There are many schools of thought on this subject. In some cases, you are going to have some landlords that will completely gut and remodel the property and then rent it out to tenants. You have another school of thought that states that you clean it up to liveable condition and then rent it out to a new tenant. Some will fix up and replace the areas that tend to result in more maintenance calls and help to preserve the rental property and then rent it out. None of these are wrong, but I do believe there are some general guideline that you should follow when deciding what to repair in your newly acquired rental property.
- Stop leaks and make sure faucets and drains operable – I want to avoid toilet calls for as long as I can. I prefer to replace toilets with new equipment to make sure they operate correctly and all leaks are stoppe in each rental. I make sure all faucets and drains are operating correctly and not leaking.
- New middle grade appliances – I dont want calls for broken appliances. I will usually start a new rental off with new middle grade appliance with self cleaning or easy to clean features. I want low maintenance appliances, so I stay away from smooth surface ovens and stainless steal appliances in my rentals.
- No moving parts – I will remove anything that could be a hazard, a maintenance call, or easily broken. I will remove ceiling fans, garbage disposals, and in door ice and water dispensors in refridgerators. In most cases, you are going to limit the amount of maintenance calls and remove the items that could break more easily than other items. If the norm is to include these items in your rental in order to get maximum rent amounts or rent the property faster, then I will include them. However, I will make sure the rent amount will cover the additional maitenance calls I will receive.
- Protect and Preserve – I will make sure that exterior maintenance is done initially and continues on a semi annual basis to make sure the whole structure is preserved and reduce major repairs. If the roof needs to be replaced right now, you should do it right now. If you can hold off a year or two without it resulting in water damage, then I recommend delaying the roof replacement until you need a capital improvement to off set your taxes. I look at the exterior as the same way.
Besides these items, I will make sure that I clean up those items that are still functional . I will do this even if the item may not be the most up to date, if it is still functional then we are going to keep it in place. An example is a bath tub that is from the 60’s that still has some life left in it, eventhough it may not be the same size as modern day tubs. If the kitchen cabinets are in descent shape, ut they might need to be painted with new hardware, I will do that over complete replacement. A good rule of thumb is that I will usually spend half of my fix and flip budget estimate for a home I decide to rent. Remember, the properties that we fix and sell to retail buyers will need more modern touches and updates, where as my rentals will be clean and functional. If I am going to sell the property to a retail buyer, I will usually remodel the bathroom and kitchen, paint the interior, and install new flooring. For these types of repairs in my area, we will normally be into our projects for about $15,000 to$25,000. If I was going to rent this same property out, I would bank on a rehab budget of about $8,000 to $15,000, because I would keep and clean what I could and make sure the rest is functional . You do need to see your rental properties and their respective repairs through a different set of eyes than you would with your buy fix and sell properties. If you budget for a buy, fix, and sell type rehab, you will have plenty of room to go either direction with that property. I always plan for the worst case scenario, so I can preserve my profit