We generally estimate all our rehabs for about 90 days and are usually met with sobs and sighs because many people consider 90 days too long of a wait.
It can be a real eye-opener to see exactly what goes on during this time period – most people would be amazed as to how much activity is happening behind the scenes regarding their new property.
Rehabbing a rental property is not like training Jedi – even 90 days is not a very long time to wait.
Why does it pay to wait 90 days?
First of all, we typically finish the job and have it rented within 60 days, even though we promise 90. This extra time gives everyone enough “wiggle room” just in case something goes terribly wrong. Our last 30 deals have been completed within 60 days, but that’s not a promise we feel comfortable making, because a million different things can go wrong.
Secondly, we are highly motivated to finish the job as fast as possible because we don’t collect any management fees until the property is rented. All of our construction staff is on salary, so the longer it takes, the more expensive it becomes for all of us. Our crews are working on multiple properties at the same time, keeping costs down for the clients and keeping the guys busy each and every day – there’s no job recession for us.
The fact that the client’s interests are also our interests maintains us at a level of accountability that cannot be found many local contractors, if one can be found at all. And even then, we still charge about 30% less than any residential contractor would – and we get it done in less time. We do this because our primary business is property management, not fixing houses – it’s a supplementary service to enhance our management package.
Another way clients save money by using bundling discounted services such as: property management, rehab, rent, tenant screening, inspections, regulations, local codes, rent market analysis, rentability, HVAC, mechanical, electrical, plumbing and roofing just to name a few.
Outside contractors have zero motivation to save you any money. When was the last time an electrical contractor inspected a property and found nothing wrong? How many times has an inexperienced investor paid for unnecessary repairs just so the plumber can make a few bucks?
Our clients avoid these unnecessary expenses simply because we handle all of it in-house – and at a fraction of the cost. We are committed to the lowest possible price because it’s our primary objective to make money for our clients. The more money they spend on rehab, the lower their return. The more money they make, the better we look.
Big Brother
Not like the type of big brother depicted in George Orwell’s prophetic dystopian all-powerful state-above-the-individual classic, but more like a welcome, guiding hand – to help ‘steer clear of major disaster’ type of big brother. We manage all aspects of each rehab project – form regular inspections and walk-throughs, to strict daily supervision and leadership; from strong quality control and productivity checks and balances, to photo and/or video progress updates for the investor.
On top of all that, if there are any major renovations to take place on a project, we ensure that the correct walls are being torn down or installed to create the ideal floor plan for the maximum potential rent.
There are many factors in a floor plan that can actually decrease rental value. We take the necessary steps that corrects these imperfections before it ends up costing the investor on a monthly basis, rather than a small up front repair cost.
This video illustrates the importance of an ideal floorplan for a rental property.
Taking all of these ‘moving parts’ into consideration, can anyone really complain that 90 days is too long of a wait?
Common mistakes with over-improving
People who insist on doing the rehab themselves have a tendency of making the same mistakes in common. This is typically because of thinking like a home owner rather than a landlord. It’s not very bad, but a number of these small errors in judgement can add up to some big bucks at the end of a project.
Material Selection is a huge factor in keeping costs down. It is key to know the difference between building materials for an owner-occupied home and materials for a rental. Take marble windowsills for example. Yes, it’s very common in Florida for homes to have marble windowsills, but to replace the damaged windowsills on a rental property with a marble slab is just giving a future tenant the opportunity to damage a more expensive windowsill, whether he or she actually damages it is not relevant – it’s the opportunity to cause a higher dollar value of damage than necessary.
Same goes for kitchens. Why put expensive stone counter tops and back-splashes when, in all likelihood, the cost of these high-end materials will not be reflected in the monthly rent, so what’s the point? The same can be said for expensive window treatments, fancy tiles or flooring, as well as expensive cabinets and vanities. These things do not improve the rental income of the property, creates greater liability, and again, creates the perfect invitation for tenants to ruin more expensive property.
These decisions are better left up to the professionals.
Other Articles by Graystone Investment Group:
Learn More About Real Estate Investing