6 Renovation Tips for New Landlords

If you’re new to investing in real estate, you’ll probably be really excited when you close escrow on your first purchase.

6 Renovation Tips for New Landlords-Professor-BaronThat’s great because real estate investing can be a very good way to improve your long-term wealth picture. However, if you are an average real estate investor — as 99 percent of us are — that excitement will turn quickly to the realization that a lot of hard work is coming to your plate, especially when it comes to renovating your new investment property.

Here are some items you should be aware of so you can better prepare for your future as a real estate mogul.

Budget money and time wisely

As your closing come close, you are probably putting together a starry-eyed list of all the improvements you’re going to make on a shoestring of a budget. Of course the repairs will also be completed in 30 days so you can rent the property out and start earning some income. Not going to happen! Once you get going and realize improvements cost much more than you thought and take longer to complete, you’ll be doing some major revisions to your estimates. Be cautious when estimating a low-priced and quick-turnaround renovation, as that rarely ends up being the case.

Expect to invest your sweat equity

To better educate yourself and minimize budget overruns, plan on spending a lot of time at the property from the day you close escrow until about one month after it is occupied by renters. Why? Because it’s a lot of hard work — getting bids, waiting for deliveries, reviewing work, doing work, shopping for supplies (and more supplies), advertising your property, reviewing rental applications. You’ll be doing it all at your new property. It may start out fun but will not end that way; however, you are in this for long-term wealth building, and that’s why you are willing to invest your time and energy in hopes of a better retirement.

Don’t take the first bid

You must get several bids to ensure that you’re getting a fair price for any contracting work. The more expensive the job, the more bids you should get. This is going to be exhausting and time consuming. However, doing your legwork can lead to better and/or less expensive bids in the long run.

Focus on paint and flooring

If the paint and flooring in your property don’t look nice — and they usually don’t — fix them! It’s going to cost some money, but hopefully you’ll get a little more rent when you make these improvements.

Paint:
Use a bright and neutral color, and paint all the walls the same color and sheen. When you have to do touch-ups down the road, it’s nice to just have one color in the property, and you can always have a can of that color on hand.

Flooring:
Your flooring options include carpet, tile, wood laminate and vinyl. Tile is best for kitchens and bathrooms due to water and moisture issues. Wood laminate is best for elsewhere due to its durability and easy cleaning. Carpet is not good for rentals as it stains easily, and every new tenant wants new carpet. Shop around: You can find some good laminate deals, and it’s relatively easy and inexpensive to install.

Check for plumbing and electrical issues

Properties that are more than 20 years old usually should have the water valves and electrical outlets replaced. So round up a few plumbers and electricians and get some bids. Do this while the property is empty. Water valves, supply line hoses, washing machine and dishwasher hoses and drains pose the biggest leak and flood risk. Change them all out. Electrical outlets and covers are not as big a risk, but usually look really bad with many coats of different color paint on them. An electrician can change out a whole house of outlets and on/off switches in half a day or less.

Don’t go for the lowest-priced supplies

When you get bids and are reviewing costs at a home improvement store, don’t just pick the least expensive supplies. Those items will never stick when you are actually making the decisions on what to contract for and purchase for your rental. You’ll end up buying the more expensive stuff, creating a budget headache that could have been avoided.

These basic tips should be supplemented with your investigation and seeking guidance from experienced real estate investors in your area. They’ll have other good advice, too. Just don’t think being a real estate investor is an easy walk in the park. It’s more like a marathon in the hot sun with a lot of hard work. But this hard work and determination will make your eventual success even more rewarding!

Have questions? Just leave me a comment below and I’m happy to help you!
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First Steps for First-Time Landlords

So you’ve got a property under contract, and you’re excited that you are going to become a landlord. While it can be a financially and personally rewarding investment, there are lots of things to do in preparation for your new career.

Pre-closing homework

First up, at the home inspection make sure to really take a hard look at what will need to be repaired or replaced once you take ownership of the property. Possible tasks include changing out the toilets to low-flow models, strapping the water heater, changing the door locks, fixing broken doors or windows, repairing damaged drywall and probably just a good old-fashioned scrubbing of the entire property.

Even before you close escrow, you should start making a list of the above items and others that need to be fixed. This will allow you to go home improvement store shopping to figure out a better budget than you previously estimated. (Don’t forget to check popular home improvement store websites for coupons, military discounts and other promotions.) It should also assist you in determining who will be doing the work and getting bids for projects.

Also, if there’s a good tenant already in place, you’ve done yourself a huge favor because you’ll get a security deposit and pro-rated rent at closing. So you possibly don’t have to go in and fix a bunch of items. Make sure to get an estoppel certificate signed by the current landlord and tenant verifying the tenant’s rent and other lease information once you go into escrow.

Essential upgrades

Once you take ownership of your new property, chances are you’ll need to make changes in these three areas:

Water: Because water issues are prevalent in rentals, it’s a good idea to have a plumber change out all the water valves, hose bibs, water supply hoses, washing machine hoses, dishwasher hoses, etc. In most rentals, it’s probably time to replace them, and doing so before a leak occurs — especially because the property will be occupied then — is just a good move. So put $250-$750 into your budget for this.

Door locks: You should change out the door locks when you take possession of the property and after each tenant moves out. Kwikset’s SmartKey system allows you to rekey the door knobs in place every time a new tenant arrives and is priced similar to normal door locks/knobs.

Flooring: If you need to change out the carpets, take a look at laminate wood flooring as an alternative. It will cost more upfront but should last 10 years or longer. Many laminates are literally tough as nails and look awesome. Plus laminate will save you the hassle of having carpets cleaned during turnover, arguing with past tenants over the cost and having new tenants complain about stains.

Leasing documents

You’ll need to get a lease application and lease agreement. Your real estate agent can provide the standard documents for your state, but be sure to add any terms or clauses that are important to you. Once you find a prospective tenant, you’ll need to pull their credit report and conduct a criminal check. Your agent may be able to run credit reports.

Finding a tenant

You can post your rental listings for free on Zillow, and if you join the Zillow Rental Network, you’ll get access to a suite of free tools including online rental applications and Craigslist AdHelper.

If your listing doesn’t get inquiries, you’re probably asking too much for rent. Interview people who respond to your ad on the phone before agreeing to meet with them at the property. This will avoid wasting everyone’s time if they don’t meet your credit, job or rental history requirements.

Once you find a good tenant, move quickly to get a lease signed so you don’t lose them to another landlord’s property.

And finally, realize that being a landlord is a business, and your tenant is your customer. Just like any other business, the better you treat your customer, the more likely you will have a successful business venture.

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