What steps would you follow to do a Rehab on a rental property you have just purchase

[Clint Jusino]

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

[Dan M.]

Switch #2 with #3/4 and add in 1a) Plumbing  

[Clint Jusino]

Quote from @Dan M.:

Switch #2 with #3/4 and add in 1a) Plumbing  

 Thanks so much Dan! Much appreciated. There is some plumbing that I know will need to be updated. The outside drain still has some cast iron pipe with some small tree roots in it and I plan to get a plumber to clean and reline the pipes with that blue stuff.

[Bruce Woodruff]

You'll need a permit and maybe some drawings (?). And like @Dan M. said, painting will come later - should be last thing actually. Get the floors and trim done, then let the painters do their thing.

Are you moving/deleting any walls? Structural? This is a good time to open up the place and make it 'great room'.

IMO, this is way more than $40k Rehab cost...you're almost doing a complete 'to-the-studs' remodel here.....Hint - you'll need to run a ground to every outlet and switch, plus adding a lot of outlet locations and in some rooms it will be easier to just demo the drywall. The electrical alone will cost you $20k...

Don't coat the old sewer line, just do all new...I never had a great experience with the re-coats, better to just run new ABS and be done with it.

You're only allowing $125 SF for the ADU....I know it's Texas but I doubt that gets 'er done.

PM me if you need more help, I just think you're a little off on your budget.

[Dan H.]

Quote from @Bruce Woodruff:

You'll need a permit and maybe some drawings (?). And like @Dan M. said, painting will come later - should be last thing actually. Get the floors and trim done, then let the painters do their thing.

Are you moving/deleting any walls? Structural? This is a good time to open up the place and make it 'great room'.

IMO, this is way more than $40k Rehab cost...you're almost doing a complete 'to-the-studs' remodel here.....Hint - you'll need to run a ground to every outlet and switch, plus adding a lot of outlet locations and in some rooms it will be easier to just demo the drywall. The electrical alone will cost you $20k...

Don't coat the old sewer line, just do all new...I never had a great experience with the re-coats, better to just run new ABS and be done with it.

You're only allowing $125 SF for the ADU....I know it's Texas but I doubt that gets 'er done.

PM me if you need more help, I just think you're a little off on your budget.

I am not familiar with Texas pricing, but I have done many BRRRRs. None of mine have been as extensive as what you describe. Unless the OP is doing a lot of the work themselves, this will be far more than $40k rehab.

Hands off Garage ADU conversions in my market are over double the price the OP specified. I suspect even in Texas a hands off garage conversion ADU addition will be double what the OP specified ($40k to $50k). If the OP does a lot of the work themselves, then they may be able to do it for close to the OP specified price. In 2019 my protege added a 1 BR garage conversion for just over $50k in southern CA, but he acted as GC and did virtually all finish work himself. His quote hands off (using a GC and having all work done by contractors) was $110k (over 4 years ago, it would be more now).

My view is the rehab budget needs to be about 50% higher. My view is the ADU budget needs to be doubled if the OP is not going to actively work the ADU addition.

Good luck

[Matthew Paul]

@Clint Jusino You dont say what size house , but from your description of the work , I have to agree with everyone else , your estimates are way low.  Unless you are doing everything yourself . 

Once you start other things are going to show up . And it will snowball . 

What about the roof ?   Windows ?  Siding ? 

[Clint Jusino]

Quote from @Bruce Woodruff:

You'll need a permit and maybe some drawings (?). And like @Dan M. said, painting will come later - should be last thing actually. Get the floors and trim done, then let the painters do their thing.

Are you moving/deleting any walls? Structural? This is a good time to open up the place and make it 'great room'.

IMO, this is way more than $40k Rehab cost...you're almost doing a complete 'to-the-studs' remodel here.....Hint - you'll need to run a ground to every outlet and switch, plus adding a lot of outlet locations and in some rooms it will be easier to just demo the drywall. The electrical alone will cost you $20k...

Don't coat the old sewer line, just do all new...I never had a great experience with the re-coats, better to just run new ABS and be done with it.

You're only allowing $125 SF for the ADU....I know it's Texas but I doubt that gets 'er done.

PM me if you need more help, I just think you're a little off on your budget.

Thanks Bruce for the tips/advice. I have a friend who have multiple rental properties and he's selling me this one to help me get started. He said the rehab would roughly be 30/40k. I plan to rehab the kitchen and bathroom to make it more modern. I had no clue rewiring the whole house would be 20k! That's alot. I guess I'll get bid and will try to stay under budget. The goal is to BRRR this house.

As for the ADU, It will be my 2nd project. It was a thought to turn the 1.5 garage into a small living place that maybe I can airbnb or have a studio place setup. Thanks for your thoughts and input!

[Clint Jusino]

Quote from @Matthew Paul:

@Clint Jusino You dont say what size house , but from your description of the work , I have to agree with everyone else , your estimates are way low.  Unless you are doing everything yourself . 

Once you start other things are going to show up . And it will snowball . 

What about the roof ?   Windows ?  Siding ? 

 Hello Matthew. It is 1500 sq ft home. The roof was replaced in 2018. The house is all brick. It is also a pier and beam structure. I plan to have contractors do the work. I'm in IT and am not a handyman at all. :/

[Bob Stevens]

Quote from @Clint Jusino:

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

 Your GC will know, do not over think it, Watch and learn 

Good luck 

BTW NO painting before demo

FLOORS ARE THE LAST THING you do. 

[Steve Vaughan]

I have some 1960s places and even though the outlets were 2 prong, or 3 but showed 'ungrounded', they had standard copper 12g w/ ground wiring.  They were just grounded to the receptacle box back then.  You may just need new receptacles vs re-wiring the whole house.

Open them up to see if the ground is just in the receptacle boxes. A major electrical expense has basically no ROI. No demo reno is the way to go.

[Clint Jusino]

Quote from @Bob Stevens:

Quote from @Clint Jusino:

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

 Your GC will know, do not over think it, Watch and learn 

Good luck 

BTW NO painting before demo

FLOORS ARE THE LAST THING you do. 

 Thanks so much Bob. Your right! I'm way overthinking it. Do you suggest to go with a GC? Or hire a specialist for each project? For example an electrician, a floor guy, a painter, etc.?

[Clint Jusino]

Quote from @Steve Vaughan:

I have some 1960s places and even though the outlets were 2 prong, or 3 but showed 'ungrounded', they had standard copper 12g w/ ground wiring.  They were just grounded to the receptacle box back then.  You may just need new receptacles vs re-wiring the whole house.

Open them up to see if the ground is just in the receptacle boxes. A major electrical expense has basically no ROI. No demo reno is the way to go.

 Thanks Steve! I'll def take a look. I was thinking of doing that exact same thing from what the inspector told me. I appreciate the tips/advice! Did you update your hvac as well? It's an old school one but still holding strong. Your thoughts? I assume a new HVAC will increase appraisal?

[Steve Vaughan]

Quote from @Clint Jusino:

Quote from @Steve Vaughan:

I have some 1960s places and even though the outlets were 2 prong, or 3 but showed 'ungrounded', they had standard copper 12g w/ ground wiring.  They were just grounded to the receptacle box back then.  You may just need new receptacles vs re-wiring the whole house.

Open them up to see if the ground is just in the receptacle boxes. A major electrical expense has basically no ROI. No demo reno is the way to go.

 Thanks Steve! I'll def take a look. I was thinking of doing that exact same thing from what the inspector told me. I appreciate the tips/advice! Did you update your hvac as well? It's an old school one but still holding strong. Your thoughts? I assume a new HVAC will increase appraisal?

No HVAC for me if what's there is strong.  Appraisals are based on comps so probably negligible value diff. 

[Bruce Woodruff]

Quote from @Bob Stevens:

Depends on the project...but I would usually have the flooring guys get finished, and then install case & base molding. Because you cant install base until floors are in, and you can't install case either.

[Bruce Woodruff]

Quote from @Clint Jusino:

If you're going to act as Owner/Builder, you had better be really knowlegable, and you already said you are not, right?
Just get a GOOD GC and let them roll.

[Bruce Woodruff]

Quote from @Clint Jusino:

Ask him to put that in writing and guarantee that he will pay anything over that amount. See what he says...... :-)

[Caroline Gerardo]

$40 is not going to cover your phase one plans. Changing garage to ADU is not going to give you much value in a residential appraisal- cost will be four times the valuation.

[Kristi K.]

Quote from @Clint Jusino:

 I'm guessing around 30-40k in rehab. 

As a lot of others have said already, your guess is way low. You will be closer to $90,000 if you do this the right way and I'm not talking about the ADU being included. Best of luck. I would really like to hear your story in a few months on how this turns out. It's worth doing if you are buying at the right price, just don't get in over your head and lose money.

[Clint Jusino]

Quote from @Bruce Woodruff:

Quote from @Clint Jusino:

If you're going to act as Owner/Builder, you had better be really knowlegable, and you already said you are not, right?
Just get a GOOD GC and let them roll.

Sounds good. I appreciate you!

[Clint Jusino]

Quote from @Caroline Gerardo:

$40 is not going to cover your phase one plans. Changing garage to ADU is not going to give you much value in a residential appraisal- cost will be four times the valuation.

Thanks Caroline for your input! How much would you say to renovate the kitchen, master bathroom, flooring and painting would cost roughly?

I understand about converting the detached garage to an ADU. I was thinking of doing it to create additional cash flow like making it a short term rental like an Airbnb. Any ideas on how much it would cost to build out the ADU? I was thinking 40 to 50k.

[Clint Jusino]

Quote from @Kristi K.:

Quote from @Clint Jusino:

 I'm guessing around 30-40k in rehab. 

As a lot of others have said already, your guess is way low. You will be closer to $90,000 if you do this the right way and I'm not talking about the ADU being included. Best of luck. I would really like to hear your story in a few months on how this turns out. It's worth doing if you are buying at the right price, just don't get in over your head and lose money.

Thanks Kristi for your thoughts and feedback! 90k?! Wowsers! I wasn't expecting that amount. I've been watching alot of YouTube videos and I would be doing a level 2 rehab in which they say will be roughly in the $20 - 30 per sq ft. I'll def keep you posted on the progress and updates. I know a few contractors who have worked on my primary home and plan to work with them since I know they do good work.

[Caroline Gerardo]

1. permits, drawings, planning desk ok $1500  https://ecode360.com/40188698 know the codes 

2.Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

$9500

3) Demo kitchen and bathroom

$1500

4) Renovate kitchen/bathroom

$44000

5) install new floors

$11000 plus base boards $600

6) input new appliances stove/oven, refrig., microwave, diswasher washer dryer

$10000 plus the GFI and power outlets $300

7) input new light fixtures

$3000

 painting of the whole house

$4100

Clean up $ 400

temporary toilet $500

temp power?

security, fencing, a guard dog inside or someone stays there at night 

$1500

carry cost of your loan/tax/insurance

$?

landscaping the front 

+$

making it have curbside appeal

+$

needs new air and heat and venting

$8000

All plumbing fixtures will not be easy to retrofit, better to rip it all down.

How does the shower pan and tub floor look? Sub floor?

Water drains?

Sewer line? Any big trees on or in water and sewer? You say cast iron- rip all that out and replace NOT reline it will fail in 9 months

Marketing and waiting carry costs

Contractor profit 10%

Or are you handy enough to order everything and replace the electrical panel?

Returns of items that don't work/ don't fit

Smoke and carbon detectors $100

If you really want to make the garage an ADU ask the planning desk now and research if you need separate electric panel - do you need certain parking set backs or a carport? What is the concrete floor like in the garage? Is the slab okay?

[Nicholas L.]

I like @Caroline Gerardo's estimates

a lot will depend on the exact size of the rooms - larger bathroom = higher rehab amount etc.

when i hear people saying a 'rehab' for 20K or even 30K I don't know what they mean

clean-out, paint, carpet, floor and appliances you're looking at 15K right there - you start adding kitchen, bathroom(s), electrical and you go way up

and then there's landscaping, decks, driveways.....

it adds up

[Caroline Gerardo]

Quote from @Nicholas L.:

I like @Caroline Gerardo's estimates

a lot will depend on the exact size of the rooms - larger bathroom = higher rehab amount etc.

when i hear people saying a 'rehab' for 20K or even 30K I don't know what they mean

clean-out, paint, carpet, floor and appliances you're looking at 15K right there - you start adding kitchen, bathroom(s), electrical and you go way up

and then there's landscaping, decks, driveways.....

it adds up

 single story 1960's Desoto 1790 square feet is my GUESS, he didn't say... so if larger add zeros

[Alan F.]

Quote from @Clint Jusino:

Hello BP Fam! I'm under contract on my 2nd rental property. This will be my first rehab project and I plan to BRRR this rental property. I would like to know if anyone has experience with this and what steps would you take from start to finish. For example, get electrical up to date first since its a 1963-style ranch house. The bathroom and kitchen are 1960s style and I plan to get some contractors to demo/rehab it to make it more modern. I'm guessing around 30-40k in rehab. Also does anyone know of any private investors in the Dallas area? A coworker of mine maybe interested but I like to have backup just in case he bails on me when it's time to actually lend me the money. The property is in Desoto, TX, and would be happy to show to anyone who has experience with Rehabs. It also has a detached garage roughly 300sq ft that I plan to turn into an ADU after I do a cash-out refi to have the funds to fix it up (estimating 40-50k). Thank you everyone!

Steps I was thinking of following:

1) Get electrical up to code since its all 2 prong outlets and the panel is way outdated.

2) painting of the whole house

3) Demo kitchen and bathroom

4) Renovate kitchen/bathroom

5) install new floors

6) input new appliances

7) input new light fixtures

8) etc.

 Texas doesn't have a state general contractors license; plumbers, electricians and HVAC are required to have staye licenses. Subsequently they're required to have bond and liability insurance.

https://www.procore.com/library/texas-contractors-license

TDLR licensing

https://www.tdlr.texas.gov/

Desoto building dept. For permits 

https://desotomo.com/departments/animal-control/

I would suggest you vet any GC very carefully, make sure their plumbers, electrician and HVAC are state licensed.

I'd also suggest permitted work for liability and equity purposes.

The electrical will be dependent on what code cycle of the NEC that Desoto has adopted.

Its doubtful an old HVAC is performing adequately relative to its installation let alone relative to current requirements. The building dept and a licensed HVAC contractor will be able to elaborate. 

Same goes for Electrical as the codes are changed annually.  FWIW "outlets" are either grounded or non grounded receptacles. There's no "prongs" lol.

More than likely smoke alarms will have to be hardwired on a dedicated circuit with an interlocking wire.

When the panel is upgraded a main building ground will be required under article 250 of NEC. That will help for grounding and bonding of the system. GFCI protection will also be required and possibly AFCI dependent upon code cycle.

Make sure the plumber double checks backflow and anti scald codes. Also have him check the DWV (drain waste and vent) so no methane back ups are present. 

Texas is notorious for foundation issues so pay attention to that.  Then any framing and structural. 

Sheetrock and the rest is just eyeliner and mascara.

Remember your building something people sleep in, if you wouldn't live in it then no one else should.

Very best of luck and hope theres many more!

[James Murphy]

Contractor quotes can differ significantly, so I always try to obtain at least three quotes for any project. It's important to confirm whether the quotes you receive are fixed bids (with approved change orders) or just "estimates" that may increase as the project progresses. In my experience, contractors who have previously worked with investors tend to be more proactive in controlling any additional costs that may arise during the project.