How much to spend on home repairs

[Alexander M Stanton]

Hey all,

My partner and I are looking at buying our first investment property (a three-family) in Worcester and trying to estimate CapEx for repairs.

The house we are leaning towards is pretty solid- we see around a 7-8% cap rate with the in-place rents and it is fully tenanted.

However it needs extensive repairs on the siding around the back side of the house, as well as some general cleanup of the backyard/driveway.

It’s clear the current owner has not cared to take good care of the property as there are several minor repairs needed inside the second unit in addition to a big pile of trash in the back yard, plywood in place of siding in one section of the house, and several boarded up windows and doorways that appear to be remnants of a section of the house that was removed - likely a previous back porch setup for each of the three floors.

There also appears to be asbestos underneath the wood siding - I’m not sure if this indicates we might need to remove ALL the siding and asbestos and redo the entire exterior or not.

I haven’t measured the exterior yet but will be doing so this week, I’m just wondering if anyone has advice on what to expect or how to ensure we don’t get screwed by contractors if we do move forward with this property.

Would you recommend making a lower offer on the property citing our own estimates on the repair costs, or offer more with the contingency that we may reduce our offer based on inspectors report and contractors estimates?

And, should we be trying to perfect the exterior or just call it “good enough” as the current owner clearly has?