WARNING: Don't Over Upgrade Your Rental Property

When you’re renovating your rental property, it’s important to make the home comfortable and safe for your tenants. However, there are certain improvements that simply don’t pay off. In order to maximize your return on investment, you won’t want to waste money on elaborate upgrades.

That’s why it’s important to assess what is appropriate, based on the neighborhood. For example, in a C class neighborhood, your tenants don’t expect high quality amenities or features. More importantly, the rental amount does not change based on these improvements! All you’re doing is decreasing your ROI.

I see this all the time—a rookie investor thinks they can make more in rent and attract a higher quality tenant by making extraneous purchases, but it never works out that way. Inexperienced investors often try to over upgrade is in the kitchen, specifically the cabinets. A rental property does not need custom cabinets made out of solid wood. We always install base grade cabinets in our rentals. They’re solid, they get the job done, and they look great!

And if one of our tenants is a little rough on the cabinets, it’s no big deal. We can simply replace the cabinets for a few hundred dollars during tenant turnover. Remember, your rental properties are not luxury apartments.

In the same realm, many investors think they need the best countertops on the market. This is not the case. Your rental needs something durable and affordable. Not granite! Formica looks convincing, and lasts for years.

If you want to know exactly what we do in a renovation to make a great home for our tenants, check out this video!  

 There are certain improvements that simply don’t pay off for rentals. In order to maximize your return on investment, you won’t want to waste money on elaborate upgrades.

Rental Property Rehab: How to Create a Rock Solid Investment

The key to minimizing expensive repairs during the life of your investment is to conduct a comprehensive renovation. Doing so allows you to maximize your monthly rental income, instead of spending it on fixing big-ticket items in the home.

Here are a few major components I tend to replace during my rental property renovations:

  • Roof – A solid roof is an essential structural component of your property, so you’ll want to have it inspected during renovation. If I purchase a property that has a roof with 20 years of life remaining, I’ll leave it be. If the home needs a new roof or an overlay, I’ll be sure to get it done! Here’s how to determine when to replace the roof on your rental property.
  • Windows – Fully functioning windows are also important. I like to purchase new white, vinyl windows that support the insulation of the property. My tenants love this because it keeps their utility bill low! Typically, I purchase windows from Pella or Anderson.
  • Electrical – I always install 200 amp electrical panels on my rental properties. Running new electric is like future-proofing your house! It’s not much more expensive than a 100-amp panel.
  • Plumbing – We rip out old galvanized pipes, in additional to PVC. I install new PEX plumbing in my rentals for multiple reasons, including it’s durability in cold weather.
  • Furnace – We install new furnaces, which are sure to last 10-15 years.
  • Water heater – A new water heater is fairly inexpensive and comes with a 10-year manufacturer’s warranty.

Replacing all of these main mechanicals will set you up for a rock solid house for years to come, minimize your repairs, and keep your costs low! 

 The key to minimizing expensive repairs during the life of your investment is to conduct a comprehensive renovation. Here are a few major components I tend to replace during my rental property renovations.

How to Choose Paint for a Rental Property

All landlords need to take this topic into account: paint! A little paint can go a long way in your investment property. When you’re doing a renovation, it’s imperative that you keep your costs down so that your ROI remains high. However, you still want your rental to look nice and cozy. So how do you pick a paint that fits the bill? 

I like to keep this decision easy.  In our business, we use the same paint in every single property. Goodbye decision fatigue! This also keeps the costs down, because we can buy in bulk!

In the event of a tenant turnover, our team can go in for touchups, and the paint is a perfect match! We use the brand Porter Paints. They’re affordable, and incredibly durable.

It’s perfect for a rental property. We use a neutral tan/cream color consistently throughout all of our properties. You can see a before and after in this video. But what happens if your tenant wants to change the paint color?

I like to handle this issue on a case-by-case basis. Most times, I like to give my tenants permission to do as they wish, so that the property feels like home. If a tenant feels at home, they are more likely to stay long-term. The longer the tenant stays, the longer we receive consistent rent from that rental property. Check out this podcast episode on how we handle tenant requests!

What has your experience been with paint colors in your rental properties? I'd love to hear from you! Leave a comment on our YouTube video about paint. 

 

 All landlords need to take this topic into account: paint! A little paint can go a long way in your investment property. Here's how to choose paint for your rental property.

The BRRRR Method for Real Estate Investing

The BRRRR Method is an effective strategy used in real estate for exponentially growing your real estate portfolio. This strategy is a powerful and proven way to leverage. If done correctly, the BRRRR Method can help you quickly grow your real estate business in a matter of a few short years. 

If you’ve ever wondered how successful investors turn one rental property into a robust portfolio, this is it! In the last few years, the BRRRR Method has become extremely popular, and I see our investors employ this strategy on a regular basis.

Here’s how to do it:
Buy - You don’t want to just purchase any house. Don’t simply call up a realtor, and pay over market value for a house plus closing costs. You want to find a property below market value, so that you can add value in repairs. The purchase is very important in this process—buy low!

Repair - Repairing can be tricky, because you don’t want to spend more than necessary, but you still want to create a solid home for your tenant. It’s a balance. Don’t over-upgrade the property. You don’t want to take too long either, because then you aren’t making money from rent checks. Check out my video on how to renovate a rental property.

Rent – Get a tenant in there, so the property begins to produce cash flow. If you’re working with a professional property management team, they’ll take care of this step for you.  

Refinance – I suggest approaching a local bank. They’re way easier to work with than big banks on refinances. Local banks tend to have great introductory rates for refinances. Sit down with a banker, talk about the property, and let them know what your goals are. They’ll be able to match you with a great product that meets your needs. You should expect to receive 75-80% of the value of the home.

Repeat – Once you’ve pulled the money back, out purchase your second and third rental properties! Rinse and repeat!

Have you used the BRRRR Method on your journey to financial freedom? Come leave a comment on our YouTube video on the BRRRR Method. We’d love to hear your thoughts!

 The BRRRR Method is an effective strategy used in real estate for exponentially growing your real estate portfolio - a powerful and proven way to leverage.

Is Turnkey Real Estate Right for You?

Is turnkey real estate right for you? This is an important question to ask yourself, because let’s be honest: it’s not for everyone. As always, I suggest real estate investors try to reverse engineer their lives.

Think about your end goal; imagine what you want your life to look like down the road once you’ve achieved your Freedom Number. What do you envision your future to look like? Will you be spending your free time renovating properties? Or do you plan to collect rent checks passively, while you spend your time with your family doing the things you love?

Turnkey real estate is not for someone who is Type A and needs to be hands-on. If that sounds like you, we have a DIY playlist on YouTube that you might find helpful.

Here’s are a few key indicators that you and turnkey are a match:  

  • You don’t know the first thing about finding a great investment in the right market.
  • You don't have the time to commit to everything investing entails.
  • You don’t want to get your hands dirty doing a rehab.
  • You don’t want to worry about hiring contractors.
  • You don’t care to pick out paint, or find the right materials.
  • You don’t want to interview property management teams to find the right fit.
  • You want a totally passive experience and high ROI.

It’s a fantastic solution for those investors who want the benefits of high ROI and monthly cash flow, but don’t want to put in the work. Turnkey is totally hands-off, you just sit back and collect rent checks.

The entire system is rock solid. You don’t have to worry about paying contractors crazy rates, and your property management team is ready to go! Everything runs incredibly efficiently, which makes your business scalable.

If you’re ready to pick up your first turnkey property, let’s talk! Book a free call with our team to talk about making your real estate goals happen.

 Is turnkey real estate investing right for you?

What to Expect During a Tenant Turnover

What happens when your tenant inevitably leaves? If you’re a new investor, the prospect of a vacant property can bring a twinge of fear. It’s scary to think that your rental income will be disrupted for a period of time.

But remember, if you’re doing this the right way, you’ve already accounted for vacancies in your ROI formula. Our formula is very conservative; we set aside 40% of our rental income for vacancies, repairs, and expenses.

This amount accounts for potential vacancies of up to three months per year. And that never happens. Our typical tenant turnover lasts about three to four weeks. The only reason that’s possible is because we insist on working with effective property management teams. Because of property management, a tenant turnover is fast and simple!

Here’s how a tenant turnover works: first the property manager will send an email notifying us that the tenant is vacating the property. Then, the property manager will confirm that we’d like to continue renting out the home. The property manager will then thoroughly assess the condition of the property, and provide us with a report.

This report will include an exhaustive list of items to be repaired or addressed at the rental property. This might be tasks like fixing holes in the walls, a window screen that needs replaced, any items left in the property, and even cleaning out the refrigerator.

This is not cause for alarm; one of our recent move-out reports had over 25 items. If the list is long, it means your property manager is doing their job in ensuring the property will be clean and functional for the next tenant. We also always replace the carpet and repaint the interior.

You might be wondering what happens to the security deposit. Honestly, that depends on the state. Different states have different laws about what the security deposit can be used for, and how quickly it must be returned. Check out this list of the five most landlord friendly states.

All in all, a tenant turnover is simply part of the business. It's nothing to be scared about. If you've got a great property management team on your side, the process should be quick and painless! 

If you want to know more about tenant turnovers, I read through a list of tenant turnover repairs on the podcast. You can listen to that episode here.

 What happens when your tenant inevitably leaves? If you’re a new investor, the prospect of a vacant property can bring a twinge of fear. Here's what to expect.