Russel's Review: Thoughts & Pointers After Completing A Large Renovation On An Investment Property

I just recently passed the five year anniversary of buying my first rental property! What a ride it has been. It was a detached home with an unfinished basement. As I chose a five year term, my mortgage was up for renewal this spring. I saw this as an opportunity to finish the basement, to get the property reappraised, and to refinance the property at the improved value (I can touch on this investor mindset in another post). Well, I just finished the renovation (managed the job myself) and I wanted to share some of the thoughts and pointers that I learned during the process.  Hopefully you can use some of these on your next renovation!

Everything Always Takes More Time Than Projected

This is a pretty standard one. Things happen and it throws other things off schedule. Plan for this in advance and allow for a very conservative contingency period.

Get Three Quotes For Large Trades Jobs

Some of the variance in the quotes were huge. Sometimes these trades guys are too busy and give quotes almost as if they don’t want the job.  Get three to make sure you know where you are at.

Don’t Always Take the Cheapest Quote

To build on the last point, the cheapest quote shouldn’t automatically be chosen. Make sure you understand the quality you are getting. Often the middle quote ends up being the best deal!

Ask for Referrals

Ask the professionals you work with for referrals to different skilled trades. Sometimes just saying to someone on the phone “so and so referred me” gets you better treatment. I wouldn’t refer someone to a friend unless I was very confident they would do a good job!

For Rental Properties Choose Neutral Materials

A good saying that is common in the real estate rental world is “choose things for 90% of people, 90% of the time”.  Don’t ever choose anything ornate or too trendy as it might not be most people’s taste. Remember that your not living here…

Keep Detailed Notes

This project has been an invaluable experience to understand firsthand how much different jobs and materials cost and the time frames associated with them (drywall, electrical, plumbing, tile, paint, framing, etc). This will give me a big leg up on my next project. Document things on a weekly basis—or even more frequently—to stay organized.

Shop Around For Materials

This seems obvious but you can save quite a bit if you shop around for the larger materials you need. If you know you need to buy tile, but not for while, you can keep an eye out for sales and save hundreds of dollars.

Buy As Many Things As Possible With A Credit Card

First off, it will keep things organized by having many of the items on the same statement making for easy bookkeeping. You can rack up a boat load of points as well ☺.

Splurge on A Few Things

As long as it doesn’t break the bank, it’s a good idea to splurge on a few items. In my case, I did a large tiled glass shower, a shiplap fireplace with a sweet napoleon electric fireplace and some upgraded funky laundry cabinets. Now I have some nice selling features for the next renter or for when I go to sell the property.

Pay Your Workers Right Away

If your trades did a great job, pay them promptly to keep them happy. You can use them again in the future and having a list of these contacts is invaluable. If they know they will be paid fairly and promptly, they won’t think twice about working for you again!

I could go on and on about this renovation but these were some of the items I thought would be useful for our readers. See the accompanying videos and photos and tell me how you think I did!

 

Investing In Real Estate – Building The Right Team #6: Contractor/Handyman/Trades

Not very handy? Don’t feel bad…we aren’t either. But that shouldn’t discourage you from investing in real estate. By building a team that includes a contractor or handyman to handle your renovations and repairs, you won’t have to slave doing manual labor jobs that you either don’t have the time for or the skills to do properly. Today we are going to talk about how having the right guys for the job will help make your investment properties more successful in the long run. We are using the terms contractor/handyman/trades interchangeably, as who you need can vary depending on your situation.

Why Do I Need A Contractor/Handyman/Trades?

If you are truly good with your hands and know the ins and outs of construction, including trades, pulling permits, etc, then maybe you don’t need a good contractor. But for the rest of us, they are very important. They will carry out necessary renovations to your rental properties that will attract the right tenants for top rents and keep your real estate values high. Time is money in real estate investing. The longer a job takes the more potential vacancy you have and the larger the hit to your potential rent. You should also be doing routine maintenance to your property, so the improvements you have will last longer, ie. servicing of the mechanical.

What Should I Look For In A Contractor/Handyman/Trades?

You should look for an experienced contractor that can handle the type of jobs you need done for your properties. Check references and assess their work with due diligence. Having a contractor that has rentals or has a background in them is a bonus. They will understand where you are coming from when it comes to smartly investing in your properties. You are not making decisions the same way you would if you were renovating your own home.

What Else Will My Contractor/Handyman/Trades Do?

They will give you advice on general updates that need to be done. Sometimes things can wait another year or two. Sometimes, an item needing repair can be a money pit and a full replacement is better in the long run. They should also have good referrals for you. For example, if you were renovating a basement and had a leak in the foundation, they should be able to refer you to some potential specialists outside of their expertise.

How Much Will My Contractor/Handyman/Trades Cost?

As with most team members in our series, the costs will vary depending on the person and the job.  Make sure to get multiple, detailed quotes in writing so you fully understand what is included in the price. Also, you usually get what you pay for in construction, so choosing team members solely on who is the lowest price isn’t always the best idea. Sometimes they are the cheapest for a reason and getting the job done right can save you money in the long term.

So there you have it, real estate investors. Do you have a team of construction experts for your properties? How has your experience been in finding the right help?

Investing in Real Estate – Building The Right Team

After doing some research on different investing ideas, you’ve decided that real estate investing is right for you. No matter how big or small you intend for this investment venture to be, its important to be ready, willing and able to handle everything that comes your way. But how do we do that? By building the proper team of professionals around you to set yourself up for success.

But what type of professionals do you need? We've put together a list of such professionals. Not every one of them is necessary for every investor, but the list is a starting point to make sure your bases are covered.

Realtor

Now this is a pretty obvious one ☺. They’ll be able to help you out with understanding values, demographics, rents, etc. Working with a realtor who either owns rentals themselves or does a good amount of income properties is a huge bonus.

Lawyer

A good real estate lawyer is invaluable. They will make sure your interests are protected in whatever deals your are considering. Good legal advice can be expensive but can save you money in the long run.

Mortgage Broker-Professional

Assuming you will be mortgaging your properties, a good mortgage broker-professional is essential in getting your deals financed. They can give you advice so you can continue to accumulate properties and get the best terms possible.

Accountant

A good accountant is also invaluable. Understanding the best way to hold the real estate, claim expenses, amortize costs, etc. can save you tax dollars. They also have your back should CRA ever audit you.

Property Manager

Don’t have time or the ability to handle your rentals yourself? Finding a good property manager is must-have. They can collect rents, leasing, handle tenant calls and be the general go between the property and the owner. Fees generally range from 5% of rent to one month’s rent per year and up.  Make sure you factor this cost into your budget if you're planning to have the property managed.

Contractor/HandyMan

Not very handy? Then you’ll need to contract out any renovations or general upkeep. When you find good people who don’t cost an arm and a leg, it is important to keep them around and happy. They will make your life much easier in this business.

Bookkeeper

A good bookkeeper can keep track of all your income and expenses related to each property and make sure everything runs smoothly. They can also run regular reports so you understand your profits and can uncover trends (like increasing utility costs), so they can be addressed.

General Maintenance – Grass, Snow, Cleaning

A list of maintenance contacts can go a long way in efficiently operating your property and keeping it safe and attractive to tenants. Be sure to also add these costs to your budget.

This is far from an exhaustive list, but it gives you a general idea about who you should have on your speed dial as a real estate investor. How has your experience been in creating your team?