SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Repairs

Tips for DIY Painting

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If you are new to real estate investing, I’m guessing you will be doing some work yourself. That’s great! This has truly been the biggest learning curve of my life. We have been rehabbing our triplex for 5 months now, and I can say with certainty that I’ve found the task that I would like to hire out, as soon as possible—painting.

Painting is the worst.

It is repetitive on your wrist and wearing on your back. You have to tape and lay down drop clothes. You need to designate an outfit for ruin. The worst part is how long it takes! This is especially true if the room requires multiple coats. One room we painted required 5 coats! Remember those custom colors?…

If you’re like me and you can’t quite afford to hire the job out yet, head this advice. I learned the hard way.

  • Buy good paint brushes. Cheap brushes will shed. Better brushes are easier to clean.
  • Buy one of those 14-in-1 paint tools. I’m not sure what all 14 functions are for but I use it a heck-of-a lot.
  • Clean you brush after every use! 
  • Clean your paint rollers after every use. They are reusable. Seriously… I didn’t know this.
  • Buy drop clothes, preferably the cloth kind. Do not use table clothes—despite how free they may be. The paint will leak through.
  • Pick neutral paint colors and stick with it. This will save money and headache in the long run.
  • Take a picture of your paint color, brand and sheen. Keep it on your smart phone until you’ve memorized it! This way, you know you’re buying the exact same paint each time.
  • Buy paint in 5-gallon buckets instead of gallon cans. You’re going to go through more than you think. If you’re using the same paint colors, you know it will be used at some point. It’s cheaper in the long run, and you can use the empty buckets for so many things.
  • Buy the cheap paint. It doesn’t matter how expensive it is, you are going to need at least 2 coats.
  • Don’t leave the door open if it’s raining outside. It will cause paint blisters on your wall.
  • It’s easier to scrape paint from finished floors than sand them from unfinished floors.
  • Do not use painter’s tape on finished hardwood. It will take the top layer of polyurethane right off!

I’m sure this doesn’t cover all of the painting mishaps that I’m doomed to encounter. If you have other bits of advice, please enlighten us all.

Are You Prepared?

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So I am sitting here in Memphis the evening before a major ice storm is expected to hit.  We have been through one of these before, back in 94 an ice storm wrecked havoc in the city, shattering limbs, and knocking out power for days.

As a landlord, these winter events can cause another types of havoc.  We have to worry about our properties.  Limbs can fall on roofs or even worse utility lines.  If utilities go out, you then begin to worry about freezing pipes and bursting water lines.  Icy roads mean utility crews, work crews and other repair crews may not be able to get out very quickly.

So what is a landlord to do?  How do you prepare?

You can do several little things, but it all must be done beforehand.  Try to keep limbs trimmed.  Make sure pipes are insulated well.  Perhaps have a few water cutoff valves installed so problem areas can be isolated.

But for the most part, you just have to wait.  You have to wait to see how bad the storm gets.  You have to wait to see what breaks or busts.  You have to wait to see what damage is done.  You have to wait for conditions to improve so you, your workers and utility crews can get out and fix the problems.

Your tenants can be a really big help.  Asking them to prepare for potential bad weather and help protect the property through a simple e-mail or text is key.  No tenant wants to be without power and water.  So if they can help keep those services on, they generally will.  Ask tenants to keep faucets dripping and sink cabinet doors open because running water generally does not freeze, thus protecting pipes and keeping the water on.

When you tenants move in, you can begin to get their help then as well.  Showing tenants where their electrical circuit breakers are and how they work is important.  As is showing them how to turn on and off water and gas supplies.  They might just save you a trip out on an icy road.

No matter what happens, do your best to get things back to normal as quickly and as safely as possible.  Communicate with your tenants.  Let them know you are aware of issues and working on the problem and hope for the best.

Don’t Forget the Oops!

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Rehabbing properties and understanding what a rehab takes is a key part of almost any real estate investment strategy.  Distressed properties that need a lot of rehab are often where deals can be found.  Plus, rehabbing properties after a tenant moves is just a part of the landlording business.

Estimating a rehab job can be tough, especially when you are just starting out.  You want to make sure you estimate accurately so you can budget appropriately.  There is nothing like the felling you get when you are 80% through a job and realize you are out of money.

Newbies are often afraid of larger rehab jobs because they fear that they will miss something, and you know what, they likely will.  They also seriously underestimate the amount of time, labor and materials that will be needed on any job.  Costs overruns can add up quick.  But here is one way both newbies and more experienced landlords can protect themselves.  Factor in an oops into your rehab budget.

The oops budget is designed to make sure you have the money in case you miss something or underestimate.  Depending on the size of the rehab job, I usually will make an oops budget somewhere between 10% and 30% of my rehab estimate.

So for example, if I have a smaller job, consisting of mostly paint and some tile work totaling about $5,000, I will only budget about 10% or $500 for an oops.  I likely did not miss anything and if I did it is not going to break me.

But if I have a serious rehab job, where I might be taking a property down to the studs or doing some foundation work, I might budget as much as 30% for the oops.  I do this because there is simply much more to miss.  I do not know what will be found once we really get in there and tear something up.  An oops budget of $15,000 or more is not unheard of in larger more complicated jobs.

If you do not need the oops money, then you can save it for the next job.  I also sometimes think of extras that need to be done as we go along.  I added closets on one property since I had some money left over.  These closets allowed me to charge a higher rent.   I have done other things such as adding more exterior lighting or improving the landscaping to enhance appearances.

So use the oops, it is a great budget item and real budget saver.  You newbies out there should be cautious and budget for a higher oops.  Trust me you will need it until you get more experience.

They Can’t See Your Vision

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Recently, Jenna wrote a post describing her experiences showing an apartment and getting it in rent ready condition.  She mentioned that she was showing the property before she was finished with all of the repairs and that one person “shared her vision” and signed a lease for the unit.

First, let’s congratulate Jenna on getting a unit rented and then ready.  She deserves it.  This is her first property and I saw it not long after she bought it, so I know the amount of work and time that was put into it.

Now, let’s use this opportunity as a teaching opportunity.

You see, I think it is a waste of time to show the property before it is rent ready because in my experience, most folks cannot or will not see “your vision.”

Yes, Jenna did find someone who saw through the unpainted walls, the missing appliances, the unfinished floors, the wet paint, the drop cloths, the extension cords, the tools lying around everywhere, etc, etc.  So again, let’s give kudos to her.  But I think her experience was the exception rather than the rule and it would have been a better use of her time to focus on getting the unit ready.

Why can’t potential tenants “see your vision?”  I think for several reasons.

  • They have never touched a paint brush much less done a major rehab so they just cannot conceive of “your vision.”  All they see is the mess which screams “RUN AWAY!”
  • They can’t see past the mess.  The mess prevents them from seeing where their TV, bed, sofa, computer, etc. will go.  In their minds, they cannot see this as their “home” because it is not put together.
  • The unfinished nature of the unit will highlight the imperfections rather than the benefits and charm of the property.
  • They do not want to worry about whether or not you will be finished when they are ready to move in.  Will they have time to finish?  Will they run out of money?  They don’t need to worry about that when there is another unit ready to go just down the street.
  • They want to move and be done.  Moving is stressful.  They do not need the landlord coming in to “finish up a few things.”
  • They are afraid you will not do what you say you will do.  They have been burned by other landlords before.  Why go through that again?

Obviously there are exceptions as Jenna has demonstrated.  Some will “see your vision” or will really like the location or some other factor.  But most will not be able to see through the mess.  Why watch them cringe and frown?  Save your time.  Save your energy.  Focus on getting it done, then show.  Your pool of applicants will likely be larger, giving you the added benefit of being choosy.

Growing the Positive Cashflow Money Tree

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Positive cashflow is the key to becoming a successful, smarter landlord.  Without positive cashflow, your time as a landlord is limited. Smarter landlords are always looking for ways to grow the cashflow money tree.

Here is how you can grow yours.

Reducing Your Expenses – There are all kinds of expenses associated with rental properties including utilities, maintenance, and upkeep.  The trick is to save while not skimping on necessary maintenance.  Some tricks include using the same brands and materials in all of your rentals.  Use the same paint, faucets, tiles, etc.  This should cut down on repair costs and the time to do it (remember your time is important too).  Use energy efficient lighting and install low flow water devices to save on utility costs.

Increasing Your Revenue – Sure you can raise rents every year but that may increase turnover.  There are other ways to raise revenue.  Put in coin laundry.  Put in a soda machine.  Rent out the basement to your contractor for storage.  Build some storage space cages in the attic and rent them out to your tenants.  Include cable or satellite dish service as part of your rental package.  Get creative to get those revenues up.

Managing Your Tenants – Tenant turnover is a cashflow killer.  Tenants move either because of a life change or because they feel they are not getting good service.  For those that have to move, ensure you have policies and procedures in place to get your property back as rent ready as possible.  For those that simply want to move, you may need to look at your customer service skills.  Are you responding to their requests adequately?  Are you fixing things that need to be fixed?  The longer tenants stay, the better it is for your bottom line.

Managing Your Property – You have to actively manage your properties or manage your property manager.  You can’t just collect the rent and forget it.  Otherwise little problems can get swept under the rug or become bigger, more expensive problems in a short matter of time.

Fixing it Right the First Time! – Don’t cheap it out because you will just be fixing it again in no time.  Do you really want to pay to fix the same thing two or three times?  Spend a little more upfront on better materials and quality contractors to do the job.

Positive cashflow is the key to being a successful landlord.  But generating positive cashflow is not just about collecting rents.  Sure, that is the biggest part of it, but there are many other facets as well.  Use these tips to fine tune your business and improve your cashflow.

Tools of the Trade – For Real Estate Beginners

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It felt like I was preparing for the first day of school. Do you remember getting excited about shopping for school supplies? I would map out everything I needed, and I would carefully plan out how to best organize them to prepare for a whole new year of challenges.

I re-experienced this excitement after closing on our first house/investment property. The first thing I did was run to the store with a list of tools and supplies that I was sure that I would need. I went home, unpacked them, and organized them perfectly.

I was ready to rehab.

Upon reflection, I could have been smarter. Some of the things I bought were surprisingly useful, like our step stool. I never anticipated using it as much as I do. Other items were just a plain waste of money. So, what tools do you need to begin the path of real estate investing? This post should help.

  • Cordless drill, socket/bit set
  • Wonder bar
  • Crescent wrench
  • Ladder
  • Utility knife
  • Channel locks
  • Putty knife: one wide, one narrow
  • Wire Strippers
  • Electrical tester
  • Dolly
  • Step stool
  • Tool box/bucket
  • Extension cord

Of course, this list is assuming that you have already purchased the bare necessities while you were searching for the perfect property.

There are quite a few other tools that I purchased during my rehab, but I’m not sure how soon every beginner will need them: drain wrench, basin wrench, and dremel tool. When I asked Kevin whether or not this list was exhaustive; he said that his reciprocating saw has been his best investment.

I can say, with complete confidence, that any expensive tools that you can borrow is money well saved. The costs of these items add up quick, and so do your materials.

 

Are you an experienced investor?

If so, which item has been most valuable to you?

Have I left anything off?

Working With Contractors: How to Pay Them

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Having a good contractor that you can trust and rely on makes any real estate investor’s job easier.  It is a big comfort to know that you have someone you can depend on to do the job, big or small, right the first time.

I have already written about how you should go about finding good contractors.  In this post I want to talk a bit about another just as important aspect, and that is how you should pay your contractors.

Let me start off by telling you the last thing you want to do.  That is to pay them up front in full.  Anyone worth their weight in salt is not going to ask for full payment up front.  If they do it is a huge RED FLAG.  Run away and start the process to find another contractor.

Smarter landlords want to pay as little upfront as is possible.  Actually, it is best if you can pay nothing upfront and the balance of the bill upon completion.  On small jobs, say less than $500 to $1,000 that may actually work.  But it does not always work so well with larger jobs.  The contractor is likely going to need some money to get supplies.

Until I get to know a contractor, and even later on, I like to give as little as possible upfront.  See if they will agree to 10% or 20% of the quoted job price (you got a quote right?).  As you work with the contractor more and more and as the relationship builds, you can increase this a little, but I never go over 1/3 of the price on big jobs.

So how does the remainder get paid?  The best way is to pay it upon completion of the job and for smaller and midsize jobs that can work.  Major jobs though are often going to require draws so the contractor can pay his crews and purchase more materials.

Usually there will be three or four draws totaling a 1/4 or a 1/3 of the total job price.  These draws are often paid at agreed upon steps as work gets completed.  For example, you might permit a draw once all drywall is hung, sanded and primed.  Or, you might allow a draw once a kitchen floor is tiled and cabinets are installed.  It is up to you and the contractor to work these details out in your contract (you are using a contract right?).

The last draw should be upon completion of the job.  This is your last chance to go through the property and make sure everything was done up to your standards.  Walk through the property, make a punchlist of items needing to be fixed or completed.  Once that list is completed, pay your contractor.

Here are some other smarter tips.

  • Always use a contract.  Specify in that contract who gets paid, how much, when, how and upon completion of what specific work.
  • Pay your contractors promptly and in full according to your contract.  Don not jerk them around.  They have done the work, so pay them promptly.
  • Consider giving them a bonus if they do a great job, that is on budget and finished early.  After all time is money to you and them and you should reward them for finishing quickly.
  • Be fair and respectful.  Kind words and understanding can go a long way.  Remember you are trying to build business relationships here.  You want to use these contractors again if they do a good job.  Treat them right so they will answer the phone the next time you call.
  • Sometimes no matter what things go south.  If they do, cut your ties quickly and move on.  Don’t hold a grudge, just move on and find someone else.

Demolitions: Don’t Pay Money; Make Money

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Every successful business person knows to solicit multiple bids from contractors. (Need help finding good contractors?) You do this to find the market price of services and to feel out the knowledge and competency of your potential help.

I’m no fool. I did the same thing with my triplex once I had a comprehensive repair list. The various estimates for my carport demolition surprised me though. They ranged from $1,000-2,500.

 

PSHH!

(if you don’t know what that means, please consultant urbandictionary)

 

We decided to complete the carport demolition ourselves, and it was one of the best decisions we’ve made so far. Granted, the demolition was spread out over several weeknights, and a contractor could have had the job finished in a day. We were perfectly ok with the delay though. The carport demolition wasn’t preventing us from renting out any units.

The best part: instead of paying a contractor over a thousand dollars, we ended up coming out ahead!

The first thing we did was throw a crowbar party! Four of my macho friends came out and competed to see who could take down the most boards as fast as possible. In retrospect, I could have charged a dollar a sledgehammer hit since they were all so amped to be the first one to take down a support beam.

Don’t believe me? Check this guy out 

After the wood was stacked, I posted an ad on craigslist for reclaimed wood. I offered it for free, and I had quite a few craftsmen come out and take a load off of my hands. This saved me from hauling debris and paying dumping fees.

The roof of the carport was made of corrugated aluminum. I also posted this on craigslist asking for people to make offers on the 26 sheets that I had. One person made an offer of $4 a sheet, if it was trailer-ready when he got there. I responded with a lower offer of $3 a sheet—with the understanding that he would be responsible for disassembling the aluminum. I also threw in an offer for free reclaimed wood, should he be interested.

Within 24 hours of him accepting my offer, the debris was gone and I was $78 richer!

 

Pros:

  • I saved money
  • I made money
  • I helped prevent debris from going into a landfill
  • I helped others find affordable materials for their projects

Cons:

  • It took longer than if I had hired a contractor
  • I had to coordinate many moving parts

 

Would I do it again? I saved money. I made money, and I had fun. You bet I would!

Hiring Contractors on Craigslist

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Kevin recently posted an interesting article about How to Find Good Contractors. I have to agree with him; networking with other landlords is the best way to find good contractors. Sometimes, these contractors think like investors. This can be helpful if you’re new to the game, like me.

We have already established that contracting cheap is not worth it for serious repairs: electrical, gas or plumbing.

My triplex needs a lot of miscellaneous work though. I need to repair the trim on doors, replace a cellar door, craft kitchen floor boards, and replace random pieces of exterior wood. This is in addition to the debris remaining from our carport demolition.

These repairs don’t require a lot of skill, but they do require time. So, it’s time for me to find some hired help. Where does a frugal, novice landlord turn?

Craigslist.

Looking for contractors on Craigslist can be efficient and cost-effective. Many people make their entire living off of Craigslist. I guarantee that you can find someone willing to do the work for the price you’re willing to pay. It’s not all flowers and sunshine though. There are just as many dishonest and unqualified people out there trying to make a dime. Here are a few rules to follow when using Craigslist to hire contractors.

  1. Do not post your phone number, email address or property address on your Craigslist post. You’re trying to save time by hiring help. Don’t waste it away answering questions to no avail.
  2. Itemize each repair requested in your post. Post pictures to reference repairs if you can. Transparency allows people to offer honest bids for the work.
  3. Sign a name to your post, but only a first name. You don’t want them to be able to look your property up if they know it’s vacant, right? *Ladies, I don’t sign my name. I use my boyfriend, Eric’s. It makes me feel less vulnerable, and Eric will most likely be on-site directing them anyway.
  4. Do not provide any information beyond what is needed. This is especially important when you’re issuing multiple posts. People who work off of Craigslist can easily piece together your information based on your signature or pictures. I posted once that I had recently purchased a truck. Someone responding to an unrelated post mentioned it. Watch out.
  5. Provide people with specific instructions to follow when responding to your post. Ask that they itemize their bid for each repair requested. At a minimum, I ask that people respond with their first and last name, phone number, whether or not I can text them, and their itemized bids. If they don’t follow directions when responding, rule them out!
  6. Call your Craigslist respondents. Ask them questions like what vehicle they drive and what tools they plan on bringing to the job. You may want to tell them you’ll call them back after speaking with the other potentials. Be discerning.
  7. If they don’t arrive at the agreed upon time, cancel and start over again. Craigslist is less dependable than Kevin’s recommendations, but it can be worth it. I get better deals when people blind bid for the work.
  8. After the work has been completed, pay the agreed upon price. Only pay your contractor for the work that has been finished. If you ask your respondents to itemize their bids, this step will be easy.

I rank my respondents based on their email professionalism and bid amounts. Good indicators are people who sell themselves a bit, people who respond with a business name and people who respond with a picture of their truck, trailer or tools. As Kevin said though, follow your gut. Be guarded with your personal information and property until you have developed a working relationship.

I will concede that buying, selling, and hiring help off of Craigslist takes time and patience. I’m a beginning investor though; all I have is time and patience.

I’m building a Rolodex from the ground up.

 

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How to Find Good Contractors

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Working with contractors is a routine part of the real estate investing business.  Something is always breaking or in need of rehab.  Plumbers, electricians, painters, HVAC, and general contractors are all folks who you will need in your investing career.

To the newbie, finding and hiring these contractors can seem daunting.  You have heard the horror stories.  You don’t want to get ripped off.  You don’t want to appear stupid.  So what to do?

First think about what you need.  You need a variety of people with various skills that can solve your repair and rehab problems quickly, at a reasonable price and without hassle.  You want someone who is reliable, because you are going to go to them again and again as problems arise.  You want to know that the job will be done and furthermore, you want it done right.

Next, follow these tips to find the people you are looking for.

  • Network With Other Landlords – This has consistently been my best source to find quality people.  Other landlords know who will do a good job at a fair price.  Plus, references will open doors.  You can meet other landlords at your local reia club.
  • Ask at Contractor Stores – Ask for references from stores frequented by contractors such as paint, lumber and home improvement stores.  Ask who is reputable.  Ask who pays their bills on time.  Most of the time someone at these stores will point you in the right direction.
  • Hang Out at Contractor Stores – Yep! Get there early when contractors are picking up materials.  Talk with folks.  Tell them what you do and what you are looking for.  Soon you will have a catalogue of business cards to call upon.
  • Talk with Friends and Family – Ask your friends and family who they have used in the past and if they liked the work.  This can be a great place to start.
  • Get Several Estimates – If you can, get several estimates on any project.  Listen to what the contractors say.  How will they do the job?  What materials will they use?  How quickly can they be completed?
  • Get References – Good contractors will be able to provide you with references.  Follow up on these.  If you can, go see some of their work.
  • Use Online Sources – Angie’s list and others rate contractors as well as many other businesses.  Make a post on Facebook asking for references.  Online sources are only going to grow in the future.  Just be careful with the reviews and don’t be attracted to the biggest ad.
  • They Purchase Their Own Materials – Remember you are an investor, not a chauffeur for contractor supplies.  If they cannot afford to get or cannot transport their own supplies, move on.  It is not worth your time.

Here are some more thoughts.

  • Do not always use the cheapest one.  Cheap is not always worth it.
  • If they do not return your call in a timely manner, don’t follow up or do what they say they will do, move on.
  • Don’t worry if they drive a nice truck.  That means they likely do a good job.
  • Realize there is trial and error involved.  You are going to have to try some to find the right one.  Do not be afraid to fire and move on.
  • Some contractors may be good today and tomorrow they flake out.  This just seems to be part of the business.  I have been through many contractors over the years.
  • What ever you do, when you are new to this or working with a contractor for the first time, use a carefully worded contract that spells out who, what, when, where, and especially how they get paid.  I will talk more about that in future posts.
  • Listen to your gut!  If something feels wrong or you are unsure about something, get more info or move on.

Finally, remember contractors are human too.  Most are out there hustling trying to do an honest days work.  They want and need your business!  They will be happy to talk and see if they can meet your needs.  Remembering this little fact can go a long way.