious as to what everyone's general approach is in their markets and what works for you.

Thanks in advance.

[Cara Lonsdale]

Only YOU can determine what it is going to take to get it rent ready.  You can use those statements as a guide, but not in place of doing your own due diligence.

It is hard to speak in general terms.  It really depends on the property.  I have walked properties where $3K sufficed.  Then, I have walked properties that I knew would be a total gut and allocated $20K.  So, you have to walk the property and create a budget based on your end goal.  So, what is your end goal...Tenant ready?  Then put your Tenant hat on and walk through the property and ask yourself what would need to change in order for YOU to live there.  If you like the kitchen cabinets, then there is no reason to change them.  If the paint is newer, then leave it.  If the carpet is clean and neutral, leave it (even if you want to tile, save that for the next turnover. Never pull up perfectly good condition carpet).

Then prioritize.  Do the things that NEED to be done first.  Save other items that are OK for now (like the carpet mentioned above) for the next turnover.  That way you can break up some of your capex.

Above ALL else, make sure the unit is CLEAN!  Clean units rent right away, even if they aren't the most upgraded.  Remember, this is going to be someone's home.  No on wants to move into a dump.

I hope that helps.