Rental Home #2 – Acquisition of the Condo (Part 2): Welcome back everyone and thanks for stopping by to check out the second part of our rental home series on the most recent acquisition – the condo. For those of you who missed part one, you can find it here.
Following up where I left off, the condo was officially ours! Once the keys were handed to us, the real work could begin.
Say “Hello” to 1974
Here are the initial pictures I took, shortly after tearing out all the carpet:
The condo is set up this way: as soon as you enter the front door, you enter the living room. Connected to it on the right is the dining room which leads to the kitchen. At the back of the living room are the stairs leading to a washer/dryer nook, the main hallway which connects to the master bedroom, second bedroom and bathroom. Overall it’s about 1000-1100 sq/ft but they use the space well.
The initial plan was to begin with drywall/trim repair and painting. Once this was complete, we would begin developing a plan to deal with the more difficult areas of the kitchen and bathroom. Considering that the kitchen and bathroom were incredibly dated, completely rehabbing them would be the only logical option. Although initially, I wanted to try to clean/refresh some things like the tile floor and original cabinets.
Starting with the upstairs bedrooms, painting was completed. Naturally we updated the outlets and hinges to match the new look. Going with a non-offensive white paint, we replaced all the 1970s era yellow with something more clean and modern looking. Once these rooms were completed, we moved downstairs to the living room and dining room which received a similar treatment. The kitchen was wallpapered, which we needed to remove, the wall was repaired and then primered/painted.
Onto the kitchen
Originally, we were thinking of keeping the cabinets in the kitchen and just repainting them. However, after some inspection we discovered water damage which was beyond repair. We went to work finding someone who could install cabinets.
I shopped around and found a quality contractor who quoted me $3500, which wasn’t too bad. This was a side job for him, so he whittled away at it over a few weeks. The only contingency was that I needed to remove the old cabinets, which I had no problem doing (sledgehammer anyone?). While this was going on, we started to transition our focus to the next major area, the bathroom.
The original bathroom was incredibly dated at this time and not in the best shape. The one nice part was the tub/shower area. Although it was dated, it was structurally very strong and in good physical shape. After looking around at other options, we decided to have the tub re glazed, which was a very cost effective option at $635 with a non-slip finish added to the bottom of the tub.
We planned to begin the tiling portion in the bathroom after receiving another great quote from our cabinet contractor who agreed to do the work. Tiling work was started and mostly complete. For some reason, our contractor had not been to the property for a while, which was slowing us down as we needed to have the tile complete to put in the vanity and finish the room.
So I get a call one afternoon, which went something like this: My contractor was in the hospital due to falling off of a second story roof, landing on his heel and breaking it. He was optimistic about completing the work but I didn’t think this was likely. Considering that all was needed was grouting for the upstairs bathroom, I decided to look up how to do this on YouTube and knock it out myself which I did.
Once the tile was done, the vanity went in, along with a new toilet and new lighting. Overall the bathroom was complete.
One of the major problem with any home that sits for an extended period is that expensive mechanical things tend to go bad. These include appliances and larger items like heaters and air conditioners. Looking over the house initially, the heater appeared to be relatively new. The air conditioner was original. At this point in the project, we decide to start checking over the mechancials and noted that the air conditioner does not work at all.
After calling around and entertaining estimates, we settled on a local company to do the work. They were very experienced with these condos and said that it would be no problem. For most part, they were right. They were honest and did fantastic work. The only hiccup was that they needed to cut two large holes in the wall of our freshly painted room. Oh well, live and learn.
The other mechanical item that needed some attention was the hot water heater. Given the history of this condo and having no idea how old this hot water heater was, we decided replacement was the safest option. Thankfully it was a job that Dad and I could handle, so overall cost remained low at $450.
Other than chasing around a few leaking pipes, everything seemed to be coming together as planned.
Final items and flooring
As we progressed, the next item on the menu would be kitchen appliances along with a new washer and dryer. The goal of this rental was to make it as low maintenance as possible. Having new appliances is a logical step in this direction. After shopping around online, we decided to go to P. C Richards which specializes in selling appliances and ended up with a great deal when we purchased all of them.
There were a few minor hiccups with installing the appliances, namely learning how to put in a 240 outlet (Thanks YouTube). With the appliances in and functioning, the last step was flooring. Considering that our first contractor was out on medical leave for the foreseeable future, we needed to find someone new.
After some discussion, we decided to go with carpet upstairs, tile in the kitchen and vinyl plank laminate flooring in the living room and dining room. It would provide the right combination of durability and visual appeal. Some friends referred us to a great local company who offered to complete the job for a reasonable amount of money. Service and timeliness was top-notch and I am definitely using them again.
The finished product
Now that the condo was basically complete, it was time to begin the marketing for finding a renter.
Finding a suitable renter
In my experience, finding a good renter is one of the more challenging aspects of owning rental property. It feels like a high stakes game where if you make the wrong choice, you get to deal with the negative consequences for a long time. Wanting to do this right, I am very selective. Although most professional rental screening suggests only looking at things like income and credit score, I find that there are other subtle signs about how someone will behave as a renter. Things like timeliness, presentation and honesty all weigh very heavily in my book when selecting a potential renter.
Although I could talk about this topic at length, I covered it in a post a wrote as I was selecting the renter for this place. You can check it out here.
After about 4 weeks, we managed to find someone who met most of the qualifications. The only issue was damage to his credit from a divorce. Everything else was stellar: income, presentation, cleanliness, timeliness and references. After getting the security deposit, first month’s rent and getting an official lease agreement signed – we were in business!
How I like to manage my rentals
If you met me, you would know my love of efficiency. When it comes to the idea of rental income, it is generally thought of as “passive income” – so I figure the more seamless I could make it, the better. This led me down the path of using Cozy to help with managing my rental payments.
Cozy allows you to collect rental payments online. The best part is that it’s free. The worst part is that the payments take about 5 days to transfer. If you’re willing to deal with the 5-day delay (I was), then this site will work well for you. The other nice feature is that you can add additional items such as a water bill or sewer bill which your tenants can reimburse you for. Having used Cozy for 1.5 years, I can say it’s a solid program.
So how did this whole thing fare as an investment?
Overall, it worked out better than I thought it would. Although we hit a few snags with the air conditioner and some extra rehab in the bathroom and kitchen, it works. The rental comps for this property were in the area of $1250-1300. We managed to get a very easy $1350. The apartment complex next door (the one I used to live at) raised their rents for 2 bedroom apartments to $1450 which made marketing this property very easy considering this condo has been more recently updated.
For you fellow investors out there, here are my numbers on the property. I didn’t include things like vacancy and repairs as I find that they’re very hard to accurately predict. So here are the raw numbers on the property:
I hope you enjoyed our post on rehabbing and renting our second property. Subscribe to our email list get the latest posts!
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