Rehabbing a large 1910 2-family home

[Devin Berrian]

Hi all, 

I am soon to close on my first deal - a 2800 sf legal two-family home in the City of Poughkeepsie, NY. The basics:

Build in 1910

3 BR 1 bath in each unit

hardwood floors are OK, need to be refinished but definitely usable

asbestos siding

31 exterior windows

front and back door access into stairwell/foyer

needs full electrical upgrade (still has fuse box)

needs full plumbing installed

needs full hvac system

doing all carpentry and renovations myself aside from electrical (may end up hiring out plumbing too if the inspector will not let my Professional Engineer father-in-law certify my work)

I'm reading all that I can on BP to learn about what level of quality I should use in my purchases and renovations, but is there anything you wish someone told you when YOU began fixing up an old home you were going to rent out?

Thanks in advance!

[Moses Kagan]

The most important thing to remember is that everything you do needs to be justified by the economics.

Do not get carried away and try to make this into the Taj.

For every dollar you spend, you need to consider the marginal return. In our business, where we either sell or refi the properties post completion, we use a simple GRM test:

• We want to be all in for something like 10x annual rent (10x GRM)
• So, if we are considering spending $5,000 for something (say, adding a bathroom), it needs to increase the rent by $500 / year or more (ideally more!).

Obviously, things like re-wiring don't add much, if anything, to the rent. So, the more cosmetic improvements (like adding washer / dryer or putting in hardwood) need to be MORE accretive (eg need to come in at, say, 5x GRM or something).

Bottom line: Unless it's a major system (like roof, electric, etc.), do not spend money on anything that won't directly increase the rent.