Repairing a Fixer Upper Rental
Set Budgets for Time and Money Invested
Depending on the condition of your rental property at purchase, you could face a little—or a lot—of repair work. And based on the rental income, along with expenses such as property taxes, mortgage payments, and maintenance, the amount of cash you spend on repairs can really affect your cash flow.
Calculate every penny. Putting pencil to paper is a must. It could be that the lower purchase price, down payment and mortgage payments that typically go along with a fixer-upper, even after accounting for repairs, will result in higher cash flow.
Do your homework. Prepare a budget for the amount of money and time you can reasonably invest into repairs. Obtain estimates from a few contractors—then pad them. Look at the amount of time the repairs will take—time that you will not be collecting rent. Consider that weather could adversely affect your timetable.
Determine what repairs you can do yourself. But make sure not to overestimate your abilities! If you don’t know how to tile a bathroom floor well, save yourself the time and trouble and hire a professional. Doing something twice means no profit for you. Again, consider the time factor—the longer it takes you to perform the repairs, the longer you go without collecting rent. If you work full-time and can only rehab your rental property at night and on weekends, the investment spent on a professional contractor could be well worth it.
If you are reasonably handy, have time to do repair work yourself, and can find bargains in materials, a fixer-upper can return more cash to your pocket than a ready-to-rent property. And if the price is right, you might even be able to afford to hire a professional contractor!