All Forum Posts by: James H.

Thanks guys.

Joel, I am doing the work myself. I do loose money on not getting the house rented due to only being able to work on the weekends, but I am still saving significantly more in labor than loosing in rent. I knew about rent loss rehab before starting and prepared for it as an expense. The area looks like fairly high turn over, but I am hoping to keep my tenants longer by screening and training and providing a quality dwelling. Nothing but basic fixtures. Nothing decorative. Nothing but the cheapest unless the cheapest is too flimsy. The one thing I spent a little extra on is the luxury vinyl tile. It cost about twice the cheap vinyl tile, but I am hoping it will last longer and it still wasn't much - $243 for the kitchen and bath, I do the install. Mainly I don't want tenants feeling like something needs to be added that requires them to put a hole of any size in anything. Except pictures.

Jason S. The HVAC is dirt cheap at 3K considering its a total install (no existing components or duct work). I do save some money by installing the 220 line to the outside compressor and the gas line to the furnace (already done). The only cheaper option is window units all around and that's still about 1500 to get them in each room with heat. But than I heard window units have short lifespans and are more expensive to operate. My philosophy (hope)is that I can raise rents easier if the tenant isn't paying an arm and a leg for utilities. It could be cheaper in other regions, but this is in Fort Worth and I doubt it. The $1,000 electric service upgrade will include a new 125 or 200 amp breaker box (depending on if I decide to go electric or not with the new appliances)and breakers, a new meter box, a new riser pipe and leads and the electrician to pull the permits and do all the work (side job for my workplace's admin's husband). It would normally cost 1.5 to 2 times that. The existing service is circa 1953 and has a Federal breaker box (fire hazard). I could do the work myself but cannot get around the permits as the power needs to be shut off at the street to accomplish the work. So since the electrician will charge me for the permits anyways, its cheap to pay him to do the labor while I work on something else (that doesn't require electricity). I'll probably just put gas dryer stackable since the gas line exists. Although part of the line (copper) needs to be replaced. Gas is a lot cheaper than electric and the cost AND HASSLE of running the dedicated electric offsets the savings on the electric appliance.

Bryan A. I know that putting 3 prong receptacles won't create a ground. But, If the plugs are not three prong, then the tenants will be plugging three prong adapters and such and creating more hazard in my thoughts. The ground wire connects to the same bar in the breaker box as does the neutral, so the system is still grounded. The third prong is like a dummy hole. The new plugs and switches I see as part of an inexpensive way to get things just a little more "right" during the painting process for not too much money. Mainly I don't like the idea of miscellaneous adapters the tenant might pick up at the dollar store. But I believe you that the tenants wouldn't really notice. I may reconsider by the time I get around to it and just put another coat of paint over those bad boys!

Steve, That's a good point. You know, I bough this house knowing it would rent for at LEAST 450 to 550/month and even that would be profitable. But the longer I work on it and talk to people from around the area, the more value there appears to be waiting to be tapped. I will definitely drop the price down if I don't get it leased within a month after finishing the rehab. Then I'll creep the rent up as they will come to appreciate the higher quality that I provide. Hopefully!

Well, I feel better as nobody has responded that I am crazy. Thanks a lot for your input. This site is great!

Hey Guys,

I recently bought a new rental property and am in the process of rehabbing it to rent it. Generally, I buy the lowest cost of whatever-it-is that I am replacing so long as it is durable. However, As I go through the house and become more familiar with it, I find more nit picky things that I just can't leave alone. Mechanical stuff is the main culprit. It seams this house has a leaky valve where ever there is one present and gas lines are piped in copper in some places!

But these are the big ticket items that I have (80 percent decided) on doing:

Central HVAC ($3,000)

Upgrade electric service ($1,000)

Replace 60 year old wall oven and cook top ($? new or good used)

Move dryer connection and install stackables to make more useable space in kitchen ($500)

Fresh light fixtures, switches and plugs throughout - old ones are only two prong.($300)

Miscellaneous - this is the one that gets me. There is a miscellaneous of like $100 to every $400 I do no matter how thoroughly I estimate ahead of time, or so if feels like it.

Paint in and out ($1,000)

So far I have gutted the bath room, installed new subfloor,underlayment and tile, sheetrock and FRP throughout, new toilet and sink vanity and shower plumbing, and purchased all the vinyl tile for the kitchen as well ($2,000 including $300 dumpster rental for garage demo).

I just can't leave this stuff alone as I do not want to crawl under the house again, or at least not any time too soon. I have the floor up in part of the kitchen and have easy (as easy as it can be) access to the crawl space. In the mean time, it is taking more time to do the work and costing more money up front. The house is 2 bdr and I only paid 12K for it. I am looking at about 8K with the HVAC, and add the kitchen appliances onto that.

I just don't feel right renting the house to someone else if I don't have a sound mind that these mechanical things are going to be reliable. I am midway though the project (labor not money) and am kind of freaking out about the money (although I am still in budget, it hurts to come out of pocket nonetheless)and I think I just need some positive words of wisdom, affirmation if deserving and general encouragement. Its my first deal. I am planning to put on market for $650/month. This is about 50/month above market for the neighborhood, but I know the house will be in better condition when I am done. Although I am doing the improvements to reduce future maintenance, it will be in better repair than most of the houses in the immediate area - so I think I can get a little higher rent - especially when it is looking all fresh.

Thanks everyone for your feedback. Charlotte, this might give you some encouragement.

I found my answer. I just bought a house for 12K (13K with closing and all paid cash no debt) from a wholesaler and am in the process of investing 8K (incuding an new total HVAC system). I took out a 5K signauture loan at 13.9 percent over 4 years to buy certain things and pay certain people cash as well as to have some cash for surprises. I am using my credit card at 11.9 precent to buy any supplies at homedepot. I am doing the work myself. The house will rent for about 600 to 700 / month when its ready (about 1.5 to 2 months because I am doing the work myself on this one - no choice!)

The neighbor will buy it right now as is for 20K cash. But I think I can make about 4K a year every year after expenses on the house until I am ready to sell it and it should sell for about 30 to 40K after the improvements I am making.

The best thing is that there is no mortgage to pay while rehabbing and if/when it goes vacant. Taxes and insurance come out to 100/month combined. Utilities will cost about 50/month while rehabbing and when vacant.

Now that I have an asset that is a true paid off asset, I could later on get an equity loan on the house and use that cash to find steep cash discounts on other properties. When I first posted my question, I was stuck in the world of the retail realestate and mortgage industry. I just had a huge eye opener on how much better this whoe realestate investement thing is with cash. And if I leverage properly with equity loans, I'll have the best of both worlds!

Of course, I will certainly stay vigilant on the first time home run and then strikeouts thereafter. That will be especially important if I pull an equity loan in the future to invest in another property.

I'm kind of thinking cheap cash vacant lot + cheap mobile home for the next one. Unless I can find a second deal just like my first one. I think there was just a little luck in this one, but I'll take it. Luck comes to those who work hard and are persistent.

For now I am concentrating on getting this thing to the rent market and once it rents I will put all my efforts into paying off the short term debt I have accrued to make it possible (with extra help from new rental cash flow). Then I will start saving cash again. I will continue to defer my student loans (6.5 percent interest) until my wife starts working and we will address them with her salary. That way we might get another property under our belt by then and the income from the properties should more than offset the student loan payments.

Thanks for the response Dave. I was thinking to use green board. Since my post I have been reading up on green board and it seams it doesn't have much real world advantage over plain sheet rock (just sheet rock with a wax coating?). However, the only reason I am considering NOT using green board is because there is already sheet rock in place. It might actually be plaster because the house is so old (1953). Thanks for answering my question!

I am about to renovate a bathroom in a low income rental. My main concern is the shower/tub. I think I want to use FRP panels just like what you find on gas station restroom walls in the tub surround (maybe the whole thing!). I think this could be trimmed around the window and be durable. The tenants can hang a thingy on the shower head if the need shelves in the shower.

If I use this kind of material (or even a cheapy plastic 5 piece tub surround) does it matter what is behind it (e.g. sheet rock, green board, etc.)?

Any other suggestions for low cost tub/shower fixes that accommodate an existing window in the tub surround area?

J Scott, I believe so. If you are referring to what they are calling the "title premium", than yes. The title company is doing / has done a title search and verified a clean title and the "premium" is to cover anything they didn't find that is published. Now I must say, the title company has about 4 pages of disclaimers regarding this "coverage", but I never signed an insurance form for anything that didn't have at least that many pages of disclaimers. My purchase price will be credited the prorated taxes to purchase date and then I will be responsible for the full tax balance to the county at the end of the year.

The taxes have been verified current. Also, the county tax records verify that this house has been within this family since built. It belonged to the guy's parents, they gave it to him, he died, the parents inherited the house back and are now selling it.

I don't understand how I might be on the edge of financial disaster. The house is paid for, is insured and I have a job of which I live below its means. If I loose my job, I will be on the edge of financial disaster even with 12K in the bank. Just not quite as close to the edge. And I haven't lost the ability to continue to save money.

The house could burn to the ground the day after I buy it and the insurance covers twice what I paid for it and I would still own the land and mineral rights (which means something with the Barnett Shale formation and gas lease potential that exists even for the smallest parcels in Fort Worth).

As far as rehab is concerned, if I have to pay someone 3000 in labor to get it on the market 2 months sooner, I'd rather loose 2 months rent than pay 3000. I figure its a simple cost/benefit ratio where I pay myself (on paper) a certain amount an hour (say 15/hour) to do the work.

I'm not scared to change toilets and get dirty. It might pay me 15/hour to do this sort of work for someone else (and I know it sounds crazy to most, but I enjoy the work and would do it part time for that much for someone else), but it will cost me more than 15/hour to have someone do the work. Contractors work on bid price and build in profit. I don't know anybody I can trust to work by the hour for me without me standing there with them-which would defeat the purpose.

I can flip this thing for 6000 now and try to find another deal while I look on weekends and evenings competing against full time investors (its taken me a year to find this one), or I can maximize this deal and make 3600 a year (using 50% rule) on it every year forever or until I decide to flip it for 6000....or more.

The fact that there is no mortgage is a huge plus for me to hold the property.

Thanks Aaron. I appreciate your opinions.

I started with the goal to buy and hold, but I certainly see your points.

My plan was to only buy properties at a discount such that they could be sold right away at a higher price in case I wanted. It seams that if I follow your advice, I would be selling everything the day after I bought it and would actually never rent anything. I would become a wholesaler in a sense. I have no problem with that, just not what I had envisioned.

I assume you would only keep a discounted property if you thought that it would have a lot of potential for appreciation?

Thanks for all the info guys. I had paid the deposit before the responses of using an escrow account. It is non-refundable expect if the seller backs out or the title is not clean. We signed the remaining papers at the title company and will fund the remaining balance once the seller gets an affidavit (because the owner died and the house passed up to his parents). I do have a contract with the whole seller so I suppose I have some recourse if she decided to screw me. Might spend more than 2000 to do it though. I will remember to request using an escrow account next time and hope this deal works out in the mean time. I think it will. We should be funding in 2 to 3 days.

I also don't think the other buyer was a ploy either. The neighbor told us again he would buy the house (as he thought he was going to from the other buyer) and the whole seller asked if I wanted to let her give the other buyer my number as he was asking for it. I told her no since I have is business card and don't intend to sell.

I am excited to get started and get someone in there and also a little scared. This is a big deal, being my first deal. Since the house has gas, I want to make sure everything is good and sage. There is a big wall heater in the living room, but since I will be putting in new window units, there is no need for it and I may remove it and seal it off. Also, the oven and cook top are from 1953 and require lighting with an outside source (lighter or match) I would like to replace them, but the wall oven is only 22 inches wide and the smallest one I can find is 24 inches...

Josh,

Thanks! I am still getting familiar with your website and I really appreciate your help.