Reccomendation for property repairs prior to sale

Buying & Selling Real Estate
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Reccomendation for property repairs prior to sale

Bryston Wisekal
Charleston, SC · Member since 2014 · 52 posts · 14 votes

I am in the process of listing a rental property that I purchased a few years ago. The property is currently leased with a few months left on the lease. My realtor has informed me I have about $3k in repairs needed to sell the home based on an inspection he did with his contractor. About $1200 pertains to maintenance items such as a full AC service, a plumbing issue causing the pipes to back up periodically, as well as an issue with the water line going to street (but on my property). The Other $2700 includes repainting the home due to what appears exterior mold since the home was not sealed properly when it was originally built and painted, replacing a faulty dishwasher, some drywall repairs, and fixing a toilet and surrounding flooring. This is all on a home for under $125k.

My question is, how many repairs/maintenance items should I be taking care of before anyone even sees the property and orders their own inspection? Would it behoove me to wait until I need to fix something  because the buyers inspector found it or should I get some of the items out of the way to increase buyer appeal and make for an easier sale.

Thanks for your input!

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Patrice Boenzi
Real Estate Agent · Geneva, IL · Member since 2015 · 403 posts · 172 votes
9y

@Bryston Wisekal I am a Realtor and Investor and I was just curious, so thank you for helping me understand the reason "why" the inspection happened before the contract.

If your GC was the one that evaluated the property, he is not an inspector (even though he may be a as knowledgeable as one) so I would do the things to make it look nice and wait until the official inspection report and then negogiate/repair items as needed upon professional evaluation.

If your target is an investor they may prefer you leave it "as-is" and then they can control the buy-in/repair/update costs to help them get the ROI they desire.

Personally, as an investor I would prefer to have it "as-is" and let me take care of the items needed in the way that best fits my budget. If you go in an over-repair/update then you box yourself into marketing your property at a certain price and you give up leverage... in my opinion. I just purchased a distressed property and they painted the living room, dining room and put in all new carpet - the rest of the house was trashed. I would have preferred to have that price off the house because I am ripping everything out and repainting anyways. Good luck!

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  • Patrice Boenzi
    Real Estate Agent · Geneva, IL · Member since 2015 · 403 posts · 172 votes
    9y

    @Bryston Wisekal I have a bigger questions for you? 

    Did you authorize your agent to bring in an inspector on your property?Is that usual and customary in SC? 

    My next question... did they test for mold? Is the inspector a licensed professional and was testing done?

    Did you live in the property for the last 12 months?

    Here is my opinion without the questions above answered.

    1. maintenance issue don't need to be done as long as everything is working

    2. How do you know the plumbing issue? How do you know there is an issue with the water line going to the street?

    3.  Is there a warranty on the siding? Any recourse with the builder?

    4. Can the dishwasher be sold "as-is"

    5. What kind of drywall repairs

    6. What is the matter with the toilet?

    So who is your target buyer, what does the market demand as far as property condition? Interested to understand the strategy. 

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  • John Whittle
    Vendor · Cincinnati, OH · Member since 2014 · 144 posts · 58 votes
    9y

    I'm curious why the inspector is in before sale too.  I'm also trying to figure out how a clogged sewer is just standard maintenance. Inspection reports will bring these issues up on 40k houses.  How much you discount or fix depends on what the property is really worth.  Every issue you have listed sounds like very reasonable issues any retail buyer will demand be fixed before they buy it for fair market price.

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  • Bryston Wisekal
    OP
    Charleston, SC · Member since 2014 · 52 posts · 14 votes
    9y

    Thank you very much for the input. Because I am an out of state investor I authorized my realtor to walk the property with a contractor to see what is needed before I sell.

    @Patrice Boenzi We have not tested for mold but the person doing the inspection is a licensed GC. I have not lived in the property but it has been occupied for the last 5 yrs by the same tenant.

    I am waiting on a detailed quote on the water issues so I can better understand that.

    Unfortunately there are no warranties and I don't believe I have recourse with the builder.

    The dishwasher could be sold as is, but I had figured it would be worth the $200 to get a fully functional unit.

    As for the drywall repairs, it looked as though there was a dry wall repair that was done poorly and needed to be redone in order to blend back in with the rest of the wall.

    The toilet seems to have come loose and is apparently evidencing some type of erosion on the floor where the base goes into the cement under the flooring.

    Realistically my target buyer is an investor who will continue to rent it out. I'd imagine for a property that could rent for $1k/month, the buyer isn't going to want to pour in a ton of capex to get the property up to par but I also would be willing to bear a slight discount to have the buyer take care of those issues instead of being on the hook for them myself.

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  • Patrice Boenzi
    Real Estate Agent · Geneva, IL · Member since 2015 · 403 posts · 172 votes
    9y

    @Bryston Wisekal I am a Realtor and Investor and I was just curious, so thank you for helping me understand the reason "why" the inspection happened before the contract.

    If your GC was the one that evaluated the property, he is not an inspector (even though he may be a as knowledgeable as one) so I would do the things to make it look nice and wait until the official inspection report and then negogiate/repair items as needed upon professional evaluation.

    If your target is an investor they may prefer you leave it "as-is" and then they can control the buy-in/repair/update costs to help them get the ROI they desire.

    Personally, as an investor I would prefer to have it "as-is" and let me take care of the items needed in the way that best fits my budget. If you go in an over-repair/update then you box yourself into marketing your property at a certain price and you give up leverage... in my opinion. I just purchased a distressed property and they painted the living room, dining room and put in all new carpet - the rest of the house was trashed. I would have preferred to have that price off the house because I am ripping everything out and repainting anyways. Good luck!

    1Reply
  • Bryston Wisekal
    OP
    Charleston, SC · Member since 2014 · 52 posts · 14 votes
    9y

    @Patrice Boenzi Thank you very much for that insight. I think I may just hold off on some of those maintenance repairs. I had been thinking that spending all this money upfront is more of a risky move anyways.

    1Reply
  • Patrice Boenzi
    Real Estate Agent · Geneva, IL · Member since 2015 · 403 posts · 172 votes
    9y

    @Bryston Wisekal Good Luck! Keep us posted on how it works out

    0Reply
  • Bryston Wisekal
    OP
    Charleston, SC · Member since 2014 · 52 posts · 14 votes
    9y

    @Patrice Boenzi Thanks, will do!

    0Reply
  • Bryston Wisekal
    OP
    Charleston, SC · Member since 2014 · 52 posts · 14 votes
    9y

    Just as a final update on this asset. I ended up doing about $1300 in maintenance (A/C tune up/maintenance, a few plumbing repairs, and some dry wall repair). After one buyer fell through, we ended up with a full price offer from a cash investor which we closed with last month. If anyone is interested in the numbers on this deal here they are:

    Purchased asset for $82,500 w/ 20% down and with a solid tenant in place for $850/month in summer of 2015

    Had about $3k in maintenance/capex in 2016 (insulation in the ceiling that was never done and a leaking shower pan that resulted in re-tiling the master bath and shower) This was all paid for by reserve savings from the rent.

    Listed in February of 2017 for $119k with approximately $12k in closing costs. After taxes we will about double our $20k we were all in for. The entire investment worked out to a 51.4% IRR or a 2.0x multiple. Not terrible at all but I felt as though we got lucky.

    Lessons learned:

    1. I got lucky, typically, homes should not appreciate 50% just under two years.

    2. Its tough to make money on one single family rental under $1k/month around the 1% rule. After capex, maintenance savings, property management fees, mortgage, taxes, insurance, we were left with about $150/month. If you can scale it quickly, perhaps it may work better but $150 of buffer between profit and loss doesn't leave a lot of room for a $4k A/C replacement right after you have had another major expense. The $3k we spent in 2016 wiped out the reserves I had set aside for this specific property. Again, we were lucky the we could get out before another major expense showed up before we could replenish those capex and maintenance reserves.

    3. Real Estate investing is beautiful thing. Being able to take advantage of tax laws is immensely advantageous. Make sure you have a solid accountant who knows real estate. We effectively took a tax loss every year while making "cash profits." This doesn't include capital gains taxes of course.

    Now onto the next deal!

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