All Forum Posts by: Ori Skloot

@Jonathan Pflueger good question.   Typically, the bigger the square footage the more the price per square foot should drop because the cost of the kitchen, electric meter, hvac system, etc is then spread across more square feet.   

@Steve Vaughan  Good Point!  I did my underwriting at the actual  property management fee of 8% plus 5% for vacancies.  Moving forward I like the idea of adding some "apathy" percentage points the management cost.  I think an additional 5% cost is reasonable.

@Matthew Paul   Thanks for the good point.  My rate with workers comp and withholding is around $33/hr.   That's the number I used to get $6,500 in labor.   I pay them a very nice bonus at the end of the year, so realistically it's probably more like $35/hr, so my labor cost for the job would be around $7,000.   

I live in California and own some properties in Texas.  I hear a lot of people talking up out of state investments.  I'm sure it works for many folks, but I'll give a counter-point here. 

I have a highly vetted, and highly recommended property manager for a property in Katy, Texas.  I got the email below from him on March 26th, 21 days after the rent due date (rent is officially late after the 5th).   I would say his answer sounds reasonable, but there is no way I would wait 21 days myself to verify whether the tenant had left the apartment.   They also had called and emailed the tenant and not gotten any response, so they had a heads-up that something was wrong.  

My obvious point is this: a property manager will not care nearly as much as an owner about maximizing the rent and ensuring minimal rent losses from from move-outs and skipped tenants.  Lesson learned: put in writing ahead of time to my property managers that I want to be notified whenever a tenant is more than 5-days late on rent.  Or, get in writing their policy for how they handle late payments, and if I don't agree then request an alternative that meets my needs.

Here is the email from my soon to be former property manager: 

"Ori,

As you know, the tenants did not pay the rent for March on or before March 3rd. On Monday March 5th, they were mailed the Statutory Demand Notice For Non Payment Of Rent. We waited the required three days, with no rent received, prior sending them to the Eviction Attorney to File For Eviction. The Attorney mailed the Notice on March 20th, that he was Filing an Eviction for Non- Payment of Rent. Once we were notified the attorney sent his notice, we scheduled an inspection for today 3/26/18 to verify if the tenant was still in possession. The Tenant had Skipped. The Attorney was notified of the skipped tenant and waived his fees as he didn’t have to appear in court.

We have been using this method for Filing Evictions for about two years and have found it to be very successful in getting past due rent collected. We seldom have to evict tenants anymore. In fact , we have not had an eviction since last summer. What normally happens is the tenant comes to the office very quickly with Certified Funds when they receive the Attorney’s Letter.

The tenant that skipped on their lease for your property already have their delinquent history reported to Experian – we automatically upload tenant ledgers to Experian every night. Any delinquent rent show on the tenants Credit Reports. Tenants that pay on time get Positive Reviews on their credit reports.

In addition, these tenants will be sent to a collection agency if they do not pay the balance due which includes the past due and remaining rent due on their lease.

Please contact me should you have any additional questions. Thank you so much."

I've gotten a lot of questions lately about rehab and renovation costs.  I think it's very tough for new people to understand the real cost of renovating an apartment, house or building.  I also see a lot of posts from wholesalers where there rehab cost is way underestimated (of course).   I just finished a quick rehab of an apartment in one of my buildings and I thought it would be of interest to see my actual costs. 

A few things to note:

• I had two of my own employees who know construction do the work.  I pay each one $27/hour.   If you hire a handyman in the bay area you will probably pay $35-50/hr depending on skill level and the trade involved.
• This work was done in Richmond, CA.  I think the pricing should be approximately the same around the rest of the Bay Area.  Perhaps it would be a little higher in the South Bay or Peninsula.  
• I wasn't aiming for a high-end look, but I also feel that if I'm already putting in the effort then I might as well put in decent materials and invest in doing it right.
• This apartment is pretty small, 500 square feet.  It was a 1-bedroom apartment with a weird living room space that didn't feel functional.  I turned it into a 2-bedroom apartment that now does not have a living room.  
• This renovation took 2.5 weeks for two guys

Scope of Work

• Demo and gut entire kitchen, gut one bedroom, and partial gut of bathroom
• Build new closet and frame out a wall to create a bedroom
• Install new laminate flooring in two bedrooms
• Install new subpanel and new electrical for entire apartment
• New (and some reused) cabinets
• New quartz countertop
• New (but bought used) 24" range
• New microwave and fridge (new fridge not shown in photos)
• New toilet, medicine cabinet and vanity light in bathroom 
• New built-in kitchen table and chairs

Cost of Work (approximately)

• Labor $6,500
• Cabinets $2,000 - I bought some nice, used Ikea cabinets from Craigslist for a previous job and I had some left over. I decided to use the left-over cabinets for this job. They are higher-end then necessary for this apartment. The extra cabinets I needed in order to complete the design ended up costing $2,000. I would say this was the biggest splurge for this project. It was a pain in the arse to run to Ikea and figure out how to piece together
  
• New Laminate wood flooring - $.089/square foot.$300
• Used 24” oven and apartment size fridge.$900
• Microwave, Sink, faucet, sink hardware $600
• Quartz Countertop (one 10 foot slab)$300
• Electrical Materials: wire, receptacles, lights, etc..$400
• Baseboard (had it left over from another job so $0, but would have cost around $100)
• New interior door, wood studs, drywall, mud  $300
• Paint $100
• Dump Fees $500
• Misc stuff I’m probably forgetting $500

TOTAL COST $12,500
Rehab cost per square foot = $25

@Derek T. I appreciate the question because it's such an unknown for most early investors.  Plus, the prices can vary wildly, even in the same location. For example, your concrete price is dirt cheap, or should I say "rock bittom", ;).    I would love to meet your concrete sub.  Or is that the price of your own crew doing the work?

Here are a few of mine off the top of my head. I work in the East Bay (Berkeley, Oakland, etc). These are subcontractor prices, cheaper if I have my own guys do it. 

New shingle roof - $6-8 per sq ft 

New high efficiency furnace and all new duct work with 8 reagiters - $5000-7000

New high efficiency tankless water heater with new 1" gas line. $3500-5000

New hardwood flooring with stain - $10 per sq ft. 

Solar system - $3 per KW

I've got a long list of pricing in an excel doc where I can input rough info on a house and get my rehab costs in about 5 min.  I'm around 95% accurate these days, but when I first started I usually went 10-20% over budget when working on my own properties.  (Yup, contractors go over budget even on their own houses).  For newbies I recommend adding 20% on top of estimated  budget whenever penciling out repair costs.  

@Chris Mason the man who gets to the point. Care to expound in your comment?

I'm thinking that your numbers and those of other respondents doesn't include any soft costs (design, permits, utilities to the parcel, etc).  Looking at only the build costs can be deceiving.  I haven't seen a decent med/high level spec build in the local Bay Area (not sure about Scotts Valley) for under $300/sqft in a while.  I would say more commonly would be $400/sqft all-in. 

I have used @Jenifer Levini as my attorney for several deals.  She is awesome.

I'm also in the CRM hunt.   For my construction company we use Salesforce, but it's too expensive and overwhelming for what I want to do for my real estate business.  I have taken a closer look at Wholesalehacker.com so far and received great customer service from @Michael DeFrancisis.  I like what he built and I'm trying to figure out if it's the right CRM for how I conduct my business.   @Elizabeth Wilson please do let us know which platform you choose.  I'll keep you posted on my progress as well.