Change windows in renovation

[Sherwin Vargas]

I know it has been asked before but i was hoping to hear from local people in Rhode Island -providence area. 

I like to give general information because i know I would be interested. Question at bottom 

Currently renovating a 3 family we bought back in Sept/Oct. Bought appliances for all floors. 

We did the minimal on first to get rental($2300). 

Did some small upgrades on second(laminate floors, paint, and bottom kitchen cabinets, counter  $5000). Completely redoing 3rd floor 

3rd floor needs everything complete gut. Kitchen bathroom dining room. Heating system floors. 

We are almost 20k in, atleast another 8k will be spent. We are out of money with that final 8k. we only expected to spend 15 to 18k. We didnt know the extent of the rehab as its our first and didnt research much. 

 My question is since half of the apartment is being renovated should we put up new walls in the bedrooms and living room and replace the windows (10) and insulate those walls if it will all be going on credit cards. Estimated cost 5-6k we will be doing alot of work our self and our contractor will replace windows since hes doing all the other work for 50 dollars each. 

Is it worth it for a rental. The windows are wooden single pane original windows. The bedroom walls in decent shape. Living room walls look very lumpy.

Silver springs area comps dont seem too high looks like we could get 1200 to 1300 

[Carlos Tavares]

Personally I would only because nobody wants to pay high rents with high utility costs, my coworker is going through that problem now, he’s renting an apartment but his November utility bills came in @$200 for a 2 bedroom, he’s not to happy with that, he also has old windows and no insulation, maybe others can weigh in on this, hope it helps 

[Frank Patalano]

@Sherwin Vargas

You mentioned alot so here are a few things.

Before you do any more upgrades to help with efficiency, I would call RISE Engineering through National Grid. They will do an energy audit and offer you a discount on insulation. No discounts for window upgrades. I've already asked. 

They spoke to the local investors group (RIREIG) a couple of month ago. They may be too backed up for this rental. Something to consider in the future.

When you say lumpy walls I am assuming Horsehair plaster.

If you are saying the Silver Spring area of East Providence, I think 2 bedroom unit for $1200 is higher than all of mine in the area so I think that you are doing pretty well.

Are the other 2 units already rented. I would probably do the windows now. Maybe you a 0% offer on a credit card.

Good luck,

Frank

[Anthony Thompson]

@Sherwin Vargas it's hard to say because I don't know all your #s, especially what you bought it for. I also don't know how "necessary" the new walls are

At this point it sounds like you may be in over your head. I would seriously sit down and look at "what is the minimum we can do to get this into a sell-able condition".

Sell-able doesn't mean "looks great and tenants/buyers will love it", it means "a buyer will walk through and think, this can be rented at roughly market rent", and won't think, "man this is a fixer upper I'm gonna need to dump money into to make it rentable".

Multis are, as I write this, still pretty hot. So I would get some updated realistic (not prayer-based) comps, and then compare what you could sell it for (including commission and costs of sale, of course) to what you'd still need to do in order to make it sell-able, and hope that the #s work out so you still make a little profit or break even.

You can do a buy and hold analysis too of course, but it sounds like you already have a sense of the market and have figured out what a lot of buyers haven't yet figured out - that multis are selling for prices that are unsustainable because the sale price isn't justified by the rents.

This is a risky phase of the market to be paying a lot for a rehab property and running out of money. My advice, again without really knowing your #s, is to take advantage of buyers overpaying while it lasts, do the minimal amount of work necessary to make it sell-able (yes even if you temporarily have to use credit cards to fund that work) and then sell it.

[Mike McCarthy]

I think you'll want to pay for new windows at some point, but maybe you can get by for a few years without it.  Some ideas to help:

* Let the tenants know that you know the house isn't well insulated, and you'll compensate them $200 per winter season for the poor insulation.  $200 over a few years is still less than the window replacement and insulation, and makes it 'right' with your tenants.

* Install that plastic over the windows that gets shrunk with a hair dryer each fall.  It helps insulation, and helps the utility bills.

I think there are a lot of things you can do cheaply to help with the insulation on the property.  You might have some turnover due to high bills, but hey, it's an old house...

[Sherwin Vargas]

sorry i think some misunderstandings i will clarify a few things. 

Apartments are about 1000 sq ft and 3 bed 1 bath. 

Also not looking to sell the building just renovate and rent apartment. 

We paid 250k for a 3 family 3 bed 1 bath each floor. Definately expensive but i also moved to one floor because i moved back to providence from rhode island. 

With 2 floors rented (me and tenant). Cashflow -300 a month all bills and utilities. 3rd floor once renovated will bring in the positive cashflow. 

My question is would old windows in living room and bedrooms hurt rental prices. 

And yes all rooms and livingroom horse hair. Bedrooms in good condition living room not the worse i have seen 

[Sherwin Vargas]

@Mike McCarthy how has that worked? do you feel it makes a different or only a different the month they receive that credit. 

my first floor tenants have had the heat constantly 75-80 since they did not pay heat at their last apartment. they installed the plastic wrap around the windows themselves. I was thinking of offering to pay some of their first month heat bill since I know it is going to come in extremely high. 

[Anthony Thompson]

@Sherwin Vargas thanks for the extra information. No, old windows will not hurt rental prices because tenants will not pay more for new windows. All a tenant really cares about is, are there windows, and (maybe) will those windows stay up or will they fall down and need to be propped up to stay open.

However, depending on the old windows you may not be able to get a lead certificate, which you need to legally rent an apartment in RI. If you have old wooden windows, the lead inspector won't bother to take swabs, they'll simply fail you for old wooden (friction) windows. I believe you're fine with old vinyl. But you said you had old wooden.

Aside from the fact that it's the law, with 3 bedroom units chances are better than even that you're going to have kids in those units. So if it was me, I would view putting vinyl windows in as an absolute necessity.

The liability of not having the lead certificates is too huge. If there's a child who lives in the unit who has an elevated blood level, even if it came from outside the unit, and you don't have the certificates, you're going to be target #1 and you won't be covered by insurance without the certificates.

So just on that issue alone, yes, even if you have to put it on credit cards, I would get those new windows in, on all the units you're renting out.

[David Sisson]

Get the windows done - for the reason Anthony said. Shop around for windows on cost - I like Pella myself, and you can get SINGLE hung cheaper than DOUBLE hung. The advantage of single hung is that the top pane does not move on single hung which means that your idiot tenants won't struggle with closing the window when the top pane moves down a tiny bit. The disadvantage is that you can't clean the outside of the upper pane very easily unless you are on a ladder. You can also put in some fixed pane windows - even cheaper - here and there (NOT in the bedrooms though...). of course, fixed MUST be cleaned from the outside. 

[Max T.]

single pane windows no bueno