Owner Occupied Timing of Remodel / Cap Ex

[Tom Markoe]

Hi Folks,

I just closed on my first duplex in the Twin Cities.  I will occupy one unit.  Do you find it best to do capital expenditures prior to, while currently living in or after moving out?  (Ex: I would like to replace the old plumbing with PEX, I would like to add a bed/bath in the attic of the upper unit and water heaters and boiler are on the older end of their life cycle.)  What are the logical steps in which to do these activities most efficiently.  I also would like to know your thoughts are where to draw the line regarding pre-emptive activities versus squeezing more life from current situation and just being prepared to act when something gives out.

Thanks in advance,

Tom

[Mike Moe]

As far as being prepared to act when things give out, have a big enough slush fund where you feel comfortable being able to take care of the items that are nearing the end of their life. I've got a ton of water heaters that are 15+ years old. I'm not proactively replacing them, but I'm definitely accounting for them in my reserves. I've had mechanicals that are double the age than the typical life expectancy, so I have a tough time justifying preemptively replacing these. The exception, appliances. Appliance service calls will eat away your cash flow, and are very rarely under $200. As soon as I get to the point of the appliances getting service calls, I replace them. Replacing them is also a capital expense VS the operating expense of a repair.

As far as how do you sequence them, if both are vacant, turn one and get a tenant in there. As previously pointed out, you can rehab your unit while you live there, but not the best to try to do that with a tenant living there. Get the rehab done where you can get premium rents, get a tenant in there so you are at least 50% occupied, and start working on your unit next.