Knowing what to rehab, how much you spend and how far you go with it is a moving target. Always keep in mind that you are not living here, tenants are. You need to rehab according to the market that your rental property is in. This means the socio-economic market. You don’t put $50/yard carpet in a rental that is located in an upper low end neighborhood. Likewise you don’t put indoor/outdoor carpet in the living room either. This is a skill you will develop over time. My intention here is to help you shorten the learning curve and avoid as much expense as possible.
So let’s go over the basics. First we’ll discuss carpet since we mentioned it above. In these rentals use a good brand name like Shaw carpet. Get a very neutral color like Candy Truffle. I call it the color of dirt. And it looks nice! Get the lowest grade or weight. Then put a middle grade pad underneath. This is one of the secrets. A better pad will help the carpet last longer. The color will hide a lot of crud. It is appealing to the eye. It is a 10-year warranty carpet and is a standard in the rental business. I think Shaw carpet owes me some love. What do you think?
When it comes to painting, always use a good paint at least as good as Behr. Stick with one color for the wall surfaces like off-white satin and one color for all the trim like white semi-gloss. I like the two tone look and I always use semi-gloss on trim. Use can use flat on ceilings and even walls if you’d like. The challenge with flat paint on walls is that it doesn’t clean well and you have to repaint more often. You can also use a more appealing very light neutral color on the walls other than off-white. The two tone look is very appealing and it really doesn’t cost that much more. Hiring a pro to do the painting is a must. They’re better and faster than you and I, and your time is much more valuable than theirs and you will use that time to find more deals.
When it comes to plumbing fixtures don’t make the mistake everyone else makes when they first start out, and that is buying cheap plumbing fixtures. If you pay $29 for a kitchen faucet you will get what you paid for — CRAP. There’s an old saying in plumbing, “If it ain’t heavy, it ain’t good.” If you buy a plumbing fixture and it is loaded with plastic it will be a waste of your time and money. I like American Standard products. The product you and I get off the shelf at the Home Depot is the same one the plumbers get at the plumbing supply house. This is not true of other manufacturers. Also, the American Standard warranty is like gold. No fuss no muss. If you have a problem they take care of it. You won’t have a problem though. Their products stand up to a lot of use and abuse. I think American Standard owes me some lovin too!
Don’t go cheap on windows. For rentals I use American Craftsman. They are good, double hung, double pane, and all vinyl clad windows with a good long and solid warranty. If you get the cheapies you will be wasting your time and money.
My favorite subject is contractors. OK, it’s not my favorite subject. This is one of the worst parts of this whole business. It’s hard to find good contractors and they don’t last forever. I have had contractors I’ve known for years turn bad on me. At the first sign of trouble like with women, trucks, alcohol, drugs, money or health they seem to disappear into the dark side quite rapidly. Not all of them do this but an alarmingly large percentage relative to society seem to. I have friends who are contractors. I love them like brothers. But when %@#$ happens I have to cut them off. They can harm you as much as they can help you. Always remember this: When you are hiring contractors, even if you have solid referrals on them you must do a background check just like you do with tenants. Always make sure they are insured and bonded. Ask for these credentials. If they screw something up and they are not insured, the liability will fall directly to you as the owner of the property. This is not something you take a short-cut on. Period!
I had a pair of contractors working with me for years. They became friends of mine. They were twin brothers and worked well together. One was the straight man and one was the booze swigging, whore mongering derelict who I don’t even think had a valid driver’s license. They were some of the first guys I ever hired. I hired the straight man and he later brought in his brother. I still should have checked him out. What I discovered after years of good work was a little bit of fraud. Nothing major but I decided not to take any chances. I caught them cheating on supplies. They would buy more than enough supplies and charge me for it… then return the excess to Home Depot after job was completed. It may not sound like a big deal especially since we are only talking about a few measly dollars and cents. However, my knowledge of human nature, and the propensity of people to keep taking when they get away with a little bit, dictated that I act and act swiftly to send a message to everybody else working for me. I had another guy try this prior to this occurrence. He was dumb enough to turn in a receipt for some lumber that he already charged me for. He didn’t turn in the receipt before and thought he could use it on this next job. The problem was that he had 4 X 4 pressure treated lumber on there to the tune of $400 and this current job was an inside kitchen job requiring no pressure treated lumber. What an idiot. He must have assumed I didn’t check receipts. I did. I have friends who have been ripped off by their own family in business. One such situation involved over $100,000! You can never be too sure. Embezzlement and employee theft is a huge problem in business. My parents owned a business before they retired and they had an accounting category just for theft. And it was about 10% of business. That is ridiculous. But it is real. You need to have systems to track your income and your expense. Expenses will already eat you alive if you’re not careful. Throw loss due to theft on top of that and it’s no wonder so many people go out of business.
You can find good contractors. They are out there. Always ask for references. Look at other work they have done. Ask their prior customers how the contractor was when it came to keeping to the schedule and the budget and how well they communicated. Start new guys off small before you give them big jobs. Look at their appearance. Do they look like they are living the clean life or do they look like hell? Who do you want to give the keys to your property to? Whenever you are involved in a big job – more than a few thousand dollars — don’t pay all at once.
Give the contractor a little supply of money up front. Then give them a little more when they have the basic work done. Then give them another payment when they are near completion. Hold on to the last payment until the job is complete to your satisfaction. No excuses here. If you go to the final walk through and the contractor says, “Oh, I’ll come back tomorrow and finish that little bit myself,” do not give him the last of the agreed upon payment. If he is good to his word, he’ll finish completely and then you can pay him the rest. A lot of investors fall prey to this little gimmick. Even if it is innocent it is still a problem. Don’t do it!
For more information visit my investing site here.