Investor · Palm Beach County, FL · Member since 2019 · 370 posts · 330 votes
Just got a bid presented to me by my property manager from a contractor of $14k for tenant turnover, incoming rent for the unit is $800... I know the unit well and it's not in bad shape. Some of the items are totally unnecessary. They have a bid for painting the walls which they are asking $3,300, on top of that they are asking another $400 to repair walls and remove an led light strip. Is this the going rate right now? This will be my first turnover in Ohio.
Carlsbad, CA · Member since 2018 · 24 posts · 50 votes
4y
@Scott M. is completely correct. As a PM on a brand new account, I will get clients a quote for all items I think should be done in line item format and which of those items I would prioritize. The client decides which line items fit into their budget and vision. Communication is important on this though and your PM should provide you that. Usually, I recommend focusing on on Kitchen, bathrooms, flooring, and paint. We offer rent ready project management for a 15% markup when getting a property ready for the first time to be rented. If they don't want to pay me that no prob at all, i'll give them my same thoughts on line items and most important items to prioritize. Then i'll give them my contractors number, and they can coordinate the quote and project for a 0% markup. There are so many variables regarding scope of work and project specifics that any proclamations of overpricing or greed on PM/ contractor part are rooted in ignorance.
Investor · Lakeland, FL · Member since 2017 · 1k+ posts · 1k+ votes
4y
We self-manage about 40 rentals. I think you have to evaluate whether it really needs to be painted or not. It's not like you repaint an $800 a month apartment every time it turns over. Fix the obvious (holes, etc) and try to match the paint the best you can... but at $800, if there are some imperfections, no one at that price point is probably going to notice or care. If there are holes in the walls that your tenant put into them, I would make sure to be retaining their security deposit to (help) cover those expenses.
Don't even get me started on PM being willing to spend your money. They have no stake in the situation. No reason to shop a bid. All of our properties are local for this very reason... so we can self manage them and keep all the expenses in check. Think about this: If you net $400 a month on your rental... this one turnover - if you were to pay $14,000 (and don't you dare do it) - would cost you ALL of your profits for the next 35 months... and that is presuming nothing else breaks during that time. No way should you even start to think about outlaying that much money unless maybe you were going to be selling the unit and profitng handsomely from it on top of that expense. We will put a new roof on a property that we are going to flip if it really needs it - but we know we are going to recoup 5-10 times that much money when we sell the property. So there are times when doing the major overhaul can be ok... but not just turning it over.
Also - keep in mind if it was your tenant that did all this damage - you can go after them for excess damages. You are not limited to your security deposit if they neglected and abused your property. You can take them to small claims court, for instance.
@Ryan Cleary do it yourself. Contractors are Notorious at least in Phoenix about jacking up bids for rentals because they know that you need it done and the odds are extremely high that you can’t do it yourself so your hands are tied. It’s not about the “going rate” it’s about not getting ripped off and if that’s the going rate then you are getting ripped off. So get some elbow grease into it, learn a few things and save that money for bigger better investments until you find a contractor that isn’t trying to use your to by himself a something nice.
Rental Property Investor · Sacramento, CA · Member since 2017 · 202 posts · 82 votes
4y
@Ryan Cleary Have your property manager send you at least 2-3 more bids from contractors. The property manger may be over paying but don’t go with the first offer presented to you. Depends on the contractors as well, licensed contractors charge more for their services.
Rental Property Investor · East Aurora, NY · Member since 2017 · 19 posts · 17 votes
4y
@Ryan Cleary can you provide the additional breakdown of items in the proposal? We know the painting is $3,300 so what else are you getting for the remaining $10,700? If it includes some labor for clean outs, misc. new flooring, some windows, a few kitchen and bath updates, etc. then it could be a good price. Anyone on here claiming $14k is too high for the construction cost is doing you a disservice without having the details of the work scope. The investor side of me does agree that $14k is a high cost on a unit turnover where you are only receiving $800 month in rent. Do you anticipate higher rents after you spend the $14k in the reno? If you spend $14k but recognize an additional $200/month in rent then you would see a 17% return on that $14k, which isn't bad at all.
Dump the property and take a loss if you have to! Just my wild guess. I paid cash for 28 homes in Las Vegas and paid only 30 cents on the dollar for the homes during the 2008 - 2010 bubble pop and was getting $1100 to $1600 for each single-family home. That is a lot more than you are getting. I did not have to pay any mortgages and had to pay only the property taxes and insurance, but the tenants were destroying the homes faster than I could clean and paint them. So, I gave my children 6 of the homes and sold all but two. I re-invested the money in California where I paid $291,000 per unit, but I will be way ahead in profits in less than 10 years and very happy to get rid of my long-distance rental units.
You need to do the math and $800 per month is not enough money with the exception of when properties appreciate in value, but I always think of properties as being Blue Chip, or junk. The Blue Chip properties cost more, upfront, the they usually appreciate in value faster and the big money is earned from appreciation and not from collecting rents.
I was involved heavily in real estate starting when I was 15-years old in Massachusetts. I left Mass. in 1968 and when I sold a tri-pex in Holyoke Mass. about 5 years ago for something like $190,000. I think we purchased the property in about 1967 for about $90,000, Then, I spent about $100,000 remodeling the units, rented the units for only $450 to $550 per month and when you stretch out the appreciation over a 50-year period it comes out to about $2,000 per year and when you deduct the $100,000 for remodeling I made 0% percent per year and that is not good. My point is; properties are cheaper in many states like Massachusetts, Idaho and Ohio and from the way I see the numbers the properties have not increased, significantly, for many years and if this trend remains the same then those cheap properties are bad investments. You need appreciation to get past collecting low rents and to beat inflation.
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
4y
@Matthew Irish-Jones
Yeah ceilings, walls, doors, trim and materials. However, I don’t give the same quality of work as a personal residence. I don’t change the color, Ill do two light rolls with a semi smooth finish on the trim. I’ll be back next year to do it all over again.
Contractor · Virginia Beach, VA · Member since 2021 · 7 posts · 5 votes
4y
@Ryan Cleary
Just a word of advice from a contractor's point of view.
Make sure your PM (and you) are specific with the level of work your are getting quotes on. My rates change quite a bit between home owners and rental/flip work. The reason being is because I know homeowners are expecting perfection, they want everything looking perfect and lasting for years.
A lot of the flippers and PMs I work for are more just interested in getting paint on the walls, they don't want trim sanded down and painted to last.
That price sounds very reasonable to me, but again it really depends on what your expectations are and what your PM's expectations are.