There has been a popular trend in buying, renovating and either flipping or renting residential real estate since the the last housing crash. Real estate investing is risky business. If the property is purchased right, you may be able to flip it for a quick profit. If you either decide to hold it (or get stuck holding it) for awhile, you may want to approach the renovations as if it will be a longer term investment. Here a just a few tips to keep in mind while renovating investment properties:
- Understand the scope of the renovations before buying the property. You need to understand that residential renters are usually more particular than commercial and it is well worth doing the major repairs while the house is vacant.
- If the roof needs replacement, just do it. Especially in a market like South Florida that sees several months of heavy rain in the summer, you don’t want to get that call in the middle of the night from your tenant saying that the house is full of water and they have damaged furnishings, etc.
- HVAC – Make sure the unit has been serviced and is operating properly. Usually in May or June when the first heat wave hits is the time when you will get your first a/c call from a tenant. Make sure the unit is not leaking freon, clear the condensate line and make sure the tenant has plenty of new filters on hand. Also, prior to moving in a tenant, make sure the home is properly insulated.
- If the appliances are not new, spend the money before the tenant moves in. Prospective tenants will notice these things and see that you made the investment. After all, you can buy a refrigerator, oven / stove and washer / dryer for less than a few thousand dollars.
- As far as landscaping and maintenance, I usually prefer to have all of this completed prior to a tenant moving in. Don’t leave the monthly property maintenance up to the tenant, because they won’t do it. When you purchase a REO property, chances are that it will require a complete redo on the landscaping. Hiring a professional service to maintain the landscaping will ensure that you don’t receive any code violations due to neglect.
- Hire licensed and insured contractors for any roofing, plumbing, electrical and HVAC issues. Building codes are constantly changing and you don’t need the liability from hiring a contractor who is not licensed. After all, the next time you try and sell the property, you don’t need a bad inspection report holding up the sale. After the housing market cooled several years ago, there is a surplus of licensed and insured contractors that are reasonably priced.
These are just a few tips to get you started in renovating residential real estate. Here is a good article about the large players in the REO to Rental business since the housing market crash.