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?

Growing Trends for 2016 Real Estate - The Low Loonie

In case you haven’t noticed, the Canadian dollar has been spending most the last 2 years dropping like a rock, as oil prices have plunged from over $100/barrel to recently under $30/barrel. The “Loonie” has spent much of the last decade around parity with the US Dollar or a $1.00 exchange rate.

This month the exchange rate has fallen all the way to under $0.70. This has been a painful adjustment for certain participants in the Canadian economy, especially considering the speed of this decline. This currency decline also has ramifications for the Canadian real estate markets, which we expect to see play out in 2016:

1. Canadian assets are on sale to Americans and other international markets. Although Canadian home prices are at all time highs in many markets, they are suddenly a lot cheaper to buyers in stronger currencies. This would seem to indicate strong interest from international investors this year looking to stretch their investment dollars.
2. Canadians investing in American investment properties or vacation properties should slow markedly or even grind to a halt. With the ‘Loonie’s” strength over the last decade, we have seen huge investment south of the border, especially during their real estate market correction in 2007-10. These dollars will surely see some repatriation and investment within Canada should look more attractive domestically, further increasing demand.
3. Material costs for renovations and new home or building construction will increase. Many of the materials used in construction in Canada are imported from the US and these costs will be increasing this year. Expect sticker shock on new construction costs.
4. The Canadian tourism sector should see a good year. Expect Americans to vacation more north of the border with their increased purchasing power. Also expect less Canadians to vacation south of the border and travel more domestically. This will translate into a good year for hotels, resorts, casinos, etc. This effect could be considerably strong in border towns and could also spill down into retail sales from American shoppers.
5. Manufacturing will look more efficient in Canada. We expect the Canadian industrial to benefit from the low “loonie” and increase production. Therefore we see increased absorption in the industrial market and as the vacancy rate really tightens, new construction in the industrial market.

These are some of the effects we expect to see from the lower exchange rate in 2016. What are the effects you are seeing?

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Russel Lalovich
russel@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 995-5620