In my last blog I discussed targeting great tenants and in this blog I’m going to discuss the options available when purchasing a rental property. Once you’ve decided to become a landlord it’s time to decide if you want to purchase a “turn key” property that is ready to rent as soon as the property is transferred to you or if you want to purchase a property that is a “fixer upper” to try and improve your return on investment right away. There are obvious advantages to getting a home that is rent ready; you don’t have that time that the house sits vacant losing you money while it’s being rehabbed, you don’t have to invest the time repairing the house yourself, or you don’t have to find someone, or a team of someones, to do the work for you, and last but not least you can save yourself some stress. On the flip side, buying a distressed property can increase the property value and you can demand a higher rent.
Let’s just say you decided to purchase a distressed property, there are a lot of questions that need answered. Who is going to do the work? Are you qualified and capable of making the repairs yourself? If you are, does it make sense for you to do the work yourself or could you make more money and enjoy something else more? Luckily we’ve got options.
Approach1: Do the Work Yourself
If you have experience and are knowledgeable in home remodeling there is the option to do the repair work yourself. There are many investors that are temped to do this even if they lack the proper know how to try and save money. In the end if you don’t know what you are doing this approach can end up costing more money then you save because of all of the time it takes to complete the task. In addition, many new investors aren’t able to allocate all of their time to the rehab project because they have another job to report to. It’s important to think about how much your time is worth and how much it would cost to hire someone to complete the task. When you factor in that a professional would likely be able to complete the task quicker it can be more cost effective to hire someone. If there are certain tasks that you are skilled at and that you enjoy then do those jobs.
One thing to consider is that if you hire other people to do the work you can manage the crew and spend the remainder of your time searching for more deals. If you’re tied up with manual labor you will not be able to krank out as many deals because your focus will be elsewhere. The leads and deals that are being brought to your attention from your search on your current deal will slowly disappear and the search for your next deal will have to be started all over. It’s easier to keep the momentum going and keep actively searching for deals. If you add up the time you spend going to and from and shopping at the home improvement stores alone you could probably find your next deal. There are people who really enjoy fixing the property on their own and if that’s the case then by all means fix away but recongnize that it may not be the most cost effective way to go about business.
Approach 2: Hire Help
Hiring help is generally a good idea to get the property rent ready as quickly as possible. One can act as the general contractor and hire various subcontractors trained in specific fields (plumbing, electrical, structural, etc) to complete the work needed for the rehab. Or hire a general contractor to run the crews. The general contractor, whether it is you or someone you hire, has a lot of responsibility and needs to stay on top of what projects are going on, there progress and schedule the subcontractors to come as needed. The last thing you want is to have the contractors tripping all over each other or scheduling work that can’t be completed until another job is completed. If you don’t have much experience or knowledge about rehabbing a house I definitely recommend hiring a general contractor until you get a handle on the process to keep things running smoothly. The ideal scenario would be to find an affordable, trustworthy general contractor whom you can leave in charge and know that the work is being handled correctly and timely. This leaves you with free time to search for the next great deal.
Regardless of whether you decide to run the show or hire someone good communication is key. Being very specific about the job at hand, the materials you want used, and the level of professionalism you expect. It’s important that they know the deadlines and your expectations for keeping the job site clean and secure. As with anything having an agreement in writing is always a good idea.