Should I get new cabinets, toilets, etc?

[Sam Zawatsky]

So, I’ve got this rental property, was currently renting at 1000 per month, but I am trying to get 1400-1500 per month now. It has cabinets that are original, 45 years old. The cabinet under the sink had water damage to the base, and I have the option of just repairing that and painting the inside of it. Or I could just get all new cabinets top and bottom. Which would you do? Also, the toilets are old, probably 15-25 years old. Do you recommend just getting new toilets put in, because I am having the old really worn and poorly laid tile floors replaced with full LVP so they would need to be reseated anyway. I was eyeing the American standard cadet 3 toilets if I was to replace.

[Bruce Woodruff]

Quote from @Sam Zawatsky:

I'm still getting quotes for painting the cabinets vs getting new ones. So far, a company quoted me $3200 for painting, vs $6500 to install new plywood cabinets. I think this is all far too expensive, and I'm thinking now I'm going to go  there and paint these cabinets myself over a weekend for closer to $200 . Do these numbers sound normal to everyone? To me, it sounds really expensive. I haven't priced out the home depot or Ikea cabinets yet, but I would expect around 2000+1000 for install

Please do not paint the cabinets yourself! There is zero chance of having them look even decent. When painters paint cabinets the correct way, they spray an enamel, both for looks and durability. 

at this point, and after getting everyone else's input, like Dan H says, I think you should just clean it up real good and re-rent it, it's looking like it's not worth it....

[Sam Zawatsky]

@Dan H.

I have no loan on the property, as I bought it with cash and have been slowly doing rehab while there was a very messy tenant family living there. The property was falling apart  while they lived there, and it was difficult for me to get them out of there, as I was consistently getting the rent, albeit late most months and the property was falling further and further into disrepair. It had never been maintained or had any real repairs done since it was built in 1979. So now that it is empty, I have been doing as much work as I can myself, such as painting all the walls, replacing damaged bricks, drywall repairs, AC duct repairs, plumbing repairs, and simple electrical stuff to save money, but do not feel like I have the woodworking skills needed to install cabinets or siding and have it come out looking professional and clean. Also, I have been extremely dissapointed with how high prices are to have people work on stuff, and then the cheaper guys seem to have horrible work quality. Considering the purchase price in 2022 of 32k, and my additional costs so far of 27k for  new roof, new septic, major electrical repair, AC repair, garbage removal, lawyer fees, and lots of miscellaneous, that puts me at 59k so far. Then I am expecting another 20k-25k for these most recent improvements, depending on the option and pricing of getting new cabinets or not. So I am going to be at 85k total all in cost, but have a mostly low maintenance rental at that point. The price that the house would sell for once I get it to that level is around 170k, and I know I could at least get 1300 in rent for it. but hoping for 1500. I feel as though these repairs/ improvements are needed, because the condition of the property previously when I was getting the 1000 in rent I feel was unacceptable and a liability. I would like to refinance with a conventional loan, but I am looking to use a conventional loan in the next year on a different house I would live in for a while and then rent out and buy another. So I don't want to get a loan on this one yet at these current interest rates which I am not impressed by.  I originally planned to get a refinance loan on this house when rates were 3-4%, but the property was in such bad shape the banks kept rejecting my requests for loans once they saw the condition of the property, and I couldnt qualify for insurance at that time. Currently, I am not in a massive rush to get a loan on this property, but I would jump on it if interest rate were low. And I am now researching how best for me to repair and paint these cabinets myself! It seems like it would be around 2000 for decent quality RTA cabinets delivered from online, then probably 1500 for someone to install them. So its either 300 for paint materials and my time/ labor for painting/repair. Or 3500 for new cabinets + install. 

[Gino Barbaro]

@Sam Zawatsky

Make sure you can "get" 1400-1500. This will be a huge factor when trying to invest in rehabbing the unit. 

If you can't achieve those rents, you may be able to reface the cabinets, and paint the boxes. Old cabinets are usually made with better quality.

New toilets are much more efficient with water, and not very expensive. A new vanity is also an inexpensive upgrade.

[Lanee Johnson]

@Sam Zawatsky

If you do land on painting the kitchen cabinets yourself, here is a good instructional guide on DiY process https://www.younghouselove.com/mauve-kitchen-cabinets-hidden. These folks are great budget friendly DiY rehabbers (they're actually friends of mine) who also had an HGTV show. Good luck and don't get discouraged. REI is not about avoiding problems but finding creative solutions!

[Dan H.]

Quote from @Sam Zawatsky:

@Dan H.

I have no loan on the property, as I bought it with cash and have been slowly doing rehab while there was a very messy tenant family living there. The property was falling apart  while they lived there, and it was difficult for me to get them out of there, as I was consistently getting the rent, albeit late most months and the property was falling further and further into disrepair. It had never been maintained or had any real repairs done since it was built in 1979. So now that it is empty, I have been doing as much work as I can myself, such as painting all the walls, replacing damaged bricks, drywall repairs, AC duct repairs, plumbing repairs, and simple electrical stuff to save money, but do not feel like I have the woodworking skills needed to install cabinets or siding and have it come out looking professional and clean. Also, I have been extremely dissapointed with how high prices are to have people work on stuff, and then the cheaper guys seem to have horrible work quality. Considering the purchase price in 2022 of 32k, and my additional costs so far of 27k for  new roof, new septic, major electrical repair, AC repair, garbage removal, lawyer fees, and lots of miscellaneous, that puts me at 59k so far. Then I am expecting another 20k-25k for these most recent improvements, depending on the option and pricing of getting new cabinets or not. So I am going to be at 85k total all in cost, but have a mostly low maintenance rental at that point. The price that the house would sell for once I get it to that level is around 170k, and I know I could at least get 1300 in rent for it. but hoping for 1500. I feel as though these repairs/ improvements are needed, because the condition of the property previously when I was getting the 1000 in rent I feel was unacceptable and a liability. I would like to refinance with a conventional loan, but I am looking to use a conventional loan in the next year on a different house I would live in for a while and then rent out and buy another. So I don't want to get a loan on this one yet at these current interest rates which I am not impressed by.  I originally planned to get a refinance loan on this house when rates were 3-4%, but the property was in such bad shape the banks kept rejecting my requests for loans once they saw the condition of the property, and I couldnt qualify for insurance at that time. Currently, I am not in a massive rush to get a loan on this property, but I would jump on it if interest rate were low. And I am now researching how best for me to repair and paint these cabinets myself! It seems like it would be around 2000 for decent quality RTA cabinets delivered from online, then probably 1500 for someone to install them. So its either 300 for paint materials and my time/ labor for painting/repair. Or 3500 for new cabinets + install. 

 >I know I could at least get 1300 in rent for it. but hoping for 1500

I always do underwriting with the conservative range.   At $1300 rent, using 50% rule that is $150 a month of additional cash flow from the rehab.  I have to believe there are easier ways to make that money.  

Note many of your items in this project are not related to health and safety.   I would swap toilet seats because those were disgusting but I would only swap the toilets if the water was in your name and not the tenant’s name.  In general repair only what is necessary and replace only what is necessary and cannot be replaced. 

We do this to make money. the margins on this property are tight.  The tenant flips have to be performed being budget conscious.  

As for not having a loan, that implies no leverage. ARV is $170k. I will use $140k value doing minimum to make safe and not in constant need of maintenance.

$1k rent using 50% rule places with no leverage provides $500/month cash flow or $6k year.  I believe at that low a rent point your expenses likely exceed 50% of the rent but I will use 50% rule.  This means cash flow is producing 4.3% ROE.   Note in a decent appreciation market I may accept this cash flow return but I would still need to have leverage to magnify the return.   In a market where units have a value of ~$140k, the appreciation is not likely to help this return significantly. 

Using $1300 rent with no leverage and an arv of $170k provides $650 cash flow with 50% rule.   This route requires a larger rehab budget and more work (and risk).  It Provides 4.6% ROE.  Again appreciation is unlikely to be a big help but there will be more sweat equity than the minimum Approach.  

Your numbers are very tight regardless of which path you take.  Residential RE is not passive.  Is this return worth the effort involved?  Only you can answer the question for you.  I know the answer for me.  

Good luck

[Verna Littleton]

Definitely new toilets and I would do the cabinets as well.  It will pay for itself in the long run.  A renter will be just as picky with a rental as they would be if they were buying it.